Wildfires Threaten Indonesia’s Katingan Mentaya Carbon Project, Putting Peatland Climate Credits at Risk

Indonesia’s latest wave of wildfires is tearing through rainforest, plantations and farmland—but the damage could also extend into a fast-growing corner of the country’s climate economy.

Blazes in Central Kalimantan are burning close to the boundary of the Katingan Mentaya Project, one of Indonesia’s newly launched forest and peatland conservation initiatives designed to prevent greenhouse gas emissions. The project works by keeping carbon-rich ecosystems intact—particularly peatlands, which can release large quantities of carbon when drained or burned—and then documenting those avoided emissions so they can be converted into verified carbon credits for sale.

The threat is not limited to a single site. Across Indonesia, fires are now endangering four recently established carbon-credit projects that collectively cover about 225,000 hectares of forest. These schemes generate emissions credits by preventing deforestation and degradation, and the credits associated with them are valued in the hundreds of millions of dollars.

The premise of these projects is straightforward: by protecting forests and peatlands that might otherwise be cleared or degraded, developers can claim a measurable climate benefit—reduced emissions compared with a projected “business-as-usual” scenario. That benefit is then audited and issued as credits that companies or other buyers can use toward climate targets. But when fires ignite inside or near project areas, the same landscapes that were supposed to remain stable carbon stores can become sources of emissions, potentially undermining both climate claims and financial returns.

The Katingan Mentaya Project illustrates the stakes. Located in Central Kalimantan province on the island of Borneo, it is intended to shield a large expanse of forest and peatland from destruction. Its ability to generate credits rests on maintaining the integrity of that ecosystem over time—meaning that wildfire, whether it burns inside protected zones or degrades nearby areas, poses a direct risk to the project’s core climate promise.

Indonesia’s annual fire season has long been fueled by land clearing, degraded peatlands and dry conditions that can allow small burns to spread. When peat catches fire, it can smolder underground and prove difficult to extinguish, releasing carbon and haze for extended periods. For carbon projects dependent on avoiding emissions, that volatility introduces a major challenge: ensuring that credited reductions are durable in the face of a growing fire threat.

As these projects enter the market, the fires are testing whether forest-based credits can remain reliable instruments for climate finance in landscapes prone to burning. For investors and credit buyers, the immediate question is whether the projects can prevent damage and continue to verify the emissions reductions they were launched to deliver.

Why it matters

Forest and peatland carbon projects are meant to turn conservation into a revenue stream, but wildfires can erase claimed emissions benefits and put large credit valuations at risk. Communities, project developers, and companies buying credits could all be affected if fires compromise verification and long-term carbon storage. What happens during this fire season will be an early indicator of whether Indonesia’s new forest-credit initiatives can withstand the realities of climate-driven and human-caused burning.