Climate Impact X suspends scandal-hit Kenya carbon project from flagship contract

SINGAPORE Exchange-backed carbon exchange Climate Impact X (CIX) has suspended the delivery of credits from a scandal-hit forest conservation carbon project in Kenya into its flagship contract, the Nature X. It said this is because the credits no longer meet its criteria for market acceptability and tradability.

The suspension kicked in a day after Wildlife Works, the US-based developer of the troubled Kasigau Corridor project, sacked the head of security at the project over “gross misconduct, including conduct in violation of the company’s policy against sexual harassment”.

The project developer also sacked the project’s human resources manager since he “created a culture of fear and intimidation that, according to interviewed personnel, prevented reporting of sexual harassment incidents”.

These actions were carried out after a Nov 6 report by the Kenya Human Rights Commission and the Centre for Research on Multinational Corporations alleged systemic sexual harassment and abuse at Kasigau.

In a Tuesday (Nov 21) market notice, CIX said that the suspension is effective immediately, and was decided upon after its review found that the project’s credits no longer meet Nature X’s qualifying criteria. Its governance protocol allows an urgent suspension in case of a market event or sudden loss of acceptance of any of the credits deliverable under the Nature X contracts.

The suspension is termed as temporary, however. This means Kasigau is placed under a “monitoring period”, during which its credits are not deliverable into all vintages of Nature X contracts, CIX said.

Nature X contracts are issued in vintages that span rolling four-year bands. The existing vintages of these contracts cover credits that are issued between 2016 and 2019, 2017 and 2020, 2018 and 2021, and 2019 and 2022.

The suspension effectively unallocated all credits from the Kasigau project from contracts that were prepared based on its previous delivery basket, which held credits from 11 forest conservation projects, but are not sold yet. “No new (Kasigau) credits can be allocated to the contracts until further notice,” CIX added.

As to what will happen to the Kasigau credits already traded under the Nature X contracts before the suspension date, a CIX spokesperson told The Business Times (BT) that completed trades cannot be reversed. However, any affected open orders on its carbon exchange will be cancelled, she said.

CIX, meanwhile, said that it will conduct further reviews of Kasigau’s adherence to Nature X’s qualifying criteria. Depending on the outcome, CIX will initiate either a formal and permanent project removal process or a formal addition process to reinstate the project within the contract. It said that whatever the outcome, it will seek market feedback before taking further action.

Adding context to the need for further reviews, its spokesperson told BT that its investigations to date, including conversations with the project developer, do not suggest that the allegations made against the Kasigau project are systemic. “We understand that the project developer has taken actions against the relevant staff and taken steps to minimise the risk of reoccurrence. We still believe that this is a quality project,” she added. She also said that CIX has a dual responsibility to both buyers and project developers.

According to price reporting outfit Quantum Commodity Intelligence, prices of Nature X contracts have inched up at the wake of Kasigau’s suspension. Contracts of 2018 to 2021 vintage settled US$0.02 higher at US$1.07 per carbon credit by the end of Tuesday.

Verra, the world’s biggest carbon-credit certifier, suspended future issuance of Kasigau credits on Nov 3, and is investigating the issue as well.

Another project deliverable under Nature X that also got suspended by Verra is the Southern Cardamom project in Cambodia. CIX’s list of 10 projects deliverable under Nature X continued to include Southern Cardamom on Tuesday.

CIX, meanwhile, updated that an additional project that will become deliverable under the Nature X contracts from Jan 2, 2024, is the Mataven project, which protects tropical forests in the indigenous reservation of the Mataven forest in Colombia.

While Kasigau credits are now removed from Nature X, CIX said that market participants can still trade standalone Kasigau credits on its exchange. They are also available on its marketplace platform, and accepted on its clearing and settlement service for privately negotiated transactions.