Degraded forest in Borneo (Photo: M.Faqih/Climate&GIS Technical staff)
Indonesia's Ministry of Environment and Forestry has struck a blow to the Rimba Raya project on Borneo Island, one of the world's largest carbon offset initiatives, by revoking its license due to violations of local regulations.
The Ministry of Environment and Forestry's action affects more than 36,000 hectares in Central Kalimantan. This area is part of a project that has issued more thank 30 million credits since 2013, according to non-profit CarbonPlan.
In March, the government cited Rimba Raya Conservation, the license-holder, for three offenses: transferring its license to a third-party without approval, operating beyond its sanctioned area, and failing to make required payments to the state, according to a statement from the ministry.
The government's action against the project has potential consequences for carbon exchanges, traders, and companies that have purchased Rimba Raya credits to offset emissions, given the project's magnitude. It also underscores the risks associated with multiple participants and the volatility of government regulations.
Carbon offsets play a crucial role in addressing climate change, enabling emitters to offset emissions by purchasing credits from initiatives such as forest conservation projects in Indonesia. Prices for these credits are projected to rise significantly over the coming decades, potentially leading to a market valued at up to $1 trillion by 2050, as estimated by BloombergNEF.
In recent years, the voluntary carbon market has faced criticism for exaggerated green assertions. Last year, the leading seller of carbon credits saw its CEO depart amid accusations of overstating the climate benefits of its products.
The developments may also impact Rimba Raya’s business associates. InfiniteEARTH, headquartered in Hong Kong, has a deal with Rimba Raya to trade the carbon credits and promotes the project as its own. The company said that it had registered and validated the Rimba Raya project according to Indonesia’s new carbon registry and standard.
Carbon Streaming, a Toronto-based firm, entered into an agreement in 2021 to purchase over 50 million Rimba Raya credits from InfiniteEARTH over the next two decades. In a statement released recently, the company mentioned that it is currently awaiting further clarification from InfiniteEARTH and the Indonesian government.
