Eligibility for carbon projects in Sarawak is determined through several key criteria.

First, a project must cover at least 100ha, says Semilan Ripot, deputy director of forests in the Forest Department Sarawak. Developers must obtain a letter of consent from landowners — with similar requirements applying to alienated land — for areas within legally gazetted native customary rights land.

In addition, a carbon study permit (CSP) may be issued in areas under an existing timber licence, but the licence will be cancelled once a forest carbon licence (FCL) is granted to ensure that the two land-use regimes do not overlap, explains Semilan.

Sarawak also enforces a two-tier system to ensure project integrity. All carbon projects must first be validated and verified by an internationally recognised standard, ensuring that baselines, data and monitoring results are independently scrutinised.

At the state level, the licensing system for CSPs and FCLs — governed under the Forests (Forest Carbon Activity) Rules 2022 — provides an additional layer of oversight by preventing overlapping project areas and avoiding double issuance within the jurisdiction.

Meanwhile, project developers must pay Sarawak annual land-based royalties for every hectare under its FCL, along with a 5% ecosystem fee on carbon credit sales, ensuring the state benefits from these activities as well.

The state also retains the right to set aside an additional percentage of credits as a government buffer.

There is no clear answer currently as to how much the state could earn from these activities. For context, the Marudi Forest Conservation and Restoration project is expected to produce more than a million credits annually. Each carbon credit represents one tonne of greenhouse gas emissions reduced, removed or avoided from the atmosphere.

As at Dec 12, nature-based avoidance credits were assessed at roughly US$6.39 per tonne CO2e, according to Platts, a price assessment service under S&P Global Commodity Insights that tracks voluntary carbon market benchmarks. This would mean the project could generate millions of dollars for the company, a percentage of which goes to the state.

How should the income be managed? Dzul Hadzwan Husaini, a Sarawak-based economist, suggests that the state’s carbon income should be treated as a long-term sustainability fund rather than absorbed into general expenditure.

A portion of income from carbon credits should be reinvested in forest protection and ecological restoration to ensure the permanence of carbon stocks and safeguard the credibility of Sarawak’s carbon credits.

In addition, carbon revenue must be directed towards rural development, says Dzul. “By reducing structural disadvantages, carbon income can play a pivotal role in narrowing urban-rural inequality and lifting long-term living standards,” he says.

“Strategic use of carbon revenue such as improving rural roads, digital connectivity, clean water access, health outreach and education infrastructure can dramatically lower the cost of doing business and open pathways for higher-value economic activities.”

Sarawak must also adopt a transparent, rules-based benefit-sharing mechanism to maintain trust and accountability, says Dzul. This could be through a dedicated carbon fund with clear governance structures and community participation.

“When revenue flows visibly improve rural well-being and strengthen conservation outcomes, communities become active partners in protecting natural capital, and the carbon market itself gains greater stability and legitimacy,” he adds.

More carbon accounting needed

Having said that, there is no precise valuation of Sarawak’s total forest carbon stock currently, and definitive projections for credit volumes or revenue have yet to be set.

The main challenge in implementing carbon projects on the ground is the limited availability of comprehensive and reliable historical baseline data, which restricts the capacity of the Forest Department to accurately quantify carbon stocks and project potential emission reductions, says Semilan.

“A precise valuation of Sarawak’s total forest carbon stock is contingent upon detailed measurement, verification and final market agreements; preliminary estimates indicate substantial value,” he says.

Sarawak is in the process of developing a state-level carbon registry, which could address this problem. “This registry, akin to those maintained by international carbon standards, is intended to make relevant project information publicly accessible, thereby enhancing transparency and market confidence,” adds Semilan.

Meanwhile, Sarawak’s carbon potential should not be limited to forest-based projects, says Soon Hun Yang, founder and CEO of Eco-Ideal Consulting Sdn Bhd.

He says the state could develop a range of other carbon project types from nature-based solutions such as mangrove restoration and improved agricultural land management to technology-based initiatives such as carbon capture, waste-to-energy and eligible renewable energy projects.

Forest carbon projects are a test of whether keeping forests standing can generate viable long-term revenue, rather than relying solely on income from logging and land development.

For Samling Group, the Marudi Forest Conservation and Restoration Project acts as a pilot to assess whether nature-based carbon credits can provide an alternative income stream while supporting forest protection.

This comes as the Malaysian timber group is prioritising industrial tree plantations and sustainable forest management.

The Marudi project — the first carbon project to be licensed in Sarawak — is now in the final stages of validation. SaraCarbon Sdn Bhd, a subsidiary of Samling, is developing the project.

Once validation is complete, the project will move into the Monitoring, Reporting and Verification phase, after which an independent auditor will review the results. If verified, the chosen carbon standard will issue the project’s carbon credits.

“We are addressing the final findings by the validation body in order to finalise the project design document before submitting to Verra for their technical review to complete the validation,” says Francois Blignaut, carbon project lead at SaraCarbon.

The Marudi project is being developed using the VM0007 REDD+ methodology under Verra, the world’s largest voluntary carbon credit issuer. The annual issuance expected of the project is expected to fall between 1.3 million and 1.4 million carbon credits.

The project covers 25,675ha, comprising 21,409ha designated for avoided planned deforestation and degradation and 3,806ha for conservation intact wetlands. It excludes areas currently occupied by community settlements or used for agriculture, which will continue as usual, says Blignaut.

Avoidance credits are important

The Marudi project will generate avoidance or reduction credits, as its carbon gains come from protecting peat areas and preventing the forest from being cleared or degraded.

