Indonesia, PNG restrictions may stifle carbon credit market

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Indonesia, PNG restrictions may stifle carbon credit market

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With two major carbon credit exporters in the Asia-Pacific—Indonesia and Papua New Guinea—declaring to cut back on generation, the fast-growing market is now facing challenges.

Papua New Guinea has halted new carbon credit transactions after a watchdog group raised concerns about a contract in the Oro province. Its administration resolved to strengthen the legal framework that governs voluntary carbon credits.

According to the country’s environment ministry, the prohibition is temporary and is in place to ensure appropriate stock take. It will also give time to audit the existing carbon programs.

Similarly, the Indonesian government delayed carbon project approval due to regulatory concerns. Credit issuances related with projects in North Sumatra and Kalimantan were halted.

Government around the world have vowed to reduce their greenhouse gas emissions under the climate agreements, prompting companies to purchase carbon credits. However, to avoid double counting emission reductions, those who sell credits are not permitted to include them in their own climate targets. To assure this, Indonesia and Papua New Guinea chose to impose new restrictions on the generation of forest carbon credits.

On top of the problem, Indonesia is concerned about the country’s rising private carbon projects, which appear to be losing control over their rainforest’s potential to store carbon.

The governments’ move has an impact on major carbon credit-generating projects like the Indonesian Rimba Raya REDD+ project on the island of Borneo, and the Katingan Mentaya Project.

The Katingan Mentaya Project is claimed to be the world’s largest emission-reduction forest project. The project offers local people jobs to conserve the dense forest, which is home to a variety of species.

Despite negative influence caused by the suspension, the governments’ restrictions on forest carbon credits are supported by some climate activists, who claim that private carbon credit initiatives are not doing enough to curb deforestation and that project developers can easily exaggerate the emission reduction result in the absence of projects.

As a result, the two countries’ restrictions on carbon credits will be able to strengthen investors’ trust in the credits and the market.

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