Eleven years ago Dharsono Hartono, a former JPMorgan Chase & Co. banker, spotted what he thought was a new way to make a fortune: climate change.The plan was to snap up rainforest in Borneo, preserve it from logging and sell carbon credits to big polluting companies in the developed world. The earth’s temperature was rising, and this was a way to profit by confronting the problem.  Investors around the world have poured money into assets like once-frozen farmland in Canada and groundwater basins in California, betting that warming temperatures will raise their value.  Another bet has been on what some investors hope will be the most profitable outcome of a warming climate: government regulation of carbon emissions. Those who correctly anticipate future government responses to climate change are likely to reap profits.

Mr. Hartono went in big. His company’s rain forest, a humid and swampy expanse home to orangutans and clouded leopards, is twice the size of New York City and has one of the largest carbon stores of any such project in the world.  Mr. Hartono has sold just 20% of his credits to environmentally conscious corporations voluntarily buying credits, and has lost around $20 million, burning through $5 million to $10 million a year in recent years. Other investors in Indonesia and Latin America who made similar bets, including one backed by Australian bank Macquarie Group , failed to sell credits and abandoned their rain-forest projects…

Only after actor Harrison Ford visited the project to shoot a documentary on climate change, and raised the issue with Indonesia’s forestry minister, did final approval come for most of the concession in October 2013. For an initial payment of around $3 million to the Indonesian government, Mr. Hartono’s company gained the rights to the forestland for 60 years.  By then, however, some environmentalists were questioning private carbon-selling projects like Mr. Hartono’s. They argued that buying up and preserving rain forest to sell credits wouldn’t decrease net deforestation, since palm-oil barons would simply work around the few protected plots in the forest.  U.S. legislation that would have put a price on carbon failed during the Obama administration. The European Union’s carbon market doesn’t include tropical forests amid worry that low-cost credits generated there would make it affordable to pollute…

The Paris climate accords are expected to lead to an international carbon market after 2020, where countries that exceed emissions targets can purchase offset credits from countries that reduce emissions beyond their targets, potentially opening up new opportunities for Mr. Hartono.

Excerpts fom One Man’s Money Draining Bet on Climate Change, WSJ, Dec. 27, 2018