6 October 2025

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Introduction
On 1 August 2025, Malaysia gazetted the Carbon Capture, Utilization and Storage Act 2025 (‘CCUS Act 2025’), following Royal Assent on 22 July 2025. Pursuant to P.U. (B) 355/2025, the Minister of Economy, Datuk Seri Amir Hamzah, has appointed 1 October 2025 as the date on which the CCUS Act 2025 comes into operation (save for Part VII (Assessment and Permanent Storage in Onshore Areas)). In conjunction with this, the Government has also issued the Carbon Capture, Utilization and Storage (Offshore Permit and Licensing) Regulations 2025 (‘CCUS (Offshore Permit and Licensing) Regulations 2025’), which set out detailed procedures for offshore permits and licences.

The CCUS Act 2025 represents a landmark step in Malaysia’s journey towards achieving its climate targets. For the first time, the country has introduced a dedicated legal framework governing the capture, transportation, utilization, and permanent storage of carbon dioxide.

Scope and Regulatory Oversight
The CCUS Act 2025 applies to Peninsular Malaysia and the Federal Territory of Labuan^[1], and is to be read together with other existing written laws. At its core, the CCUS Act 2025 establishes the Malaysia Carbon Capture, Utilization and Storage Agency^[2], which will be responsible for licensing, monitoring, enforcement and policy recommendations. The Agency will also administer the Post-Closure Stewardship Fund^[3], which finances the long-term monitoring and remediation of storage sites after closure. Under the Regulations, the Agency will also be supported by a “competent technical entity for offshore storage” tasked with advising on technical standards, evaluating permit and licence applications, and conducting inspections^[4].

Key Features of the CCUS Act 2025 & Regulation
One of the CCUS Act 2025’s central features is the mandatory registration regime. All operators of carbon capture installations must be registered with the Agency^[5]. Similarly, anyone transporting CO₂ by road, rail, water, pipeline or other means must be registered^[6], and any company that intends to use domestically captured CO₂ for industrial purposes is also required to register^[7]. However, the CCUS Act 2025 draws a sharp distinction when it comes to imported CO₂. While locally captured CO₂ may be utilised for approved purposes, imported CO₂ cannot be utilised at all^[8] and it may only be brought into Malaysia for permanent storage.

To this end, the CCUS Act 2025 imposes strict rules on the importation of CO₂. Carbon dioxide captured outside Malaysia may only be imported if it is intended exclusively for storage and if it meets the prescribed acceptance criteria under s. 28 of the CCUS Act 2025. An import permit from the Agency must be obtained, and any contravention of these rules attracts significant penalties, including fines of up to RM1 million and/or imprisonment of up to five years.

For companies exploring or operating storage projects, the CCUS Act 2025 creates a two-tier licensing framework. An assessment permit is required before conducting geological studies and site characterisation, both for offshore and onshore areas. To operate a storage site, companies must then obtain an offshore storage licence or an onshore storage licence. Under the Regulations, an offshore assessment permit grants exclusive rights to conduct geological assessments for up to three years, subject to extension^[9], while only holders of such permits are eligible to apply for offshore storage licences^[10].

Applicants for offshore storage licences must demonstrate technical competence, financial capacity, and provide detailed documentation including site characterisation results, storage models, monitoring plans, corrective measures plans, emergency response plans, and financial security^[11]. A licence, once granted, confers exclusive rights to operate the storage site^[12] but is subject to strict compliance obligations.

The CCUS (Offshore Permit and Licensing) Regulations 2025also impose robust operational and closure obligations. These include risk assessment and management reports, emergency response and shutdown safety plans, continuous monitoring of CO₂ streams and the surrounding environment, annual reporting, and corrective action in case of leakage. Operators must also maintain financial security throughout the project lifecycle.

To ensure the safe closure of projects, storage sites cannot be closed without meeting the prescribed conditions and issuance of a closure certificate, after which operators remain liable for at least 10 years before obligations can be transferred to the Government, subject to strict conditions. In addition, operators are required to contribute to an injection levy, which finances the Post-Closure Stewardship Fund.

The CCUS Act 2025 also introduces strong compliance and enforcement provisions. Offences carry penalties of up to RM2 million and/or five years’ imprisonment. Corporate liability provisions^[13] extend responsibility to directors, managers and officers of companies, who may be held personally liable unless they can demonstrate that offences occurred without their knowledge or consent and that due diligence was exercised.

Implications for Businesses
The CCUS Act 2025 will have significant implications for a wide range of industries. Energy and oil and gas companies may see opportunities to repurpose depleted reservoirs for CO₂ storage or integrate CCUS into enhanced oil recovery. Heavy industries such as cement, steel and power generation will be required to register capture installations and comply with monitoring and reporting obligations, though doing so may also strengthen access to sustainable financing and enhance ESG credentials. Transport and logistics providers handling CO₂ must comply with the registration requirements. At the same time, the new framework gives foreign investors greater certainty and confidence in pursuing CCUS projects in Malaysia.

Key Takeaways & Conclusion
The CCUS Act 2025 is Malaysia’s first dedicated law regulating the full CCUS chain, from capture to permanent storage. The CCUS Act 2025 signals Malaysia’s commitment to tackling climate change while positioning CCUS as a driver of sustainable economic growth. With the CCUS Act 2025 now in force from 1 October (save for Part VII (Assessment and Permanent Storage in Onshore Areas)), businesses across energy, manufacturing, and infrastructure sectors should immediately assess how the CCUS Act 2025 applies to their operations. The introduction of the Offshore Permit and Licensing Regulations 2025 further provides clarity on the permitting and licensing framework for offshore storage activities. Businesses are encouraged to prepare early for both compliance requirements and the new opportunities created under Malaysia’s CCUS regime.

Authors:

Disclaimer: The contents do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.

^[1] s. 2 CCUS Act 2025.

^[2] s. 6 CCUS Act 2025.

^[3] s. 41 CCUS Act 2025.

^[4] r. 4 CCUS (Offshore Permit and Licensing) Regulations 2025

^[5] s.15 & s.16 CCUS Act 2025.

^[6] s. 17 & s. 18 CCUS Act 2025.

^[7] s. 21 & s. 22 CCUS Act 2025.

^[8] s. 23 CCUS Act 2025.

^[9] r.8 – r.10 CCUS (Offshore Permit and Licensing) Regulations 2025

^[10] r.13(4) CCUS (Offshore Permit and Licensing) Regulations 2025

^[11] r.14 & r.15 CCUS (Offshore Permit and Licensing) Regulations 2025

^[12] r.17 CCUS (Offshore Permit and Licensing) Regulations 2025

^[13] s. 50 CCUS Act 2025.

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