The original project design included some removal credits with plans to reforest degraded areas, says Blignaut. Verra no longer recognises these restoration-based removals under the VM0007 methodology it uses, but SaraCarbon still intends to carry out restoration planting.

There is preference for removal credits because they deliver a tangible climate benefit by physically drawing carbon dioxide out of the atmosphere. Avoidance credits are sometimes criticised for preventing emissions that have not yet happened, which makes climate impact less direct.

Blignaut says, however, that avoidance credits are just as important in economies such as Malaysia. If countries such as Malaysia were to rapidly expand agricultural land, millions of hectares of forest could be cleared, releasing huge amounts of carbon.

This means that protecting intact tropical forests and peatlands should be recognised as a legitimate form of climate action, he says.

Carbon credit projects must be assessed on their baseline and additionality before they can be registered.

For the Marudi project, the baseline is based on the scenario of the land being developed into a commercial tree plantation, which is the original status of the land. Additionality arises because these avoided emissions would not occur without the project.

Non-governmental organisations (NGOs) in Sarawak are wary that carbon projects in the state are moving ahead with inadequate protection of indigenous people and local community rights.

They are concerned about weak implementation of free, prior and informed consent (FPIC), unclear information provided to villagers, and carbon deals that could compromise native customary rights (NCR) land.

June Rubis, co-founder of Building Initiatives in Indigenous Heritage, says many communities remain confused about basic facts such as whether their NCR land falls inside project boundaries, who signed agreements, how long commitments last and what they may lose control over.

“If people are still confused about the basic facts — the duration of the agreement, who controls what, what happens when they say no — then, by definition, the ‘informed’ part of FPIC has not been fulfilled,” says June.

Celine Lim, managing director of Miri-based NGO SAVE Rivers, says: “There have been engagement sessions carried out by companies that claim communities living in the areas need to obtain permission before entering the forest to forage, hunt, fish or carry out any other traditional forest activities they have practised for generations. This is both a shock and concern, as communities have never needed to obtain anyone’s permission to enter their own forest for their livelihood.”

These concerns have not escaped the Marudi Forest Conservation and Restoration project.

Francois Blignaut, carbon project lead of SaraCarbon Sdn Bhd, says communities remain free to carry out activities such as hunting and collecting non-timber forest products and for subsistence.

“To safeguard biodiversity and ensure sustainability, we have engaged local communities as forest guards to mediate and monitor the wildlife populations, allowing the natural habitat of diverse flora and fauna to thrive for continued conservation and preservation,” he adds.

“This will promote and maintain the integrity of the forest ecosystem while supporting community livelihoods and activities with minimum impact to the forest equilibrium.”

Registered NCR land, villages and cultivated land are excluded from the project

SaraCarbon also engaged Poline Bala, professor of anthropology and director of Institute of Borneo Studies at Universiti Malaysia Sarawak, as a consultant to assist with reaching out to the local communities.

Poline has led community-engaged research teams for more than 25 years in Sarawak, Sabah and Peninsular Malaysia.

For this project, she headed a multidisciplinary team responsible for conducting community and social engagement in 58 villages involving both local and indigenous communities. The team conducted a five-stage engagement process — from preliminary scoping to the final presentation of study findings.

FPIC was also used as a framework and practice during the engagement, she says. “The biggest challenge for us was the operationalisation of the concept as a framework simply because there is no ‘law’ of the land to refer to,” she notes.

In this regard, most communities felt they were not overtly pressured, although some worried that timelines were externally driven and could create the sense that decisions were being rushed. Others felt the prior element of FPIC was not fully met, as consultations took place only after key project decisions had already been shaped, she says.

She adds that the biggest gap was in the informed component. “Carbon accounting, credit valuation and long-term land-use implications are complex, and many villagers asked for clearer, repeated explanations,” says Poline.

In addition, communities felt they were in a position to meaningfully give or withhold consent by the mid-stages of engagement.

“Later, differing opinions and interpretations began to emerge, however, owing to options such as a bamboo project, land clearing for oil palms plantations, paddy projects and the involvement of NGOs that do not subscribe to the idea of forest carbon,” she says.

“Overall, communities appreciated the consultation process but stressed that information needs to be iterative, not one-off, and ideally facilitated in local languages.”

NCR land rights and boundaries must be secured

The main concerns raised during the engagement sessions at Marudi included land rights and NCR boundaries and long-term commitments such as how long the land would be locked in and whether this would limit the flexibility of future generations.

To address these concerns, NCR and indigenous territories must be recognised and secured in law and spatial planning, says June. “NCR landowners and indigenous communities are rights holders, not stakeholders. In practice, that means clear recognition of NCR and native territories in law and in practice. So, these areas are not treated as empty ‘state land’ for carbon deals.”

Villagers were also uncertain about how revenue would be distributed and whether any portion would directly reach the community.

June says a fair and transparent model must have full transparency around projected revenues and costs, community participation in designing the benefit-sharing mechanism, and benefits that reach the wider customary landowners.

SAVE River’s Lim adds that benefit sharing must also include commitment by companies and government agencies to develop non-market approaches. “This could be done by supporting and recognising community-led efforts to climate solutions like protecting their communal forest reserves as well as recognising their Tagang and reforestation efforts,” she says.

June warns that expanding carbon trading without strong governance and clear community rights carries several risks. For instance, long-term contracts could tie up NCR land for decades, limiting community use of their own territories, while carbon rules could restrict traditional practices.

“If Sarawak insists on moving ahead, doing it properly would mean slowing down on carbon and speeding up on rights such as resolving land claims, legislating FPIC, ensuring independent oversight and allowing communities to choose different climate finance options and not only carbon credits,” she says.