Overview

Under the CCUS, a new Malaysia CCUS Agency ("MyCCUS") will be established to oversee the licensing, regulation, and compliance of CCUS activities in Malaysia. The CCUSA also introduces monitoring and compliance obligations, and licensing requirements. Businesses who own or operate any carbon capture installations¹, transports or utilizes carbon dioxide are required to be registered. 

An important point to note is that the CCUSA is only applicable in Peninsular Malaysia and Federal Territory of Labuan. CCUS activities in Sarawak and Sabah are regulated by their respective regulatory frameworks. In particular, Sarawak's CCUS activities is presently governed by the Sarawak Land Code (Cap 81 (1958 Ed.)) and the corresponding Sarawak Land Code (Carbon Storage) Rules 2022. Sabah, on the other hand, has yet to pass state legislation to govern CCUS activities. 

Main provisions

The key developments in the CCUSA are set out as below:

1. Two-phased authorization approach for both on-shore and off-shore storage 

Applications to undertake CCUS activities must be made to MyCCUS, who is empowered to grant, refuse or place conditions. The CCUSA has separated the licencing of CCUS activities into:

1. Assessment Permit: An onshore or offshore assessment permit is required to carry out the geological assessment of any potential storage complex or geological formation. Failure to obtain an Assessment Permit where required may, upon conviction, be punishable with a fine of up to RM 1 million, or imprisonment of up to three years. 
2. Storage License: An onshore or offshore storage license is required to carry out the permanent storage of carbon dioxide captured within or outside of Malaysia. Failure to obtain a Storage License where required may, upon conviction, be punishable with a fine of up to RM 2 million, or imprisonment of up to five years.

2. Registration with the Agency 

Any person who wants to utlize and transport carbon dioxide or develop carbon capture installations must be registered with the MyCCUS. 

3. Restrictions on cross-border transportation and utilization 

Importation of carbon dioxide captured outside of Malaysia is not permitted unless it complies with the carbon dioxide stream acceptance criteria and an import permit granted by the MyCCUS. Further, utilization of carbon dioxide captured outside of Malaysia meant for purposes of permanent storage is strictly prohibited.

4. Carbon dioxide stream acceptance criteria

The CCUSA sets out carbon dioxide stream acceptance criteria for the injection of carbon dioxide streams into storage sites, namely that:

• There must be compliance with prudent CCUS practices. 
• Operators must keep a register of the quantities and properties of carbon dioxide streams.
• The carbon dioxide stream must consist of overwhelmingly of carbon dioxide without wastes or other matters, although the stream may contain trace substances to assist in the monitoring and verifying the migration of carbon dioxide. 
• Any incidental associated trace substances for the monitoring or verification purposes must not be added in concentrations that will:
  1. adversely affect the integrity of the storage site or transport infrastructure;
  2. pose any significant risks against human health or the environment; or 
  3. breach any written laws applicable in Malaysia.

5. Operational and closure obligations on the storage operator

Operational obligations on the storage operator include: 

• Providing information to assess the compliance with the conditions imposed.
• Monitoring the storage complex and prepare a monitoring plan.
• Implementing corrective and remediation measures.
• Submitting reports to the MyCCUS on the monitoring and corrective measures taken. 

Closure of the storage site and post-closure obligations include:

• Storage sites are only closed on issuance of a closure certificate upon compliance of conditions of closure.
• A storage operator has the continuing responsibility to implement monitoring, corrective and remediation measures until the storage site is transferred to the Government.
• For onshore storage sites, the transfer of obligations relating to the monitoring, corrective, and remediation measures post-closure will be determined by the Minister after consultation with the State Government. 
• For offshore storage sites, a certificate transferring the offshore operator's obligations to the Government will be issued once the closure certificate has lapsed and conditions in the closure certificate are fulfilled.

6. Financial mechanisms: Post Closure Stewardship Fund and injection levy

The CCUSA establishes a Post-Closure Stewardship Fund ("Fund").

• The Fund is comprised of sums provided by the Government and dividends, the injection levies paid by offshore operators, and from investments financed from the Fund.
• It may be invested by the MyCCUS under the supervision of the Minister and only expended for the costs incurred by the Government for the long-term stewardship of offshore storage sites.

In addition, an injection Ievy is imposed on offshore operators for injecting captured carbon dioxide, which is determined by the MyCCUS on the risk and probability of risk for each storage site.

Comparison between the Federal and Sarawak CCUS regimes

Conclusion

The enactment of the CCUSA aims to balance Malaysia's economic growth whilst meeting its sustainability goals. Although the CCUSA lacks clarity in certain areas such as carbon credits, it nevertheless provides much needed comfort to potential investors by introducing a formal regulatory framework for CCUS activities. This is a good starting point for Malaysia to capitalise on its natural resources and move further towards realising its net zero targets.

1 A carbon capture installation is defined as an installation which carries out carbon capture, including any associated technical facilities of such installations

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