The future of one of the world’s largest carbon offsets projects is in doubt, after the Indonesian government revoked its licence for violating local regulations.
The Ministry of Environment and Forestry’s action covers more than 36,000 hectares in Central Kalimantan, on the island of Borneo. The area is part of a project that has issued more than 30 million credits since 2013, according to data from non-profit CarbonPlan.
The government cited the licence-holder, PT Rimba Raya Conservation, for three offenses: The company transferred its licence to a third-party without ministry approval, operated beyond its sanctioned area and failed to make required payments to the state, according to a statement from the ministry in March.
Given the project’s scale, the government’s action creates potential consequences for carbon exchanges, traders, and companies that have bought Rimba Raya credits to offset emissions. It also highlights the risks that can be obscured by multiple participants, and the threat of emerging and rapidly changing government regulations.
Carbon offsets are a key component of tackling climate change, allowing polluters to counter their emissions by buying credits from projects like forest reserves in Indonesia. Prices for the credits are expected to soar over the next few decades, creating a market that could be worth as much as US$1 trillion ($1.37 trillion) by 2050, according to BloombergNEF.
In recent years, the voluntary carbon market has come under scrutiny for overblown green claims. Last year, the world’s top seller of carbon credits parted ways with its chief executive officer, following months of allegations that the company overstated the climate impact of the products it sold.
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The developments could also affect Rimba Raya’s business partners. Hong Kong-based InfiniteEARTH Ltd. has an agreement with Rimba Raya to sell the carbon credits and markets the project as its own. The company said in an email that it had registered and validated the Rimba Raya project under Indonesia’s new carbon registry and standard.
Toronto-based Carbon Streaming Corp. agreed in 2021 to buy more than 50 million Rimba Raya credits from InfiniteEARTH over the next 20 years. In a statement on April 26, it said it is waiting for more clarity from InfiniteEARTH and the Indonesian government.
The Indonesian government and Djonni Andhella, CEO of PT Rimba Raya Conservation according to his LinkedIn profile, did not respond to requests for comment.
See also: Commentary: Want the market to treat carbon like money? Be ready for the same scrutiny
Learn more about the carbon markets:
- ‘We love debating over things; we love clickbait titles’: Gold Standard CEO defends carbon markets at GenZero summit
- At COP28, carbon market players attempt to recoup trust after global scandal
- Voluntary carbon market body publishes rulebook for credible use of carbon credits
- Singapore-backed carbon credits data platform CAD Trust launches 20-member user forum
- Verra CEO resigns after 15 years, president appointed in February set to take over
- Are carbon credits credible?
- IETA responds to The Guardian's claims that carbon offsets are 'worthless'
