Malaysia’s 1.5°C Energy Pathway Could Boost GDP By 2.4% And Create Over 1 Million Jobs By 2050 – IRENA

Malaysia has long been seen as a steady economic success story. For years, the country has recorded average annual GDP growth of more than 4 percent, helping raise incomes and improve living standards. But this progress is now increasingly at risk from climate change. Rising temperatures and shifting rainfall patterns are already making natural disasters more frequent and severe, and the effects could slow Malaysia’s development, widen social gaps, and place heavier pressure on the environment.

As one of Southeast Asia’s most ecologically rich countries, Malaysia is highly exposed to climate-related hazards such as flooding, landslides, and drought. These events do not affect everyone equally. Low-income households are often hit hardest because they tend to live in more vulnerable areas, have fewer resources to recover, and rely more heavily on climate-sensitive livelihoods. This makes climate action not only an environmental priority, but also a social and economic one.

The energy sector sits at the center of this challenge. It is Malaysia’s biggest source of greenhouse gas emissions, meaning that cutting pollution from energy production and use is critical for meeting the country’s climate goals. Malaysia has already set strong targets. It has pledged to reduce its greenhouse gas emission intensity by 45 percent by 2030 compared to 2005 levels, and it aims to reach net-zero emissions as early as 2050. To support these goals, the government has launched major national frameworks such as Ekonomi Madani and the National Energy Transition Roadmap. These plans are designed to push the country toward renewable energy while keeping growth inclusive and fair.

New analysis suggests that a faster energy transition could bring major benefits. Comparing a highly ambitious 1.5°C pathway with Malaysia’s planned energy approach shows clear economic gains between 2024 and 2050. Under the accelerated scenario, Malaysia’s GDP is projected to be about 2.4 percent higher. Industry is expected to grow strongly, with gross value added rising an extra 5.2 percent by 2050. A key driver is the electricity supply sector, which could contribute an additional USD 35 billion. These gains come from rising investments in renewables, energy efficiency, engineering, and construction, along with spillover benefits into services.

Employment outcomes are also promising. Total jobs across the economy are projected to be about 1.4 percent higher on average through 2050 under the faster transition. The energy sector sees the largest change. Its workforce could nearly double, climbing to more than one million jobs compared to about 600,000 under the planned scenario. By 2050, over a third of energy jobs — more than 390,000 positions — would be in renewables, enough to offset losses in fossil fuel industries. Solar and bioenergy stand out as the strongest job creators, with roughly 224,000 and 160,000 jobs respectively.

Beyond growth and jobs, the transition improves overall well-being. Malaysia’s Energy Transition Welfare Index score could rise from 0.29 to 0.55 by 2050, largely due to better environmental quality and stronger economic performance.

Still, success depends on fairness. Malaysia must ensure that new benefits are shared widely, not captured by a few. This means aligning energy policies with development priorities, expanding high-value industries and sustainable R&D, and investing in skills. Training programs should target women, youth, and vulnerable groups so they can participate in clean energy supply chains. Fiscal reforms are also needed, including phasing out fossil-fuel subsidies and shifting spending toward social protection. Finally, improving energy access through decentralized renewables is vital for rural regions such as Sabah and Sarawak. If Malaysia keeps inclusion at the heart of its strategy, the energy transition can become a powerful tool to reduce climate risks, ease inequality, and build a resilient low-carbon economy.