Malaysia leverages biomass resources to decarbonise industrial heat post-COP30

As the COP30 climate summit concluded in Belém, Brazil, a clear and urgent message echoed among negotiators: the next phase of climate action must decisively address the “hard-to-abate” sectors, particularly the industrial heat segment. This focus carries profound implications for countries like Malaysia, where manufacturing remains a key economic driver and exporter.

In Malaysia, industrial heat is largely invisible in public conversations dominated by solar power, electric vehicle adoption, and grid modernisation. However, steam and thermal energy, primarily generated by boilers powered by natural gas, diesel, or coal, form the backbone of critical industries such as food processing, palm oil milling, paper production, rubber manufacturing, and chemical processing. Together, these sectors contribute substantially to the country’s industrial emissions. Yet, policy and financing mechanisms often overlook them, concentrating more on electricity generation.

Globally, industrial heat represents roughly half of total industrial energy consumption, a statistic that aligns closely with Malaysia’s resource processing and export-dependent economy. This fuels growing concern among Malaysian exporters who face tightening regulations and compliance standards from international frameworks. Notably, the European Union’s Carbon Border Adjustment Mechanism (CBAM), which will transition from reporting to a paid compliance phase in 2026, compels importers to acquire CBAM certificates. This policy change is set to affect Malaysian exporters directly by influencing market access and product competitiveness based on their emissions profiles.

Amid these challenges, Malaysia possesses a significant yet underappreciated strategic advantage: its abundant agricultural biomass resources. Palm oil industry residues, empty fruit bunches, palm kernel shells, and fibres, provide a locally available, renewable, and cost-efficient fuel alternative for industrial steam generation. Frost & Sullivan research estimates that Malaysia produces over 90 million tonnes of dried palm biomass annually, with a total biomass availability of approximately 182.6 million tonnes per year. This considerable supply offers a sustainable, long-term foundation for renewable heat solutions in key industrial sectors.

Already, palm oil mills utilising biomass boilers exemplify the potential of renewable steam to sustain industrial operations while reducing dependence on fossil fuels. Encouragingly, other sectors including paper, food processing, and sugar refining are actively exploring biomass-based thermal systems as part of broader decarbonisation strategies.

Complementing this resource advantage is Malaysia’s advancing engineering ecosystem. Local engineering firms and specialised providers have developed and deployed a diverse range of biomass steam systems across multiple industries. These installations demonstrate progress from merely servicing boilers to designing, fabricating, and commissioning complete renewable heat systems. Industry trends indicate improvements in combustion efficiency, fuel utilisation, and system reliability to support continuous industrial processes. Companies such as Wasco Greenergy report a rising volume of enquiries for renewable steam solutions, signalling growing recognition that decarbonising industrial heat is critical alongside electricity transition efforts.

The economics of renewable industrial heat are also shifting favourably. Biomass residues offer greater price stability compared to fossil fuels, owing to their local sourcing and reduced exposure to global market volatility. Malaysia’s anticipated adoption of carbon pricing and more stringent emissions reporting standards further strengthens the financial rationale for switching to renewable heat. Banking institutions are increasingly integrating industrial heat upgrades into sustainability-linked lending products, facilitating better access to financing at lower costs. Additionally, new commercial models such as “energy-as-a-service” are emerging, where providers build, own, and operate biomass steam plants, delivering steam under long-term contracts and thus lowering upfront investment for manufacturers.

Looking at the regional market, projections support strong growth trajectories. Frost & Sullivan expect the Malaysian biomass boiler market to grow at a compound annual growth rate (CAGR) of 9.0% between 2024 and 2029, driven by replacement of ageing mills and rising adoption across industries. Indonesia, as a neighbouring market, is forecasted to experience even faster growth with an 11.2% annual increase in biomass boiler demand during the same period.

This regional dynamic aligns with global renewable energy trends highlighted by international organisations. The International Renewable Energy Agency (IRENA) anticipates sustainable biofuels as a key focus of COP30 discussions, including potential ambitious pledges to quadruple biofuel production by 2035. The agency notes faster deployment rates have narrowed the gap in renewable energy capacity needed to meet 2030 targets, demanding an annual growth rate of 16.6% between 2025 and 2030.

Industry data further corroborates the expanding biomass boiler market. Globally, the industrial biomass boiler market is projected to grow from USD 122.81 billion in 2025 to USD 339.58 billion by 2034, with a compound annual growth rate near 12%. Similarly, the global woody biomass boiler market is expected to grow robustly at an 8.5% CAGR through 2034, fuelled by policy support and rising emphasis on sustainable alternatives to fossil fuels.

Within Malaysia, the industrial boilers market itself, with multi-tube and gas-fired boiler segments, is forecasted to expand significantly, reaching USD 622 billion by 2032, underscoring the scale and urgency of the sector’s transformation.

Taken together, these factors reveal a window of opportunity for Malaysia. The country’s abundant biomass resources, growing local engineering capability, and favourable economic environment position industrial heat decarbonisation as a highly impactful and achievable pathway to reduce emissions. It also strengthens Malaysia’s competitive edge as global markets increasingly factor carbon footprints into trade and investment decisions.

The technical solutions for renewable industrial heat already exist and are being designed and built domestically. The challenge ahead is to scale deployment with urgency, leveraging the momentum from COP30 to transition Malaysia’s heavy industries towards a more sustainable and resilient future.

Pankaj Kumar, managing director of Datametrics Research & Information Centre (DARE), encapsulates this perspective, noting that industrial heat decarbonisation could be “one of the country’s fastest and most impactful pathways to lowering emissions, while strengthening export competitiveness in a carbon-constrained global marketplace.” This pragmatic approach is essential for an economy where manufacturing remains a cornerstone, one that must innovate not just to survive but to thrive in an evolving global climate landscape.