A Comparative Study between Government Support and Energy Efficiency in Malaysian Transport

The 2030 Agenda states that sustainable transport systems, as well as other associated energy systems and policies, would create a strong economic foundation for all countries. In this regard, countries need to pay more attention to their transport systems. This has been accomplished through a great deal of work and policies that they can enact, such as improving fuel efficiency and government support. Therefore, this study attempts to compare the impact of a 10% increase in government subsidies and a 5% increase in improvement in fuel efficiency to the transport subsectors in Malaysia using a computable general equilibrium model (CGE). Results suggest that fuel efficiency improvement is an effective policy in increasing economic growth, exports, investment, and household consumption for the entire economy. While both policies increase output, employment, investment, and household use across the transport subsectors, except water transport, the magnitude of the impacts is greater for improving fuel efficiency policy. Improving fuel efficiency, despite the reduction in energy consumption in the land and water transportation subsectors, has led to a rebound in the air and other transport subsectors. However, increasing government subsidies to transport subsectors increases energy consumption and CO2 emissions in these subsectors. The outcomes of this policy can be used for the future of sustainable development in Malaysian transportation systems.