| Summary: | This report was commissioned to evaluate carbon emissions intensity by sectors and scrutinize the impact of introducing a carbon tax in the economy, as a matter of concern to the growth in Malaysia’s CO2 emissions. Besides capturing the highest emitters of carbon dioxide, the report assesses its economic impacts in terms of production prices, private welfare and public revenues by separately taxing the top three highest emitters. The dominant industrial-produced emissions has led the country not only almost 0.7 percent of the global emissions, but also 6.93 metric tonnes CO2 per capita and 0.63 kg CO2 per GDP, much greater than Thailand and Indonesia. Although numerous measures and projects come all the way to reduce CO2 emission like the establishment of the SEDA Act 2011, the emission level is still at high level. While the government intends to reduce the country’s emission intensity of GDP up to 45% by 2030 relative to the 2005 level, the carbon tax is seen a new way to accelerate its success. An environmental input-output price model was developed, closely following the Miller and Blaire (2009) and Gemechu, et al. (2012) models. The building and construction sector, the transportation sector and the electricity water and gas sector were found the top three largest emission producers by taking direct and indirect effects into account. With a
price of 25$ per ton CO2 placed on these sectors, the public administration sector, metal production sector, manufacturing product sector, transport sector and food and drink sector would have high price effects. The aggressive emission reduction would bring high welfare loss with the reduction in real incomes. Thus, our findings suggest that the carbon tax would be a worthwhile policy in climate change mitigation if the excessive public revenues from the tax collection could be directed to more socially benefited programs
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