Scientists develop new model to help Malaysia set a fair and effective price on carbon
image: Modelling the social cost of carbon for Malaysia
Credit: Thirupathi Rao, Siti Indati Mustapa, Abdul Quasem Al-Amin & Adeel Ahmed
A new study has introduced the first Malaysia specific model for estimating the social cost of carbon, offering policymakers a clearer path toward meeting the country’s climate and biodiversity goals while protecting economic growth. The research, published in Carbon Research, highlights how Malaysia can leverage its extensive forest resources to reduce climate damages, lower mitigation costs, and accelerate progress toward net zero emissions.
The social cost of carbon is the monetary value assigned to the damage caused by every additional tonne of greenhouse gas released into the atmosphere. Governments worldwide use this metric to evaluate climate policies. Yet existing global models often overlook country specific factors such as national land use, carbon sinks, and economic structure. Malaysia’s current estimates are outdated and may not reflect the country’s forest potential or its growing economic and demographic trends.
To address this gap, researchers developed the Integrated Climate Model for Malaysia, known as ICLIM 2024R. The model adapts the well known DICE framework but is enhanced with Malaysia specific data on population, economic growth, industrial emissions, deforestation rates, forest carbon stocks, and protected areas. The team also introduced new functions that treat deforestation and carbon sinks as dynamic processes rather than fixed assumptions. This innovation allows policymakers to test how different conservation and climate strategies affect long term costs and benefits.
Using this new model, researchers evaluated five scenarios aligned with Malaysia’s commitments under the Paris Agreement and the Kunming Montreal Global Biodiversity Framework. The study shows that continuing with current policies will raise the social cost of carbon from 64 USD per tonne in 2025 to 212 USD per tonne by 2050. This sharp increase reflects higher climate damages and limited investments in mitigation or conservation. High carbon costs could also weaken Malaysia’s global competitiveness as major markets implement carbon border taxes.
In contrast, scenarios that expand forest conservation or halt deforestation produce significantly lower carbon costs. The Maximum Conservation Scenario delivers the strongest results. By doubling protected forest areas to meet the thirty percent conservation target by 2030, Malaysia can reduce the social cost of carbon to 23 USD per tonne in 2025 and 152 USD per tonne by 2050. This approach lowers net emissions, supports biodiversity, and keeps Malaysian products competitive in a low carbon global economy. It also avoids abrupt losses in timber revenue, since states can continue sustainable forest management practices while increasing carbon sinks through reforestation.
Extreme scenarios were also tested. One aggressive pathway that halts deforestation and expands conservation simultaneously by 2030 produces a negative social cost of carbon in the near term. Although appealing on paper, this scenario could reduce short term economic welfare and would require strong international cooperation on carbon markets. Another slow paced option delays conservation targets to 2050 but fails to meet global biodiversity commitments and leaves Malaysia vulnerable to higher climate damages.
The authors conclude that expanding forest conservation now is the most balanced and beneficial strategy. It supports climate mitigation and biodiversity protection while maintaining economic welfare across generations. The study recommends that Malaysia adopt a social cost of carbon beginning at 23 USD per tonne in 2025, increasing gradually to 152 USD per tonne by 2050. Revenue generated through carbon pricing could be reinvested in climate resilience, clean technology development, disaster recovery, and support for low income communities.
The authors note that future research could refine the model further by adding Malaysia specific climate damage functions, incorporating methane and nitrous oxide emissions, and distinguishing carbon sinks by forest type. These improvements would strengthen national climate planning as Malaysia advances toward a sustainable, climate resilient future.
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Journal reference: Rao, T., Mustapa, S.I., Al-Amin, A.Q. et al. Modelling the social cost of carbon for Malaysia. Carbon Res. 4, 18 (2025).
https://doi.org/10.1007/s44246-024-00182-5
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About Carbon Research
The journal Carbon Research is an international multidisciplinary platform for communicating advances in fundamental and applied research on natural and engineered carbonaceous materials that are associated with ecological and environmental functions, energy generation, and global change. It is a fully Open Access (OA) journal and the Article Publishing Charges (APC) are waived until Dec 31, 2025. It is dedicated to serving as an innovative, efficient and professional platform for researchers in the field of carbon functions around the world to deliver findings from this rapidly expanding field of science. The journal is currently indexed by Scopus and Ei Compendex, and as of June 2025, the dynamic CiteScore value is 15.4.