RON95 subsidy cut to come before carbon tax - minister

Finance Minister II Amir Hamzah Azizan said the government will prioritise rationalising the RON95 petrol subsidy this year before introducing a carbon tax in 2026.

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,” Amir said.

“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.

The minister made these remarks during a session titled “Delivering Malaysia’s Energy Transition”, where he was a panellist alongside Energy Transition and Water Transformation deputy minister Akmal Nasrullah Nasir.

The session was chaired by Abdul Wahid Omar, a senior independent and non-executive director of IOI Corporation Bhd.

Subsidy reform key to sustainable policies

Amir also emphasised that subsidy rationalisation is a critical step to establish 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 Anwar Ibrahim said the adjustments involving the price of RON95 petrol would not affect 85 to 90 percent of the population.

Anwar said the government’s move towards subsidy rationalisation is critical to ensure national resources are channelled effectively to benefit the lower-income group.

- Bernama

RON95 subsidy rationalisation will not affect most M'sians: PM

Delay SST expansion, power tariff and RON95 hikes, Radzi tells govt

RON95 subsidy rationalisation now in Finance Ministry's hands: Rafizi

Delay RON95 rationalisation, electricity tariff hike - MPs tell govt