The Muamalat Newsletter Vol. 2 2023

51 FEM eNewsletter | Dec 2023 Introduction Malaysia ranksasoneof the topgreenhousegas (GHG) emitting countries in the ASEAN region, following Indonesia and Thailand, emitting 330,358 Gg of CO2 in 2019 (MNRECC, 2022; Ritchie & Roser, 2020). The increase of Malaysia’s GHG emissions by 13,525 Gg of CO2 compared to 2016 has led to environmental degradation, as evidenced by its poor performance in the 2021 Climate Change Performance Index (CCPI). Malaysia was ranked as a ‘very low’ country on the index, securing the 56th position out of 61 countries, with an overall score of 27.78. Malaysia received a ‘very low’ rating for GHG emissions and renewable energy and a ‘medium’ rating for energy use and climate policy (CCPI, 2021). Malaysia has committed to reducing its CO2- equivalent GHG emission intensity of GDP by up to a 45% reduction compared to 2005 levels by 2030 (UNFCCC, 2020). One of the strategies to achieve this goal is the implementation of carbon pricing policies, which include an Emission Trading System (ETS) that received government approval in 2021 and a carbon tax proposal announced in the 12th Malaysian Plan (2021-2025). Due to the complexity of adapting to Malaysia’s economic, social, financial, and political conditions, the full implementation of these policies is expected to take at least five to ten years. Energy Subsidies The World Bank defines energy subsidies as “deliberate policy actions by a government that specifically target electricity, fossil fuels, or district heating and have one or more of the following effects: reducing the net cost of energy purchased, reducing the cost of energy production or delivery, and increasing revenues retained by energy producers and suppliers” (Kojima, 2018, p. 1). Energy subsidies are prevalent in both OECD and non-OECD countries. The reasons for introducing and maintaining energy subsidies include safeguarding household welfare, ensuring energy access, promoting environmental sustainability, Carbon Pricing Policy Implementation inMalaysia: Future Research in Constructing an Energy Subsidy Reformation Framework Author: Izlawanie Muhammad Faculty of Economics and Muamalat Universiti Sains Islam Malaysia