Sabah’s new climate law sets stage for investment and regional carbon market cooperation
KOTA KINABALU – The passing of the Climate Change and Carbon Governance Enactment 2025 has positioned Sabah to attract greater investment while laying the foundation for a regional carbon market, said Chief Minister Datuk Seri Hajiji Noor.
“This legal foundation gives investors the certainty they need. But the bigger opportunity lies in Asean cooperation. To grow this space, we need a functioning regional carbon market with common standards, regulatory alignment and mutual recognition of credits,” he said at the Asean Sustainable Forestry Summit 2025 at Shangri-La Tanjung Aru.
“A fragmented system will only delay investment. Sabah is ready to work with other Asean countries to push this agenda forward. Our forests are already doing their part. Now the frameworks must catch up,” Hajiji added in a speech read by State Finance Minister Datuk Seri Masidi Manjun.
The new enactment establishes the Sabah Climate Action Council, a Climate Fund, a state-level emissions inventory and a framework for benefit-sharing with indigenous communities. Carbon rights have been legally affirmed as belonging to the State Government, and all carbon-related activities — from project approvals to credit trading — will now be governed by a clear and enforceable structure.
Hajiji noted that Sabah is already a net sink jurisdiction, absorbing more carbon than it emits, and contributes an estimated 36 per cent of Malaysia’s total carbon sequestration. “This is more than an environmental milestone. It is a strategic economic asset. In a carbon-constrained world, it is a competitive advantage we cannot afford to lose,” he said.
Forestry, Hajiji stressed, remains central to Sabah’s economy and future. Under the Hala Tuju Sabah Maju Jaya (SMJ) development plan, sustainable forestry has been embedded into the state’s long-term growth strategy. In 2022, Sabah introduced the Forest Plantation Development Action Plan, a 15-year blueprint to rehabilitate 400,000 hectares of degraded forest.
“This initiative is not just about replanting trees. It is about securing a reliable timber supply, generating green jobs and strengthening rural economies. Achieving these targets requires the continued commitment of Forest Management Unit licence holders and close partnership with the Sabah Forestry Department,” he said.
Hajiji urged licence holders to meet their obligations as the Forestry Department strengthens its oversight role. Once fully implemented, the plan is projected to contribute more than RM11 billion to Sabah’s GDP and create 40,000 jobs across the value chain.
Timber remains a strategic sector for Sabah, with timber royalties rising to RM171 million in 2024, up RM16 million from the previous year. Export volumes have grown steadily, particularly to Japan, the United States and Taiwan. “Our target is clear: to reduce dependence on natural forests and scale up plantation-based, sustainable timber production,” Hajiji said.
He also highlighted Sabah’s leadership in the palm oil industry as Malaysia’s largest producer, contributing over 25 per cent of national output. In 2024, Malaysia’s crude palm oil production reached 19.3 million tonnes, the highest in six years. “We are leveraging this advantage to attract investments in downstream processing, biofuels and palm-based innovation,” he said, citing facilities like the Palm Oil Industrial Cluster in Lahad Datu and the Sipitang Oil and Gas Industrial Park as hubs for value-added manufacturing and biomass development.
“Forestry and climate are now at the core of economic strategy for Sabah, for Malaysia and for Asean. We are no longer treating sustainability as optional. It is how we create jobs, attract investment and strengthen resilience,” he said.
Hajiji concluded by calling for partnerships to strengthen Sabah’s green economy. “With clear laws, strong institutions and the Hala Tuju SMJ roadmap, we are well prepared for the carbon market. Our forests and communities are already doing the hard work of carbon sequestration and biodiversity protection. But we cannot do this alone. We welcome capital, expertise and long-term partnerships from Asean and beyond. Invest in Sabah and you are investing in a State that is stable, strategic and serious about a green future,” he said.
The summit, jointly organised by the KSI Strategic Institute for Asia Pacific and the Asean Economic Club, gathered policymakers, business leaders and environmental experts from across Southeast Asia to address sustainable forestry and climate resilience.
