This article investigates policy constraints for the environmental goods sector in Malaysia based on the dimensions of market-based (including regulatory) instruments and trade policies. In-depth structured interviews with the government and key industry players are conducted, and six overarching themes constraining the efficacy of the instruments and policies were identified. The findings suggest that incentives and loans for this sector are skewed to manufacturers and low-risk projects, respectively. The major policy gaps in this sector are mostly related to procedural issues, namely non-transparent information, non-uniformity of requirements and complex documentation for certification, licensing and permits.