Carbon capture law needs more guadrails

Malaysian Reserve

4 days ago

In Asia, govts are already moving to integrate carbon capture, utilisation and storage into national climate plans through a combination of incentives and regulatory mandates
by AUFA MARDHIAH
MALAYSIA'S newly introduced carbon capture, utilisation and storage (CCUS) legislation may accelerate investment in low-carbon technologies — but climate experts caution that the country must chart its own course, rather than becoming a repository for foreign emissions.
Seen as a key instrument in Malaysia's net-zero roadmap, the CCUS Act is expected to establish a regulatory framework for businesses seeking to invest in carbon capture projects.
But its success will depend on how effective it is implemented, and who it truly benefits.
An outfit for carbon capture and storage (CCS) has noted that investors are increasingly viewing CCUS as a necessary component of climate risk mitigation rather than a last resort.
Investors are investing in CCUS because they recognise it as an essential technology for the mitigation of climate change,' Global CCS Institute strategic advisor for emerging CCS markets Alex Zapantis told The Malaysian Reserve (TMR).
Zapantis pointed out that since 2017, global investment in CCUS has grown steadily, supported by stronger policy signals and the need to reduce exposure to future regulatory and market risks.
In Asia, governments are already moving to integrate CCUS into national climate plans through a combination of incentives and regulatory mandates.
However, Malaysia finds itself in a different position. Although the CCUS Act was passed in early 2025, no operational CCUS projects have been launched to date.
Petroliam Nasional Bhd (Petronas), the national oil company and the country's most advanced player in the field, remains focused solely on carbon storage, with no utilisation element in its current commercial ventures.
Nationwide, efforts are still concentrated on permanent geological storage, while carbon utilisation remains limited to early-stage studies and pilot-scale initiatives.
This places Malaysia behind countries such as Japan and Singapore, which already have mature CCUS roadmaps supported by carbon pricing instruments, bilateral agreements and targeted investment incentives.
While the legislative structure is in place, the broader ecosystem — including regulations, pricing mechanisms and industrial readiness — is still under development.
The challenge ahead lies not in passing laws, but in establishing the policy, financial and technical frameworks required to enable real-world deployment.
There is the need for regulatory readiness and technical capacity before Malaysia begins storing imported CO2 at scale, says Theseira (Source: marc.com.my)
CCUS Needs More Than Legislation
Climate scientist Dr Gary Theseira warned that without strong governance, Malaysia risks repeating past environmental injustices, such as the mismanagement of plastic waste imports.
He stressed the need for regulatory readiness and technical capacity before Malaysia begins storing imported CO2 at scale.
'If we import CO2 and we are compressing it, pumping it and transporting it — what happens if there is an accident and we discover toxic gases inside? Do we have the capacity to monitor and investigate this properly?' he said, highlighting the concern during the National Climate Governance Summit (NCGS) 2025.
He pointed out that while the act provides a starting point, critical safeguards still need to be enforced — especially regarding cross-border liability, pipeline routing and environmental protection.
'If your governance is good, then I trust the people handling the CO2 pipeline. But if a gas pipe suddenly appears behind someone's house, there will be backlash,' he said, emphasising the importance of land-use planning and biodiversity protection.
Theseira also explained the technical complexity of CCS operations, noting that CO2 must be pressurised to nearly 1,000 atmospheres to become a supercritical fluid suitable for injection. This process, he said, requires high levels of engineering expertise, robust infrastructure and strict safety protocols.
From a policy standpoint, he warned that many CCS projects worldwide are limited to storage rather than utilisation, and may even be linked to enhanced oil recovery (EOR) — where CO2 is injected into wells to extract additional fossil fuels.
He called for corporate accountability at the board level, urging that any special purpose vehicles or joint ventures managing CCS projects must include experts from different fields, such as geology, marine biology, safety engineering and sociology.
'Safety is most important, and audits must be in place to show there are no leaks. Otherwise, there will be allegations of green-washing,' he said.
