This article first appeared in Forum, The Edge Malaysia Weekly on December 13, 2021 - December 19, 2021

In the run-up to the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow, the Intergovernmental Panel on Climate Change (IPCC) released in August such a bleak assessment on climate change that UN Secretary-General António Guterres described it as “code red for humanity”.

Global temperature from 2011 to 2020 was 1.1°C higher than pre-industrial levels and was projected to exceed the 1.5°C target of the Paris Agreement as early as 2040. The implication was that there would be more extreme weather events such as heatwaves, floods, droughts and hurricanes.

In response, the recently concluded COP26 issued the Glasgow Climate Pact that called for CO emissions to fall by 45% from 2010 levels by 2030.

However, according to the carbon-reduction plans (Nationally Determined Contributions or NDC) submitted by all countries, CO2 emissions in 2020 would actually be almost 14% higher by 2030 than in 2010. And when all the NDCs were input into a well-regarded climate model, it predicted that global temperature in 2100 would be 2.4°C higher than pre-industrial levels.

What does climate change mean for daily life in Malaysia? To begin with, Malaysians will feel hotter because the number of days exceeding 35°C could increase by more than 60 days by the turn of the century. For a farmer, his crop yields would be severely reduced because the number of consecutive dry days could increase by more than 15 days. And for folks living in low-lying areas with poor drainage systems, they will experience more dangerous flooding as daily rainfall could increase by 46% in 2100.

The 2021 NDC of Malaysia had a higher decarbonisation target than its 2015 NDC: Carbon emissions per unit GDP in 2030 would now be 45% lower than in 2005 instead of 35% lower. Perhaps a more accurate indicator of Malaysia’s decarbonisation ambition is the last-minute announcement by Prime Minister Datuk Seri Ismail Sabri Yaakob, when he unveiled the 12th Malaysia Plan (12MP) on Sept 27, that the country intends to be carbon neutral by as early as 2050. His announcement was unexpected because the 2050 target was not mentioned in 12MP.

Decarbonisation will be achieved through numerous measures, among which are the development of Malaysia’s Long-Term Low-Emissions Development Strategy (LT-LEDS) that will be completed by 2022, the development of a Domestic Emissions Trading Scheme (which would provide the economic incentive for firms to decarbonise), the commitment to keep at least 50% forest cover in Malaysia, and the incentivisation of the private sector to achieve net zero emissions (NZE).

It is critical for the private sector to do so because it accounted for more than 74% of total fixed investments in 2020. Several large corporations in Malaysia have heeded the prime minister’s call by declaring their commitment to achieve NZE by 2050, such as Petroliam Nasional Bhd (Petronas), Tenaga Nasional Bhd and Sunway Group, which have specified their strategies for how to get there.

A well-crafted NZE strategy should consist of the following key elements. First, a full and transparent account of the firm’s current level of carbon emissions, because, as famously put forth by Peter Drucker, “you can’t manage what you can’t measure”. Second, immediate actions to meet near-term targets in order to ensure efficient outcomes by 2050 because of the scale of the climate challenge and the long lifecycle of capital investments (for example, a typical coal power plant in the US operates for more than 40 years).

Third, longer-term commitments to develop and scale up new low carbon technologies to transform the present economy into an NZE economy. Fourth, the right institutional arrangements to ensure that the strategies are implemented effectively.

Petronas, Tenaga and Sunway have made full disclosures of their carbon emissions. In 2020, the national oil company emitted 44.2 million tonnes of carbon; Tenaga, 39.1 million tonnes; and Sunway, 207.9 thousand tonnes (14%, 12% and 0.06% respectively of the national total). Sunway has gone a step further in its carbon accounting by publicly disclosing the source of carbon emissions according to the types of energy used by each business unit. For example, its quarry business uses electricity, diesel and light fuel oil, and emitted 36.6 thousand tonnes of carbon in 2020 (around 18% of the firm’s total). This granular disclosure of the source of carbon emissions makes every business unit in the firm accountable for its emissions.

