Harmonise carbon rules

Businesses should not have to pay twice for identical emissions

KUCHING: Clear coordination between Sarawak’s proposed carbon levy and the federal carbon-pricing framework is needed to prevent businesses from facing overlapping charges and unnecessary compliance costs.

Swinburne University of Technology Sarawak academic Dr Nivakan Sritharan said both governments should clarify the emissions and facilities covered, applicable liabilities and administrative responsibilities.

“Where the same emissions fall within both frameworks, the treatment of any overlapping liabilities should be clearly established to avoid unintended double charging,” he told Sarawak Tribune.

He said the Federal Government’s decision to defer the planned carbon tax as of October 2026 provided an opportunity to align the two frameworks before their implementation.

The initial national approach had focused on sectors including iron, steel and energy, while Sarawak’s proposed levy would cover the oil and gas and energy sectors.

“Businesses also need certainty over whether carbon credits or offsets could be recognised when calculating their liabilities.”

Nivakan said the levy’s financial impact would depend on its rates, emissions coverage, liability thresholds and available incentives.

While companies directly subject to the levy would face additional costs based on their emissions, the financial implications could extend to contractors and suppliers.

“Businesses may also face indirect costs if regulated companies pass some of their additional expenses through their supply chains,” he said.

He stressed that the framework should distinguish between large, emissions-intensive facilities and smaller businesses with limited financial and technical capacity.

Reasonable compliance timelines, clear reporting requirements and practical guidance would help companies prepare without facing excessive administrative costs.

Nivakan said predictable carbon-pricing rules could also encourage investment in energy efficiency, cleaner production and emissions-reduction technologies.

He suggested allocating part of the levy proceeds towards supporting businesses in adopting such measures.

“If a portion of the proceeds is channelled into emissions-reduction initiatives, energy-efficiency improvements or appropriate transition incentives, the levy could help finance the changes it seeks to encourage,” he said.

He also called for compatible emissions measurement, reporting and verification standards between state and federal authorities.

Common definitions, reporting periods and data requirements would reduce duplication, while appropriate data-sharing arrangements could streamline administration.

Carbon credit rules should also be coordinated to ensure consistent standards for verification, ownership and retirement, preventing the same emissions reduction from being claimed more than once.

“Importantly, coordination need not mean that Sarawak must abandon its own policy priorities,” he said.

Nivakan said a harmonised approach could preserve the state’s existing arrangements while supporting national climate commitments and maintaining business confidence.

On the RM10 million allocation for Phase 2 of Sarawak’s Greenhouse Gas Management System (GHGMS) under the 2027 Budget, he said the initiative could strengthen emissions reporting, levy administration and carbon credit management.

However, its effectiveness would depend on providing businesses with a reliable and user-friendly compliance platform.

“The system should incorporate automated calculations, built-in validation checks, clear submission deadlines and notifications to identify incomplete or inconsistent information.”

He also recommended proportionate verification requirements, strong data security safeguards and adequate technical support.

The existing GHGMS has been available online through the Environmental Information System Sarawak since September 2025.

“Phase 2 should build on this foundation by making compliance simpler, not merely expanding reporting obligations,” he said.