Sabah's carbon trade deal bogged down with legal flaws, says lawyer

KOTA KINABALU: The controversial Nature Conservation Agreement (NCA) involving a two-million-hectare of state forest reserve for carbon credit trading cannot move forward as it was legally flawed.

Legal advisor to Sabah Government, Tengku Datuk Ahmad Fuad, said the agreement did not conform with the Sabah Biodiversity Enactment 2000, which required all exploitation of biological resources to be first approved by the director of the Biodiversity Institute with the approval of the Biodiversity Council.

The agreement – signed on Oct 28, 2021 with Singapore-based Hoch Standard Pvt Limited – fails to take into account the legal requirements that are needed to be obtained from the two bodies that oversee all conservation and sustainable use of natural capital, he said.

Furthermore, he said an approved "benefit sharing agreement" with the locals must be in place to guarantee that the native communities benefit from it and be developed by funds generated from the utilisation of biological resources (natural capital).

"It fails to provide guarantees to natives and community rights," he said while delivering a paper titled "From local to global-learning from Sabah and the region's sustainable development journey Borneo" at the Borneo Rainforest Law Conference here on Wednesday (Feb 28).

ALSO READ: NCA controversy blocked Sabah from cashing in on carbon credit trade, says Kitingan's aide

Fuad was defending the state government's caution over rushing the NCA deal in apparent response to lawyer Anuar Mohd Ghani, political secretary to Deputy Chief Minister Datuk Seri Dr Jeffrey Kitingan, who at an earlier session said that the NCA controversy including the legal objection of Sabah Attorney-General Datuk Nor Asiah Yusof had affected Sabah's efforts in capitalising on carbon trading.

He noted that Nor Asiah should be commended and not criticised for taking the principled stand given the political pressure and public criticism by certain quarters.

"She has ensured that Sabah laws are followed in the implementation of the NCA.

"Nor Asiah is aware that the NCA in its current form does not comply with the requirements of the Sabah Biodiversity Enactment 2000 or the Forest Enactment 1968.

"The NCA only provides for the profits to be shared with the Sabah government and fails to acknowledge or compensate the local community directly.

"If implemented, it would breach the terms of the Biodiversity Enactment because 'free prior and informed consent' (under section 24B of the Enactment) has not been complied with or provided for in the terms of the NCA," he said.

ALSO READ: Technical issues main hurdle to get NCA’s carbon credit sales start, says Sabah Chief Minister

Furthermore, Fuad said the company has been allocated with 600,000ha of protected forest (Class I) for carbon trading under the agreement, it needs to now find other commercial forest areas to carry out restorations or rehabilitation to qualify for carbon trading."The pilot project cannot proceed using Class I forest reserve areas because commercial exploitation of such areas is completely prohibited by Section 15 of the Forest Enactment 1968.

"There are, according to the state forest officials, no 'unencumbered Class II or III' forest reserve areas available since most, if not all, are subject to existing Sustainable Forest Management Agreements or are part of other Forest Management Unit schemes," he said.

Without the 600,000ha pilot project, Fuad said the NCA cannot provide the government with proof of concept and the agreement cannot proceed.

Fuad said the 'Totally Protected Areas' are unsuitable for carbon credit generating projects as it was not in line with Article 6 of the Paris Agreement that specified carbon credits could only be generated if the area concerned is under threat of deforestation.

Apart from the legal and technical issues, Fuad said the NCA also faces other challenges.

He said the state Attorney-General's Chambers in exercising due diligence were still waiting for Hoch Standard and its owner Dr Ho Choon Hou to provide details on the company's experience in carbon trading.

He said the NCA should be amended for the sake of transparency as under the agreement there is no mechanism to ensure that Hoch Standard sells Sabah's carbon credits at a fair market price.

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