KUALA LUMPUR: The government will prioritise the rationalisation of RON95 petrol subsidy this year before introducing a carbon tax in 2026, said Finance Minister II Datuk Seri Amir Hamzah Azizan.
He said Malaysia must first address the issue of fuel subsidies, particularly those involving the energy sector, before implementing the carbon tax. The government had previously announced plans to roll out a carbon tax targeting the iron, steel, and energy industries by 2026, as outlined in Budget 2025.
“As we embark on this transition, we must ensure that no unintended consequences are embedded within our system. For instance, Malaysia has yet to implement a carbon tax as part of its policy framework. While it is scheduled for rollout by 2026, there are important precursor steps we must take,” he added.
“One major issue is the existing distortions in the system, especially the subsidies provided to the energy sector. A key objective now is to begin scaling back these subsidies. It doesn’t make sense to impose taxes on one side while simultaneously providing subsidies for petrol, diesel, and other fuels,” he continued.
Amir Hamzah made these remarks during a session titled “Delivering Malaysia’s Energy Transition”, where he was a panellist alongside Deputy Minister of the Ministry of Energy Transition and Water Transformation (PETRA), Akmal Nasrullah Mohd Nasir.
The session was chaired by Tan Sri Abdul Wahid Omar, a senior independent and non-executive director of IOI Corporation Bhd.
He also emphasised that subsidy rationalisation is a critical step toward establishing a strong foundation for building sustainable mechanisms and policy frameworks.
“As a result, we can expect the introduction of structured measures, including climate action frameworks, robust measurement tools, and ultimately, the implementation of a carbon tax to support these initiatives.
“If we want this transition to be sustainable and impactful, the entire system must respond. It cannot be driven by isolated announcements or standalone policies. The challenge for the government is to tie everything together coherently and effectively,” Amir added.
Yesterday, Prime Minister Datuk Seri Anwar Ibrahim said the adjustments involving the price of RON95 petrol would not affect 85 to 90 per cent of the population.
Anwar said the government’s move towards subsidy rationalisation is a critical step to ensure national resources are channelled effectively to benefit the lower-income group.