Moreover, Theseira said the carbon market's credibility depends on companies going beyond basic rules and adopting clear, inclusive governance.
'This has to be something the rakyat is comfortable with. It is about equity and fairness,' he said.
Petronas Leads Malaysia's CCS Rollout
Several large-scale CCS projects are progressing, with Petronas taking the lead as the primary developer.
The company's Kasawari CCS in Sarawak is currently the most advanced, with carbon injection expected to begin by the end of 2025. Designed to store up to 3.3 million tonnes of CO2 annually, it is set to become the world's largest offshore CCS facility by volume.
Other developments include the Lang Lebah-Golok CCS project by Thailand's PTTEP plc and the BIGST high-CO2 gas cluster off Terengganu, led by Petronas and JX Nippon Oil & Gas Exploration Corp.
Feasibility work is also ongoing for several regional storage hubs aimed at servicing foreign emitters from Japan, Korea and Singapore. There is the Penyu Basin facilities, a joint venture between Petronas, Abu Dhabi National Oil Co (ADNOC) and Storegga Geotechnologies Ltd. There is also the Petronas-Japan Petroleum Exploration Co Ltd (Japex) consortium.
Although these initiatives focus primarily on carbon storage, Malaysia currently has no commercial projects that convert captured carbon into usable products.
The sole announced CCUS project with a utilisation component is a planned CO2- to-syngas plant in Bintulu, a collaboration between Petronas LNG and US-based HYCO1 Inc, which is expected to become operational by 2029.
Petronas is leading Malaysia's efforts in carbon storage, aiming to create a regional CCS hub by 2030.
The company is investing in CO2 transport, offshore storage and partnerships with foreign firms, while researching ways to use captured carbon.
However, Malaysia's CCUS industry is still in its early stages, with most projects still being planned or studied.
Biochar is one of Malaysia's most overlooked tools for carbon management — a low-cost, carbon-rich material produced from biomass that could play a vital role in strengthening climate resilience (pic: Bloomberg)
CCUS, Renewables Can Coexist
Addressing concerns that CCUS may delay the energy transition or lock in fossil fuel use, Zapantis emphasised that carbon capture technologies can complement, not compete with, renewables.
'Power plants equipped with CCUS can supply flexible low-carbon electricity that complements the variable nature of renewables like solar and wind,' he said.
This is especially relevant for energy systems in South-East Asia, which continue to rely on coal and gas for baseload generation. Without CCUS, he said, these plants would continue emitting CO2 at unsustainable rates.
Additionally, Theseira highlighted biochar as one of Malaysia's most overlooked tools for carbon management — a low-cost, carbon-rich material produced from biomass that could play a vital role in strengthening climate resilience.
When applied to soil or coastal areas, biochar can boost evaporation and trigger the release of natural compounds that promote cloud formation, helping to offset dry spells caused by El Niño.
Beyond short-term climate adaptation, Theseira believes biochar could support the growth of future industries built around high-value carbon materials like activated carbon, carbon nanotubes, graphite and graphene.
He framed biochar as a practical alternative to costly, infrastructure-heavy CCS technologies — offering a more accessible and scalable option for carbon removal in a country rich in biomass and rural land.
'When it comes to cost per tonne of CO2 equivalent, even with eyes closed, biochar wins,' he said.
Building Investor Confidence Through Transparency
Zapantis said a key way to boost CCUS investment is by improving how companies report their climate actions and following trusted global standards.
He encouraged Malaysian firms to use frameworks like the International Financial Reporting Standards (IFRS) S2 Climate-related Disclosures, which help companies measure carbon reduction, understand climate risks and explain how CCUS fits into their plans to cut emissions.
He added that being open and clear is important not just for investors but also to build trust with policymakers, regulators and the public.
Clear carbon accounting ensures that emissions reduction claims — particularly those involving carbon capture and storage — are verifiable and credible.
