Colombia's draft decree on land based carbon credits could destabilise existing nature based projects

A draft decree regulating land based mitigation activities in Colombia contains provisions on crediting periods and the ownership of carbon credits that market participants say could place severe additional financial strain on existing nature based projects if the text is enacted as written. The concerns have been raised directly with Carbon Pulse by stakeholders operating in what is already described as a weakened Colombian carbon market. The timing is particularly difficult for project developers who have made long term financial commitments based on the regulatory conditions that existed at the time of project design.

The crediting period provisions are central to the anxiety. Carbon projects depend on predictable timelines to amortise development costs and generate returns for conservation activities and community benefit sharing. If the draft decree shortens or restructures crediting periods for existing projects retroactively, the financial models underpinning those projects could collapse. Changes to credit ownership rules compound the problem by introducing uncertainty about who can legally transfer or retire credits that have already been generated or contracted.

For corporate buyers with Colombian nature based offsets in their voluntary carbon portfolios, the draft decree creates immediate questions about the ongoing validity and market value of those holdings. Companies using Colombian REDD+ or other land based credits to address residual emissions or meet voluntary commitments will need to track this regulatory process closely. Legal reviews of existing purchase agreements and an assessment of force majeure provisions may become necessary depending on how the final text reads.

The Colombian situation is part of a wider pattern of host country regulation catching up with voluntary carbon market activity that developed under lighter touch conditions. As Article 6 of the Paris Agreement continues to be operationalised and national governments assert greater authority over carbon credit issuance and transfer, the risk profile of nature based credits in emerging market jurisdictions is being reassessed by buyers and standard setters alike. The regulatory uncertainty is adding a country risk premium that did not exist in earlier project vintages.

Market players speaking to Carbon Pulse are urging the Colombian government to engage with project developers and investors before finalising the decree, warning that the current draft risks not only harming existing projects but deterring future conservation finance into the country. The outcome will be watched closely by buyers and developers active in other Latin American jurisdictions where similar regulatory updates are under discussion, including Brazil, where the federal carbon market framework is still being built out.