Sabah’s Moment. Why This State Must Seize Its Carbon Leadership now

KUALA LUMPUR, December 4, 2025 – With the Sabah State Election concluded and new line of State Cabinet securing a renewed mandate, the time has come for decisive action. All eyes are now on Sabah to fully activate the Sabah Climate Change and Carbon Governance Enactment 2025, launched earlier this year. The stakes have never been higher, not just for Sabah, but for Malaysia’s climate future and economic competitiveness in the rapidly expanding global carbon market.

Why Sabah Must Lead Now

Malaysia’s Carbon Powerhouse

Sabah isn’t just another state. It’s Malaysia’s environmental backbone. Contributing an estimated 36% of Malaysia’s total carbon sequestration while representing 25.8% of the nation’s forest area, Sabah punches well above its weight. With 4.68 million hectares of forest cover (62% of the state’s land area) and over 3.8 million hectares designated as protected areas, Sabah holds the natural capital that Malaysia desperately needs to meet its climate commitments.

For Blue Carbon, the numbers are even more striking. Sabah’s mangrove forests account for 59% of Malaysia’s total mangrove area. This isn’t just environmental significance. It is also it’s strategic national importance.

As a Blue carbon specialist, I cannot overstate the urgency and opportunity before us. Mangrove ecosystems are among the most carbon-dense habitats on Earth, sequestering carbon at rates up to four times higher than terrestrial forests. They store carbon not just in biomass, but in deep soil deposits that can lock away CO2 for millennia. When we protect or restore a hectare of mangrove, we’re not just preserving trees, we’re safeguarding one of nature’s most powerful carbon vaults.

The Federal Law is Coming

The federal Rang Undang Undang Perubahan Iklim (RUUPIN) is expected to be tabled in Parliament by late January 2026, with the establishment of a yet-to-be-announced “Coordinating Agency.” This creates a narrow but critical window. By moving decisively now, Sabah can now establish operational precedents before federal regulations fully take effect. It can secure its autonomous authority over carbon resources by piloting and showcasing more high integrity carbon projects. Also, being able to demonstrate to federal lawmakers what effective carbon governance looks like in practice.

Global Market Timing

The voluntary carbon market is grew rapidly in Sabah in the last 2 years, with corporate demand for high-integrity credits surging coming from the one Sabah project. Malaysia Airlines’ adoption of Kuamut credits in September 2024 signals growing domestic appetite. International buyers increasingly seek verified, community-centered projects, exactly what Sabah has proven it can deliver.

A Framework Built on Hard Lessons

Unlike jurisdictions starting from scratch, Sabah has already weathered its storm. The controversial 2021 Nature Conservation Agreement with Hoch Standard was painful, but transformative. The resulting legislative framework, namely the Sabah Climate Change and Carbon Governance Enactment 2025 passed in July 2025, and the Forest Enactment Amendment of April 2025, represent some of the most comprehensive carbon governance in the region.

It is interesting that the framework delivers full-fledged of the following:

Clear authority: Two-tier governance with the Sabah Climate Action Council (SCAC) setting policy and an appointed director overseeing implementation

Complete lifecycle management: From the Sabah Climate Registry and Inventory Centre handling MRV systems to the Sabah Climate Fund financing initiatives

Serious enforcement: Mandatory licensing for all carbon activities, with penalties up to RM5 million and five years’ imprisonment

Indigenous rights protection: Free, Prior, and Informed Consent (FPIC) formally integrated, with benefit-sharing requirements

Revenue mechanisms: Levies and annual royalties on carbon credits generated in Sabah

This isn’t theoretical in Sabah, it’s now operational law, waiting to be fully activated.

The Kuamut Vindication

The Kuamut Rainforest Conservation Project didn’t just restore Sabah’s reputation. It established a gold standard. Protecting 83,381 hectares through a public-private partnership, Kuamut achieved what many thought impossible after Hoch Standard.

