As companies and companies turn to carbon offsets in order to achieve net-zero emissions, what role can philanthropy play in the carbon credit ecosystem?
BY SARAH TAM
As companies and governments build out their net-zero roadmaps, many have turned to the promise of carbon offsets—measurable, verifiable emission reductions from certified climate action projects—to offset their emissions, while driving an economic model for conservation. If executed well, these projects can deliver benefits beyond reducing emissions, such as improving health, women’s empowerment, and conservation.
Yet, while carbon markets appear to be a win-win for protecting public land and achieving net-zero. Critics argue that carbon offsets allow companies to continue “business-as-usual” instead of pursuing a path towards absolute zero emissions. Others point to more pragmatic concerns: projects designed and implemented without meaningfully including communities could worsen risks faced by Indigenous groups, including land grabs and loss of livelihoods.
With private sector demand expected to outpace the supply of high-quality projects available to generate carbon credits, what role can philanthropy play in the carbon credit ecosystem?
As part of APC’s Climate Collective meetings, APC invited Dharsono Hartono, CEO of PT Rimba Makmur Utama (RMU), and Bill Pazos, Managing Director and Co-Founder of AirCarbon Exchange (ACX) to share their perspectives key challenges and best practices from their own experiences as carbon market players—and recommendations where philanthropy can engage.
Carbon markets help mobilise funding and reduce costs to give countries and companies the space to transition to a net-zero future. However, carbon markets continue to face critical challenges including low political will, low traceability of credits, and the lack of customisable investments. These are the challenges ACX—an active global exchange—aims to address in its bid to revolutionise voluntary carbon markets.
Nature-based solutions (NbS) are another pathway to addressing the climate challenge, but they must also be driven by their intention and social impact—not just on pure economic returns, but also on how it benefits local communities and the environment. This requires strong collaboration with mission-aligned stakeholders, including universities, government, and NGOs. And when a project is successful, the impact multiplies.
When it comes to building trust with local stakeholders, Dharsono is no stranger. The Katingan Mentaya Project, founded and managed by PT RMU, is an NbS project that aims to reduce deforestation in the heart of Central Kalimantan, Indonesia. Even before PT RMU received a license for the project, Dharsono spent six years working with local stakeholders in a bid to demonstrate that achieving sustainable development, climate mitigation, and biodiversity with a sound business model is achievable. Along the way, he and his team learned two key lessons: (1) trust between communities and the private sector, based on a mutual respect for nature, is essential; and (2) behaviour change for local communities requires actionable solutions.
Today, KMP generates an average of 7.5 million triple gold certified carbon credits annually, equivalent to taking 2 million cars off the road each year, and offers alternative livelihoods for the local community.
So, what is the role for philanthropy? Bill and Dharsono left members with three points:
- Support promising projects. Carbon projects are still in their infancy and require time to meet high standards and to change behaviours at the community level. Philanthropy can help fill funding gaps for promising projects rooted in community development and conservation.
- Foster community engagement. NbS are complex and require behaviour change where communities already exist. Communities must be engaged and involved from the start in order for projects to be successful.
- Support direct air capture technology. Carbon removal is necessary to avoid future emissions. One such method is to extract current emissions vis-à-vis carbon capture technologies. These solutions are expensive and require patient capital.
Carbon offsets offer another piece of the climate mitigation puzzle as a transitional tool. As the market evolves, so too will our understanding. In the long-term, companies that have committed to net-zero must find a way to reach their goal of reducing emissions, while developing economically viable solutions for communities and the environment. And these solutions, Dharsono and Bill emphasised, must be rooted in impact—only then can we get a holistic picture of what it will take to build a restorative economy.