As COP30 concluded in Belém, one clear message emerged from global climate negotiations: the next phase of climate action must focus on hard-to-abate sectors, including the often overlooked area of industrial heat. For Malaysia, where manufacturing is a key driver of economic growth and exports, this shift carries significant implications, reports New Straits Times.
While public discussions frequently highlight solar energy, electric vehicles, and grid upgrades, Malaysia’s industrial sector relies heavily on steam and thermal energy. Industries such as food processing, palm oil milling, paper production, rubber manufacturing, and chemical processing depend on boilers powered by natural gas, diesel, or coal. These activities make up a large share of industrial emissions yet receive far less policy and financial attention than electricity generation.
Industrial heat, though not visible to most Malaysians, is central to economic activity. Globally, heat represents half of industrial energy consumption. Malaysia’s strong focus on resource processing and export-oriented manufacturing suggests a similar share locally.
As international climate frameworks demand visible emissions cuts, Malaysian exporters will face growing scrutiny over how they decarbonise heat—not just electricity. With the EU’s Carbon Border Adjustment Mechanism (CBAM), supply-chain ESG audits and Scope 3 reporting shaping future market access, industrial heat decarbonisation becomes increasingly urgent. From 2026, CBAM transitions from reporting to paid compliance, directly affecting Malaysian exports.
Malaysia holds a strong but underutilised advantage: agricultural biomass. Palm residues such as empty fruit bunches, palm kernel shells and fibres provide a renewable, abundant and cost-effective fuel source for steam generation. Frost & Sullivan estimates Malaysia produces more than 90 million tonnes of dried palm biomass annually, with total biomass availability reaching 182.6 million tonnes—enough to ensure long-term supply for renewable heat solutions.
Palm oil mills already operating biomass boilers show that renewable steam can reliably support operations while reducing dependence on fossil fuels. Other sectors—including paper, food processing and sugar refining—are now exploring biomass-based thermal systems as part of their decarbonisation plans.
Malaysia’s engineering sector has quietly advanced in thermal-system development, with several domestic firms deploying biomass-based steam systems across mills and factories. These installations show that local engineers are increasingly capable of designing, fabricating and commissioning full renewable heat solutions, not only maintaining them.
Performance varies across technologies and providers, but industry trends point toward improved combustion systems, better fuel efficiency and reliable long-duration operations. Local companies such as Wasco Greenergy report rising inquiries, reflecting a growing understanding that industrial decarbonisation requires tackling heat as well as electricity.
For many industries, switching to renewable heat is becoming more financially attractive. Biomass residues offer stable pricing because they are locally sourced and less exposed to global fuel-market volatility. Malaysia’s move toward carbon pricing and stronger reporting standards also positions renewable heat as a hedge against future compliance costs.
In addition, banks increasingly classify industrial heat upgrades under sustainability-linked financing, improving access to funds and lowering borrowing costs. Some energy providers now offer “energy-as-a-service” models, in which they build, own and operate biomass steam plants while supplying steam under long-term contracts—reducing upfront investment for manufacturers.
Malaysia’s renewable heat sector is expanding in line with industrial needs. Frost & Sullivan projects the Malaysian biomass boiler market will grow 9% annually between 2024 and 2029, supported by demand from ageing mills and broader industrial adoption. Indonesia is expected to see even faster growth at 11.2% annually, highlighting Southeast Asia’s growing interest in renewable industrial heat.
These trends show that the region’s transition toward renewable heat is driven not only by environmental goals but also economic opportunity.
Despite progress in the electricity sector, Malaysia has yet to address emissions from industrial heat. After COP30, three areas require urgent action:
A national transition plan for industrial heat, including efficiency standards and incentives for boiler replacement.
A structured biomass value chain with clear feedstock standards, certification and traceability.
A dedicated climate-finance pipeline to help manufacturers—especially SMEs—upgrade thermal systems.
If Malaysia acts now, industrial heat could become one of the most effective and fastest pathways to reduce emissions while strengthening export competitiveness in a carbon-constrained world. The country has immense biomass potential, strong engineering capability and available solutions already being built locally.
The challenge ahead is not technological innovation—it is scaling existing solutions, and doing so with urgency.