BeZero Carbon’s highest rating for improved forest management projects globally

Gold Level Climate status under CCB Standards

800,000+ tonnes of annual CO2e reductions verified under Verra standards

Successful domestic market launch at RM50 per credit on Bursa Exchange

Blue-chip buyers such as Petronas, Maybank, Gas Malaysia, Yinson Holdings, and Malaysia Airlines

Critically, Kuamut proved that transparency, indigenous rights, and commercial success can coexist. The project’s community engagement with Kuamut and Karamuak communities had shown to deliver jobs, sustainable businesses, and co-designed social program hadshowed the world that Sabah learned its lessons.

Federal Confidence Restored

Perhaps most tellingly, on August 27, 2025, Finance Minister II Datuk Seri Amir Hamzah Azizan announced the Federal Government would partner specifically with Sabah via the Sabah Maju Jaya Secretariat and Sabah State Forestry Department in order to develop Malaysia’s blue carbon platform and policies.

Why did MOF choose Sabah? Because the Federal Government now trusts Sabah to do this right. That trust is precious political capital that must be converted into action before the moment passes.

The Cost of Hesitation

Bureaucratic Drift

Sabah’s streamlined regulations were designed to enable faster project approvals than Sarawak’s more detailed and careful framework. This is a competitive advantage, but only if execution delivers. If bureaucracy bogs down implementation, Sabah’s legislative superiority becomes meaningless. The credibility established by Kuamut will erode rapidly if subsequent projects face years-long approval processes.

Market Momentum

The carbon market rewards consistency and volume. Kuamut was a powerful proof of concept, but one project does not make a market. International buyers need a pipeline of verified projects to justify establishing Sabah relationships. Institutional investors who showed interest post-Kuamut need to see systematic deal flow, or they’ll look elsewhere.

Climate Urgency

This isn’t just about economics. Malaysia has committed to achieving net-zero emissions by 2050 and reducing emissions intensity of GDP by 45% by 2030. Sabah’s forests and mangroves are critical to meeting these targets. Every tonne of CO2 that could be sequestered or avoided through Sabah projects but isn’t because frameworks aren’t operational, it brings Malaysia closer to missing its Paris Agreement commitments.

Regional Competition

While Sabah deliberates, Indonesia is scaling its carbon market aggressively, the Philippines is developing its own frameworks, and even Cambodia and Vietnam are entering the space. Southeast Asia’s carbon market is being carved up now. The regions and nations that establish track records in 2025–2026 will dominate for the next decade.

What “Full Activation” Must Mean

With electoral uncertainty behind them, Sabah’s new leadership must translate legislative excellence into operational reality.

What do I think the immediate priorities are?

Operationalize the Sabah Climate Registry with clear, fast-track registration processes for carbon rights

Staff and empower the implementing state agency with adequate resources and authority to approve projects efficiently

Launch the Sabah Climate Fund with initial capitalisation to demonstrate commitment

Establish clear MRV standards aligned with international best practices while avoiding unnecessary complexity

Create a project pipeline roadmap identifying priority areas for carbon project development

Engage indigenous communities proactively to identify collaborative opportunities before projects are proposed

Market Sabah aggressively to international buyers and project developers through roadshows and partnerships

The Sabah Advantage

Sabah possesses what few jurisdictions can claim. It has natural capital, legal framework, proven execution, federal support, and renewed political mandate. All at the same time. This convergence is rare and fleeting.

Sarawak has shown to accelerate this Carbon Credit space well. The next 12–18 months will determine whether Sabah becomes one of Southeast Asia’s leading carbon market, generating revenue, protecting forests, empowering communities, and advancing climate goals. Or whether this moment of advantage slips away into bureaucratic inertia while competitors seize the opportunity.

The legislation is passed. The election is won. The framework is built. The credibility is restored. The federal partnership is offered. The market is waiting.

Now Sabah must act, decisively, transparently, and swiftly, to claim the leadership position that is within its grasp. Malaysia’s climate future may well depend on it.​​​​​​​​​​​​​​​​

Norita Ja’afar plays a role as Task Force Leader for Carbon Credit Development in Southern Malaysia. She is also a Blue Carbon Project Developer across multiple Malaysian states committed to advancing coastal ecosystem restoration and carbon finance throughout the region.