A carbon tax is considered a sound strategy to reduce Malaysia's overall carbon emissions by 2050, and could also support the national target of reducing greenhouse gas emissions by 45% based on Gross Domestic Product (GDP) by 2030.
Malaysia is currently preparing for its "Blue Skies" program, with the imposition of a carbon tax on airlines taking effect immediately after the Malaysian Aviation Commission (MAVCOM) conducts its necessary assessment. Malaysian Transport Minister Anthony Loke emphasized that the carbon tax applied by airlines is intended to offset their carbon emissions, fulfilling an international obligation for all airlines to contribute to the International Air Carbon Offsetting and Reduction Scheme (CORSIA). The carbon tax mechanism will align with the national low-carbon aspirations 2040 plan as a target of the national energy policy.
Currently, Denmark, Sweden, South Africa, and the Netherlands are among the countries that have implemented carbon taxes on passengers. According to the International Air Transport Association (IATA), the tax rate applied by some airlines depends on the flight distance. As the distance increases, the tax also increases, and the tax rate varies between countries. For example, for international flights, Norway charges $29.70 for all passengers, while Portugal charges $2.20 for both domestic and international flights. Singapore is also expected to implement a green fuel tax on flights from 2026.
According to Dr. Mohd Harridon Mohamed Suffian, an aerospace technology economist at the Kuala Lumpur Aviation Institute in Malaysia, airlines could use this tax to purchase sustainable aviation fuel (SAF) or pay credits to offset their carbon emissions. The carbon tax would encourage airlines to increase their use of SAF. However, there are concerns that airlines may pass the emissions cost onto ticket prices to reduce the financial burden. This worries consumers because air travel is a crucial mode of transportation for both leisure and business. Furthermore, the cost of purchasing new, more fuel-efficient but more expensive aircraft is also expected to be passed on to ticket prices by airlines.
SAF is globally recognized as the most viable option for reducing future aviation emissions. According to economic experts, this is also another path for Malaysia to develop its related industry. The development of SAF requires efforts in converting biomass into usable aviation fuel, including the development and application of technology, the recruitment of skilled personnel, and the development of centralized plants. This benefits the country by creating more job opportunities in the sector, enhancing its economic stature, and facilitating technology transfer, as Malaysia's own SAF development is more efficient than importing from other countries.
According to recent IATA data, global SAF production has tripled, rising to 600 million liters from 300 million liters in 2022, accounting for 0.2% of global aviation fuel consumption in 2023. The aviation industry is expected to meet the Paris Agreement's targets of limiting global warming to below 20C, in line with IATA's 2050 emissions reduction targets.
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