Many people ask us about carbon offsets and carbon credits. In theory, they seem like a promising solution for addressing climate change while protecting forests. But in practice, their implementation is often inconsistent and complicated. Where we work in Sarawak, carbon offset projects are just starting to emerge, and we’re already seeing some alarming trends.
What’s the deal with carbon offsets and carbon credits? What are they?
A carbon offset is the claim that someone else, somewhere else, is reducing emissions or increasing carbon sinks, so you don’t have to. These claims of lower emissions or greater sequestration somewhere else can be purchased by businesses, governments or individuals. For example, a polluting company may purchase offsets from a project that is planting trees or allegedly preventing them from being cut down. The idea is to cancel out the company’s emissions by helping to reduce emissions elsewhere.
A carbon credit is a similar concept, but they are used within regulated markets. For example, a state government might issue a certain amount of credits in their jurisdiction or within an industry, and polluting companies need to hold enough credits to cover their emissions. If a company emits less, it can sell surplus credits to others that need them. Carbon credits are required for companies under some regulatory schemes and are sometimes voluntary.
In theory, this creates a financial incentive for limiting carbon emissions through forest protection and helps fund conservation projects. Projects can include renewable energy installations, energy efficiency improvements, methane capture from landfills, and forest conservation. Carbon credits are often generated through projects that conserve and restore forests because forests absorb carbon dioxide from the atmosphere.
The carbon credit system is gaining traction in Sarawak as a government-regulated system that is attractive to companies or states that are required by law or international agreements to limit their emissions. Carbon credits would allow them to meet these targets while maintaining flexibility in how they reduce emissions.
Aren’t carbon credits a great way to protect the forest using an economic model?
In theory, they could be. But the reality is more complex, especially in Sarawak. Here, timber companies—the very corporations responsible for decades of forest destruction and conflict with Indigenous communities—are now applying for permits to run carbon projects within their concessions and plantations. This raises serious concerns about the true effectiveness and intentions behind these initiatives. Can we trust the same entities that have profited from deforestation to now lead the charge in forest conservation?
In its efforts to attract more carbon credit investment, Sarawak has limited the tax on these projects to a mere 5% – much lower than similar schemes elsewhere in the world. This strikes us as a double whammy: destructive corporations continue to profit from the forest, while the state government forgoes potential tax revenue that could be directed toward better forest protection activities. Sarawak’s carbon credit regulations also fail to provide any incentives or royalties for communities whose forests are included in these projects.
Inherent Problems with the Model
Carbon offsets aren’t just under fire in Sarawak, there is growing global skepticism about their role in addressing climate change. Enforcement attorneys from the United States Environmental Protection Agency have even called them “false and unenforceable solutions that undermine the effectiveness of our other climate programs.” There are a host of technical issues with their design and implementation, including the inability to prove how much carbon has been sequestered, and the inability to prove that deforestation hasn’t simply moved to another area, and the inability to accurately determine baselines (what would have allegedly happened without the offset project). All of these problems result in enforceable and unmeasurable projects. What’s worse, using these false solutions pushes real solutions to the side.
What’s the impact on local communities?
In Sarawak, the situation becomes even more troubling when we consider the impact on Indigenous communities’ livelihoods. Some communities are being told they can no longer enter their forests to collect the resources they rely on daily. This echoes stories from around the world where carbon credit schemes have failed or where communities have been forced to withdraw because existing Indigenous land management practices were overlooked in the planning process. For many communities forests are not simply passive assets, but living resources that they actively manage through traditional ecological knowledge.
Instead of empowering local stewards of the land, carbon offset and credit schemes are often designed in a way that further marginalizes them. The architects and managers of the projects are usually large companies with profit incentives and limited interaction with communities who depend on the forests where the credits are generated. Forests are often shared between communities, with soft boundaries and communal use rights amongst many families. These schemes might try to monetize something that cannot be measured, quantified or sold. Deciding who should benefit from these projects must be decided communally, looking to traditional customs, or adat, as it is known in Sarawak. One thing we know for sure is that the benefits should not be doled out to logging companies that seldom take community interests into account.
Conclusion
While carbon projects could theoretically be part of the solution to climate change by encouraging limits on GHG emissions, their current implementation globally – and in Sarawak – is deeply problematic. We must remain vigilant and skeptical of projects that claim to protect forests while sidelining the very communities who have sustainably managed these lands for generations. One thing we do know for sure, is that there are better and simpler climate solutions available. The most effective way to protect forests is by investing in the Indigenous communities who call them home. Frontline communities are the best stewards.
