(Bloomberg) -- The future of one of the world’s largest carbon offsets projects is in doubt, after the Indonesian government revoked its license for violating local regulations.

The Ministry of Environment and Forestry’s action covers more than 36,000 hectares (88,958 acres) in Central Kalimantan, on the island of Borneo. The area is part of a project that has issued more than 30 million credits since 2013, according to data from non-profit CarbonPlan.

The government cited the license-holder, PT Rimba Raya Conservation, for three offenses: The company transferred its license to a third-party without ministry approval, operated beyond its sanctioned area, and failed to make required payments to the state, according to a statement from the ministry in March.

Given the project’s scale, the government’s action creates potential consequences for carbon exchanges, traders, and companies that have bought Rimba Raya credits to offset emissions. It also highlights the risks that can be obscured by multiple participants, and the threat of emerging and rapidly changing government regulations.

Carbon offsets are a key component of tackling climate change, allowing polluters to counter their emissions by buying credits from projects like forest reserves in Indonesia. Prices for the credits are expected to soar over the next few decades, creating a market that could be worth as much as $1 trillion by 2050, according to BloombergNEF.

In recent years, the voluntary carbon market has come under scrutiny for overblown green claims. Last year, the world’s top seller of carbon credits parted ways with its chief executive officer, following months of allegations that the company overstated the climate impact of the products it sold.

Read more: US to Advance Carbon Offset Standards to Prevent Greenwashing

The developments could also affect Rimba Raya’s business partners. Hong Kong-based InfiniteEARTH Ltd. has an agreement with Rimba Raya to sell the carbon credits and markets the project as its own. The company said in an email that it had registered and validated the Rimba Raya project under Indonesia’s new carbon registry and standard.

Toronto-based Carbon Streaming Corp. agreed in 2021 to buy more than 50 million Rimba Raya credits from InfiniteEARTH over the next 20 years. In a statement Friday, it said it is waiting for more clarity from InfiniteEARTH and the Indonesian government. 

The Indonesian government and Djonni Andhella, CEO of PT Rimba Raya Conservation according to his LinkedIn profile, didn’t respond to requests for comment.

--With assistance from Eddie Spence, Natasha White and Harry Suhartono.

©2024 Bloomberg L.P.