While 2050 is less than 30 years away, climate action needs to start now in order to be cost-effective. Sunway has set 2030 as the target for all its business units to reach peak energy efficiency through efforts such as optimising chiller operations, replacing traditional light bulbs with light emitting diodes (LEDs) and installing motion sensors to automate the switching off of electrical appliances when spaces are not being used. Petronas has committed to roll out 3,000mw of new renewable energy capacity by 2024 by deploying rooftop solar panels and building large-scale solar farms. Tenaga has made a significant pledge to stop investing in coal power plants, which will reduce its coal generation capacity by 50% by 2035 as old coal power plants are decommissioned.

New production technologies are necessary if the world is to achieve NZE without compromising on economic development. Petronas is investing in hydrogen, a clean and versatile energy that can be used for mobility, power and heating, as well as feedstock for industry. Currently, Petronas produces grey hydrogen (produced from natural gas) and blue hydrogen (produced from natural gas, but carbon emissions are captured). Moving forward, Petronas intends to produce ultra clean green hydrogen (produced through electrolysis of water and powered by renewable energy).

Sunway University formed a partnership with the Massachusetts Institute of Technology in 2017 to research carbon capture, utilisation and storage technology (CCUS) to make it commercially viable. It is most crucial for CCUS to be commercially viable because the International Energy Agency has identified carbon capture as one of the key pillars to transition away from a carbon-intensive energy system.

Tenaga is conducting research on converting waste to energy, for example, using food waste (which has high organic content) as feedstock for biogas plants. The company is also researching methods to make the residue of pressed oil palm fruit into an economical feedstock for biomass energy generation. This is particularly significant as Malaysia is one of the biggest producers of palm oil in the world.

Finally, every strategy needs the appropriate institutional arrangement to enable effective implementation. A central unit to coordinate the implementation of the NZE aspiration is vital because the journey involves many trade-offs, like short-term costs versus long-term benefits, and assignment of responsibilities and costs across different business units. Petronas established a corporate sustainability office in 2021 to drive the sustainability agenda across the group.

At Sunway, the entire workforce will be mobilised through an innovative internal carbon pricing mechanism to meet the challenging decarbonisation targets that have been set for each of its business units. The bonus for business units that fail to meet their decarbonisation targets will be lower than that of those that exceed their decarbonisation targets. This is a self-enforcing economic mechanism because it incentivises every Sunway business unit to constantly develop and implement new decarbonisation initiatives.

Increasingly more Malaysian firms are committing to NZE aspirations. However, these need to be backed up by NZE strategies that are properly sequenced and well-coordinated, and that incentivise decarbonisation actions, as exemplified by those at Petronas, Tenaga and Sunway. Moreover, Malaysian firms should consider further improvements, such as adopting decarbonisation targets under the Science Based Targets initiative (SBTi). An SBTi target for an industry is defined by a global decarbonisation pathway up to 2050 that is aligned with the Paris Agreement goals. The industry-specific SBTi target is then apportioned equally to all firms in the industry because all firms have an equal responsibility to decarbonise. Therefore, SBTi provides firms with a credible approach to set NZE targets beyond the near term up to 2050.

Currently, most Malaysian companies limit the scope of their NZE aspirations to only the operations of business units within their ownership. The typical Malaysian firm with NZE aspirations has generally not paid attention to the carbon emissions of its suppliers and customers. Clearly, it would be a great improvement if the entire supply chain, in which the firm is embedded, becomes carbon neutral. Sunway has been promoting its NZE aspirations to upstream suppliers and downstream customers by actively informing them about its experiences in decarbonisation (which resulted in lower production costs in most cases), and by working with its suppliers and customers to adapt Sunway’s decarbonisation practices for their own use. It must be mentioned that this outreach to the rest of the production value chain has aided Sunway’s business operations because of the increased trust in its relationships with suppliers and customers.

Climate change is an imminent existential threat. Combating it will require us to overhaul the ways we generate energy, the ways we produce and move goods, and the ways we grow food and manage waste. All Malaysian firms must commit to NZE now, develop their firm-specific NZE strategies carefully, and implement them with all alacrity. We owe this to our children.

Andrew Fan Chiah Howe is senior analyst at the Jeffrey Sachs Center on Sustainable Development, Sunway University. Woo Wing Thye is president of the Jeffrey Cheah Institute on Southeast Asia, president of the Jeffrey Sachs Center on Sustainable Development and acting CEO of the Asian Strategy & Leadership Institute (Asli).

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