'As environmental, social and governance (ESG) reporting frameworks improves, CCUS will gain further recognition as a viable and bankable climate solution,' he said, adding that investors now see it not as a last option, but as an important tool to manage climate risks early.
Petronas Positions CCS as New Growth Engine
Petronas has emphasised its commitment to responsible management, assuring that Malaysia's carbon storage initiatives will be carefully regulated and subject to strict oversight.
During its CCS media dialogue, held recently in conjunction with Energy Asia 2025, the national oil company stressed that any cross-border CO2 storage arrangements would be governed by bilateral agreements and mutual accountability.
Beyond its climate role, Petronas sees CCS as an industrial catalyst. The company believes that strong carbon storage infrastructure could attract industries such as blue hydrogen, blue ammonia and low-carbon steel — generating new jobs and investment.
Petronas Carbon Management Department senior GM Emry Hisham Yusoff said with CCS infrastructure, Malaysia can attract low-carbon industries.
'That is the new economy,' he said.
Still, the company acknowledged that CCS is complex. It involves a full value chain — from carbon capture at the source to pipeline transport, liquefaction, shipping and offshore injection.
To support this, Petronas is developing the world's first large-scale liquefied CO2 vessel in partnership with global shipping firms.
While the CCUS Act is in place, Petronas continues to call for clearer domestic regulations, particularly regarding environmental impact assessments, cross-border liability and CO2 classification under the Department of Environment (DOE).
At present, CO2 is not classified as a scheduled substance, which means environmental impact assessments are not mandatory— a regulatory gap that the company is urging authorities to address.
Petronas is also developing key storage sites including Kasawari, Duyong, Lawit and Penyu, each backed by over RM4 billion in investment.
These sites are expected to store up to 80 million tonnes of CO2 annually — serving both domestic emitters and regional partners.
Apart from that, Petronas has forged strategic partnerships with international players including Mitsui & Co, TotalEnergies SE, Storegga Geotechnologies and a Japan-led consortium, aiming to provide CCS as a commercial service to heavy industries across Asia.
Still, the company stressed that CCS is a developing business, not a replacement for its core oil and gas (O&G) operations.
'This is a new business. Whether this is going to be our main (income), I don't think so, but it will be one of the businesses that we will do,' Emry Hisham said.
He added that, as seen in the UK and Europe, early CCS projects often rely on government support, a reality Malaysia is also likely to face.
Ensuring Fair Transition
Theseira highlighted that the growth of green industries, including CCS, must not deepen existing social inequalities. He urged the government to prioritise job creation in these sectors for the unemployed and underemployed, particularly in rural areas, to ensure inclusive economic benefits.
'You have to be sure that the industry does not perpetuate a pattern of socioeconomic influence that ends up pushing the Gini coefficient to greater and greater inequality,' he said.
He also believed that the energy transition must be accompanied by educational reform. Schools should evolve into digital hubs offering access to global learning tools, while teachers must be equipped with digital teaching methods.
Ultimately, he urged Malaysians to abandon limiting beliefs and imagine bold futures. With its abundance of sunlight, water and land, Malaysia could become a global centre for food, clean energy and climate innovation — if it invests wisely and plans ahead.
'Only we ourselves can put the barriers in our heads,' he said.
Theseira even suggested that, in a climate-altered world, underground or undersea living could become necessary — enabled by nuclear energy and advanced technologies.
Chance to Lead, Not Blindly Follow
As the CCUS legislation takes shape, experts offer contrasting yet complementary views. Zapantis highlighted investor readiness and international momentum while Theseira emphasised equity, environmental justice and long-term credibility.
Meanwhile, Petronas aims to respond to growing climate expectations by developing commercially viable solutions, while adapting its business model to support long-term sustainability.
If Malaysia is to lead in the carbon management space, it must balance commercial ambition with responsible governance.
That means building a CCUS ecosystem that not only stores carbon — but creates value, protects communities, and earns public trust.
This article first appeared in The Malaysian Reserve weekly print edition