Carbon Credits in Sabah: Kuamut, the New Laws and the NCA Explained

What is a carbon credit, and why does Sabah have them?

A carbon credit represents one tonne of carbon dioxide (or its equivalent) kept out of the atmosphere, for example by protecting a forest that would otherwise be logged. Companies buy credits to offset their own emissions.

Sabah has a lot of forest to protect. The state energy plan, SE-RAMP 2040, counts 3,574,468 hectares of forest reserves, 48.6% of the state, as a carbon sink. In February 2026 the Chief Minister said Sabah's Totally Protected Areas, a narrower category, had reached 2.227 million hectares, about 30.06% of the state, after 216,000 hectares were added. See Sabah's forests and protected areas.

What is the Kuamut project?

The Kuamut Rainforest Conservation Project covers 83,381 hectares of forest in Sabah. Its credits were the first Malaysian carbon credits auctioned on Bursa Carbon Exchange:

Source: The Edge, 22 August 2024. The 13th Malaysia Plan describes it as "the first Malaysian carbon credit auction". Bursa Carbon Exchange's first-ever auction, on 16 March 2023, sold credits from projects in China and Cambodia.

What laws govern carbon trading in Sabah?

Two state laws were passed in 2025:

• Forest Enactment 1968 amendments (passed 17 April 2025): all carbon trading activities need a licence. Applications go through the Chief Conservator of Forests at the Sabah Forestry Department and need written state Cabinet approval; for projects on private land, only the landowner or their representative can apply. Penalties for unlicensed activity are fines of RM100,000 to RM5 million, up to five years' jail, or both.
• Sabah Climate Change and Carbon Governance Enactment 2025 (passed 8 July 2025): provides for the recognition, registration and ownership of carbon rights and credits, a Sabah Climate Action Council, a climate registry and inventory centre, and a Sabah Climate Fund. On native customary land, carbon activities must involve consultation with the native communities concerned, with consent, participation and benefit-sharing built into project proposals.

Status as of September 2026: we have not found confirmation of the date the 2025 carbon governance enactment came into force.

What happened to the Nature Conservation Agreement?

The Nature Conservation Agreement (NCA) is a forest carbon agreement involving the Sabah government and a company, Hoch Standard. In February 2022, referring to the agreement signed the previous October, Sabah's Attorney-General, Datuk Nor Asiah Mohd Yusof, said the NCA "in its present form is legally impotent", and that until the designated area is ascertained and incorporated, "each and every term, condition and penalty in the proposed NCA is rendered non-binding and unenforceable".

Among the outstanding conditions she listed were identifying the designated area, a management plan, consent from affected native communities, agreed carbon pricing, independent oversight and due diligence on Hoch Standard.

What is the state government's position now?

In September 2026, Chief Minister Hajiji Noor said Sabah "will not allow unvetted carbon market projects to be rushed to market or traded on speculation", and that it is in Sabah's commercial interest "to uphold the highest standards of environmental, social, financial, and governance integrity".

We have not found an official figure for Sabah's total carbon credit revenue or the number of licensed carbon projects.

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