To be 1.5°C compatible, Malaysia would need to transition its economy away from fossil fuels. The Malaysian government relies on oil and gas revenue from the state own Petronas company, and the oil and gas sector accounts for 20% of Malaysia’s GDP., It also relies on coal imports for power generation but has the opportunity to become energy independent through phasing out coal.
Malaysia’s total primary energy supply (TPES) is 97% fossil fuels. TPES is dominated by natural gas (41%), oil (31%) and coal (24%). Reliance on fossil fuels make the country vulnerable of price fluctuations as experienced recently from COVID-19 impacts.
Renewables represent 3% of the TPES and 17% of the power generation mix – mainly sourced from hydropower. Malaysia has a target for renewable energy to represent 31% total installed capacity by 2025 and 40% by 2035. It has implemented a feed-in-tariff mechanism to increase renewable energy share in the power mix and a Green Technology Financing Scheme (GTFS) to support green technology projects in all sectors, including energy. The feed in tariff, net metering scheme and the GTFS have so far driven renewable energy investments.
The National Energy Efficiency Action Plan also aims to increase energy efficiency in residential and commercial buildings, and in industry. Malaysia also plans to increase use of public transport and reduce demand on road infrastructure. Other actions include promoting energy efficient vehicles, palm based biodiesel in blended petroleum diesel, promoting natural gas for vehicles, and biogas recovery from POME treatment.