Singapore and Malaysia to cooperate on cross-border carbon capture and storage

2 May 2025

On 7 January 2025 at the 11th Malaysia-Singapore Leaders’ Retreat, Singapore and Malaysia exchanged a Memorandum of Understanding (“CCS MOU”) to collaborate on cross-border carbon capture and storage (“CCS”) as well as an Agreement on the Johor-Singapore Special Economic Zone.

A press release issued by the Singapore Ministry of Trade and Industry states that, under the CCS MOU, both countries will engage in bilateral discussions to enable cross-border CCS and discuss components of a legally binding Government-to-Government agreement. Both countries will also share best practices and information on CCS and facilitate industry-led research projects where relevant. The press release states that Singapore is keen to work with regional partners with suitable geological storage sites, to make cross-border CCS projects a reality. This is a win-win proposition for both Singapore and storage countries as it generates jobs and investments for the storage countries as well as supports regional decarbonisation.

On 25 March 2025, Malaysia’s Parliament passed the Carbon Capture, Utilization and Storage Bill 2025 (“Bill”). It is now pending Royal Assent. This new law is intended to catalyse the development of the carbon capture, utilization, and storage (“CCUS”) industry as a new source of economic growth for Malaysia.

With Malaysia poised to develop the CCUS industry as a new growth area against the backdrop of the MOU between Singapore and Malaysia, companies with an interest in cross-border CCS projects may find it useful to know more about Malaysia’s new law.

We set out below a summary of the key features of the Bill.

What is carbon capture and storage?

CCS is the process of capturing, transporting (where required), and permanently storing carbon dioxide (“CO2”) emissions. CCS has the potential to decarbonise hard-to-abate emissions for which there are no ready alternative solutions, in sectors such as energy and chemicals, power, and waste. Internationally, CCS is regarded as an important decarbonisation pathway to achieve global climate mitigation.

Malaysia’s Carbon Capture, Utilization and Storage Bill 2025

The Bill was passed by the Upper House of Malaysia’s Parliament, the Dewan Negara, on 25 March 2025. It is currently pending Royal Assent. The Bill seeks to catalyse the development of the CCUS industry as a new source of economic growth and applies only to Peninsular Malaysia and Labuan, excluding Sabah and Sarawak. CCUS projects within the state of Sarawak are governed by the Sarawak Land Code 1958 and its subsidiary legislation, the Land (Carbon Storage) Rules 2022.

The main objectives of the Bill are to:

  • provide for matters relating to the capture, transportation, utilization, and permanent storage of CO2;
  • reduce CO2 emissions; and
  • mitigate the effects of climate change.

The Bill consists of 10 parts, detailing the responsibilities of storage site operators in environmental protection, risk management, and liability, to ensure compliance with international CCUS.

The following is a summary of key provisions under the Bill.

  • Malaysia Carbon Capture, Utilization and Storage Agency: The Bill seeks to establish the Malaysia Carbon Capture, Utilization and Storage Agency (“Agency”) with functions including overseeing licensing, compliance, and industry development, and ensuring the safe capture, transportation, utilization, and permanent storage of carbon.
  • Carbon capture: Carbon capture installations will be required to register with the Agency. A carbon capture installation is defined in the Bill as “an installation which carries out carbon capture and includes any associated technical facilities of such installation”.
  • Transportation and importation of CO2: It will be mandatory for any person transporting CO2 obtained through carbon capture to register with the Agency. The importation of CO2 for permanent storage obtained through carbon capture outside Malaysia will require an import permit granted by the Agency and the CO2 must comply with the CO2 stream acceptance criteria specified in Clause 28 of the Bill. Failure to comply with these provisions will constitute an offence punishable with a fine not exceeding RM 1,000,000, or imprisonment for a term not exceeding five years, or both.
  • Utilization of CO2: The requirement for registration and the manner of application for registration to utilize any CO2 obtained through carbon capture in Malaysia are set out in Part V of the Bill. The Bill prohibits the utilization of CO2 captured outside Malaysia and which has been imported into Malaysia for the purpose of permanent storage.
  • Assessment and permanent storage in offshore and inshore areas: The conduct of a geological assessment of potential storage complexes or geological formations in offshore or onshore areas will require a permit from the Agency and payment of such fees as may be prescribed by the Agency. In addition, an offshore or onshore (as applicable) storage licence will be required for the operation of a storage site in offshore or onshore areas for permanent storage of CO2 captured within or outside Malaysia.

The Bill imposes an obligation on the holder of an offshore or onshore storage licence who is operating, controlling, or controlling the operation of, the relevant storage site (“Operator”) to ensure that the CO2 accepted and injected into its storage site complies with the CO2 stream acceptance criteria specified in the Bill. The Operator is required to keep a register of the quantities and properties of the CO2 streams accepted and injected, including the composition of the stream.

The Operator is also responsible for ensuring that the storage site is operated in accordance with the CCUS practices specified in Clause 5 of the Bill, including providing to the Agency information which is relevant for the purpose of assessing compliance with the conditions of the offshore or onshore storage (as the case may be) licence.

The Operator will also be required to pay an injection levy, the rates of which shall be determined by the Minister responsible for matters relating to CCUS (and based on the risk and probability of risk of each storage site), which levy is for the purpose of long-term monitoring of each storage site by the Government.

  • Post-Closure Stewardship Fund: Clause 41 of the Bill seeks to establish the Post-Closure Stewardship Fund (“Fund”) which will be administered and controlled by the Agency. This Fund will consist of:
    • any sums provided by the Government;
    • any injection levy made by Operators to the Agency in relation to the transfer of obligations relating to monitoring, corrective measures, and remediation measures of the storage site (e.g. where the storage site is to be closed). It is worth noting that there is some ambiguity in the wording of Clause 41(2)(b), as it specifically refers to “offshore operators” in relation to the transfer of obligations under Clauses 32 and 40, which relate to the closure of offshore and onshore storage sites, respectively.
    • all monies earned from investments financed from the Fund.

This Fund will only be expended to cover costs borne by the Government for the long-term stewardship of storage sites after the transfer of obligations to the Government or for the purpose of promoting the development of the CCUS industry in Malaysia.

  • General provisions: Any person aggrieved by (i) any refusal to grant an offshore or onshore assessment permit or storage licence; (ii) the imposition of any condition or restriction on his permit or licence; or (iii) the revocation, suspension, or variation of his permit or licence, may appeal to the Minister within 30 days of being informed in writing of the same. The Bill also sets out the circumstances under which directors, compliance officers, partners, and other officers of a body corporate may be liable if the body corporate commits an offence under the Bill.

Comment

The Bill marks a significant step forward in Malaysia’s efforts to establish itself as a regional CCUS hub for South-east Asia and provides welcome clarity on the Malaysian regulatory framework for the CCUS sector.

The alignment between Singapore and Malaysia regarding CCS presents a strong foundation for advancing CCS as a regional decarbonisation strategy. Singapore’s lack of known suitable geological formations necessitates partnership with regional partners like Malaysia, while Malaysia may benefit from inbound investment, infrastructure development, and long-term economic gains.

As implementation frameworks take shape (e.g. regulations, technical standards, and bilateral instruments), companies pursuing CCS initiatives should monitor legal developments and engage early with authorities on both sides of the Causeway.

Reference materials

The press release issued by the Singapore Ministry of Trade and Industry about the MOU is available on its website www.mti.gov.sg.

The Carbon Capture, Utilization and Storage Bill 2025 can be found on the Malaysia Parliament website www.parlimen.gov.my.

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