Green Technology Incentives: Towards Achieving Sustainable Development in Malaysia

Green technology presents a solution in balancing the needs for economic development and responsibility towards the environment. As there is a growing global need in dealing with climate change; sustainable development and green technology need to go hand in hand in driving the economy, creating jobs and attracting investments.

In 2015, at the United Nations Climate Change Conference (Conference of Parties, COP21) in Paris, the Government has committed to reducing Greenhouse Gas (GHG) emissions by 45 per cent by 2030, based on 2005 GDP. This target was set for 35 per cent on an unconditional basis and 10 per cent on a conditional basis upon receipt of climate finance funding, technology transfer, and capacity building from developed countries.

The green technology agenda in Malaysia consists of a range of initiatives and policies which aim to increase the use of environment-friendly approaches in every sector to reduce the reliance on fossil fuels and environmental impact. This agenda will not only spur Malaysia’s economy and social well-being but also drives the by services/system providers as well as to motivate companies to acquire assets that have been verified as green. As part of Budget 2020 measures, the Government continues to prioritise green adoption to spur economic multiplier effects by extending the Green Investment Tax Allowance for the purchase of green technology assets and Green Income Tax Exemption on the use of green technology services until 2023. The ITE has also been extended for companies which undertake solar leasing activities so as to increase interest and participation in the Net Energy Metering Scheme(NEM) which was introduced by the Sustainable Energy Development Authority (SEDA). Green Technology Incentives: Towards Achieving Sustainable Development in Malaysia nation’s development trajectory on a low carbon and climate resilience pathway.

The National Green Technology Policy (NGTP), which was launched in 2009 recognised green technology as a driver to accelerate the national economy and promote sustainable development. It emphasises on four focus areas of green initiatives: energy, building, transportation and waste management.

Provisions of an Investment Tax Allowance (ITA) for the purchase of green technology assets and an Income Tax Exemption (ITE) on the use of green technology services and system were necessary to strengthen the utilisation of green applications. These initiatives serve to encourage investments in green equipment production and the adoption of green technology by services/system providers as well as to motivate companies to acquire assets that have been verified as green.

As part of Budget 2020 measures, the Government continues to prioritise green adoption to spur economic multiplier effects by extending the Green Investment Tax Allowance for the purchase of green technology assets and Green Income Tax Exemption on the use of green technology services until 2023. The ITE has also been extended for companies which undertake solar leasing activities so as to increase interest and participation in the Net Energy Metering Scheme (NEM) which was introduced by the Sustainable Energy Development Authority (SEDA).

Companies are advised to submit application for Investment Tax Allowance before incurring the first qualifying capital expenditure (CAPEX) on the related project or assets. As for Income Tax Exemption, companies are advised to submit application to MIDA before issuing the first invoice of qualifying business sale.

In 2019, a total of 427 green technology projects were approved with the investment amount of RM4.33 billion and 12 green services projects of a total investment of RM31.67 million.

As of January to September 2020, MIDA has approved 479 green technology projects with investments amounting to RM2.23 billion despite the challenging global economic environment; an encouraging indicator of potential high investment flows and interest in green technology in Malaysia. Over the past five years of the incentive initiatives, MIDA sees positive outcomes in increased renewable mix of power generation, green technology services providers and better waste management.

Amid the COVID-19 pandemic, MIDA received more than 900 applications from January to December 2020. This reflects a positive trend in companies that are committed to minimise the degradation of the environment, reduce greenhouse gas emission, promote a healthy life and increase the use of renewable energy as well as natural resources. It is certainly in line with the Government’s aspiration towards sustainable development goals (SDGs), aspired by the United Nations.

Source: MIDA e-Newsletter December 2020