@Green January/February 2024 | Page 15

GITA Project ( for business purpose )

launched by Bursa Malaysia in March 2023 . The BCX serves as a voluntary platform for trading carbon credits between companies committed to lowcarbon and sustainability practices .

This enables the market to allocate resources to projects and solutions to reduce , remove , or avoid carbon emissions . As announced in Budget 2024 , additional tax deductions of up to RM300,000 are proposed to companies that invest in the Measurement , Reporting and Verification process to develop carbon projects .

Expenses incurred in this process can be deducted against the income generated from the sale of carbon credits traded on the BCX .

While the government is still studying the feasibility of implementing a carbon pricing mechanism in the country , Malaysia is set to join many countries pricing carbon to achieve net zero carbon emission by 2050 .

Although carbon tax was not mentioned in Budget 2024 , companies should take the necessary steps to prepare themselves , as the introduction of carbon tax is expected to occur soon .

Looking at our neighbour to the south , Singapore , carbon tax covers 80 per cent of the nation ’ s total greenhouse gas emissions from approximately 50 manufacturing , power , waste and water facilities . The carbon tax rate was first set at SG $ 5 per ton of CO2 equivalent

( SG $/ tCO2e ) in 2019 and will be raised to SG $ 25 / tCO2e in 2024 and 2025 to reach SG $ 50-80 / tCO2e by 2030 .

TRANSITIONING TO ALTERNATIVE FUELS

While this would result in additional costs for companies in the short term , the ultimate goal is to prompt companies to lower their carbon emissions in the long term by reducing the use of fossil fuels and transitioning to alternative fuels with lower carbon content and renewable energy sources .

In preparation for the potential carbon tax in Malaysia , companies should ideally begin reviewing their carbon footprint and assess the potential impact on their businesses , both from a financial and non-financial standpoint .

Should the carbon tax framework be officially announced , early preparation will give companies an advantage in implementing a coordinated response to the new tax with the least disruption to operations .

By developing effective strategies and adopting energy-efficient technologies , companies with sufficient foresight will undoubtedly gain a competitive edge by planning and adapting ahead of their industry peers .

In conclusion , the ESG agenda is here to stay and applies to all industries . Businesses should start looking into adopting ESG initiatives as early as possible , especially as the government is starting with the carrot approach i . e ., tax incentives . They may eventually move towards unleashing the stick approach , such as carbon taxation , to encourage good ESG practices in companies .

It is also essential to recognise that the tangible and intangible benefits of an ESG-compliant business should outweigh the long-term implementation costs . As the acclaimed novelist Wendell Berry said : “ The Earth is what we all have in common .”

Hence , we must collectively play an active role to drive the momentum , so real progress can be achieved to deliver the environment , social and governance agenda our future depends on . - @ green

The views expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG in Malaysia .