Evolution and drivers of CO2 and carbon intensity in Malaysia

Abstract

Malaysia, the second-largest economy in Southeast Asia, has abundant fossil energy resources and has experienced a fourfold increase in national carbon emissions since 1990. While its carbon intensity increased during 1990-2005, it has declined since 2005. However, limited research has applied input-output (I-O) analysis to examine Malaysia's emissions dynamics in a comprehensive manner. This paper addresses this gap by using the I-O framework to investigate the evolution and driving forces of Malaysia's carbon emissions and intensity over 2005-2020 using the latest dataset. The results show that Malaysia's carbon emissions and intensity are primarily driven by private consumption and exports. The dominant contributor to total emissions shifted from exports (58.8% in 2005) to private consumption (46.9% in 2020). The overall increase in absolute emissions is largely attributable to growing final demand (especially household consumption) and offset by emission intensity improvements. Similarly, for aggregate carbon intensity, the main contributor transitioned from exports (61.6% in 2005) to private consumption (44.5% in 2020). Changes in AEI at both aggregate and final demand levels are predominantly influenced by variations in emission intensity. Key sectors contributing to embodied emissions and AEI across final demand categories are identified, and the drivers of historical changes are analyzed. The paper concludes with policy implications to support Malaysia's low-carbon transition.