A CRUCIAL component of the solution to the problem of climate change lies in its roots. The fossil fuel-driven Industrial Revolution did not just usher in an era of unparalleled global prosperity and economic growth; it introduced a largely obstinate coupling of economic growth and greenhouse gas (GHG) emissions. It wasn’t until the 1990s, however, that this coupling was truly recognised as a problem.

Many nations across the world have since made attempts to reverse this relationship, in efforts to mitigate the projected damages from climate change. Many have succeeded; some to a greater extent than others. Yet, with the issue not showing significant signs of abatement, much work remains to be done.

Malaysia’s Biennial Update Report to the United Nations Framework Convention on Climate Change (UNFCCC) highlighted that over 75% of national GHG emissions in 2011 came in the form of carbon dioxide (CO₂). Over half of these CO₂ emissions arose from energy industries, predominantly for the purposes of electricity generation, putting CO₂ emissions reductions from our electricity grid at the forefront of any successful future mitigation action. This is where the coal problem becomes strikingly apparent.

While the contribution of coal towards total electricity generation in Peninsula Malaysia hovered below 10% until 2000, this figure has increased steadily since the turn of the millennium. Projections by Suruhanjaya Tenaga (ST), Malaysia’s energy industry regulator, indicate that the coal share of electricity generation will rise above 55% through to 2026. The Ministry of Energy, Green Technology, and Water extends these projections to 2030.

Such statistics are emblematic of a major failure in planning on the part of the Malaysian government. Instead of strengthening national energy security by diversifying our electricity grid through renewable energy, ST plans to increase our reliance on an entirely imported, carbon-intensive energy source for electricity generation – despite the threat of climate change, and Malaysia’s international commitment to reducing its emissions intensity of GDP by 45% by 2030.

How can we hope to achieve a decoupling of economic growth from GHG emissions if our reliance on the dirtiest fuel source on Earth continues to increase? The status quo electricity generation mix in Malaysia already accounts for a significant proportion of national emissions – our electricity grid should thus provide a tremendous avenue through which to sharply mitigate our future contributions to climate change.

With more coal, we will squander this opportunity. The role of ST – and by extension, the government – is crucial in lowering national emissions, since it controls the process of tendering permits and licences for electricity generation and supply. Approving the development of new coal power plants, and failing to phase out old ones, is representative of bad policymaking.

More emphasis must be placed on cleaner energy sources. While even combined-cycle natural gas plants represent a better option than coal-fired alternatives, increasing our investments in renewable energy sources (e.g. solar photovoltaic (PV), large-scale solar, hydro, biomass, biogas, and wind) would be best.

Such investments require substantial financing mechanisms. Diverting the intended expenditure on imported coal towards investments in renewable energy technologies would be useful. The best option for Malaysia would be to impose a ‘carbon tax’, and use these revenues to invest in clean energy infrastructure. Singapore, for instance, has recently announced plans to impose a tax of USS$5 per ton of CO₂-equivalent emissions on large-scale polluters, and aims to utilise these funds – and more – “to support worthwhile projects which deliver the necessary abatement in emissions.” Malaysia should follow suit.

The concept of a carbon tax is rooted in basic economic principles. GHG emissions represent an externality; as such, its detrimental environmental effects are not factored into our use of, say, coal to power our electricity grid. The optimal carbon tax fully internalises this externality, by pricing into the use of carbon-intensive energy sources the environmental harm it causes. It is simply a responsible policy response to the fact that unabated GHG emissions are causing climate change, and climate change is highly likely to impose monumental costs on our society moving forward.

Emissions trading schemes are often proposed as an alternative to carbon taxation; for the Malaysian context the latter is preferred, as it provides a stable price signal to power producers and companies, minimises the involvement of government, and avoids the creation of a market subject to potential manipulation.

Imposing a high-enough carbon tax would serve multiple purposes: it reduces the fiscal attractiveness of coal-fuelled power generation; provides a significant level of funding for clean energy alternatives; and, sends the signal to major emitters across the country that polluting our nation comes at a cost. This would, in turn, boost the contributions of low-carbon energy to our electricity grid, spur emitters to invest in abatement action, and play a big role in helping our nation achieve the desired decoupling of growth from emissions. – February 25, 2018.

* Darshan Joshi is an Analyst at Penang Institute in Kuala Lumpur. He holds a Bachelor’s degree in Economics from the University of New South Wales, and a Master’s degree in Public Policy from the University of Chicago. His true passions lie in the analyses of global energy- and environmental-related issues. He views climate change as the most significant issue to face contemporary society.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.