IPB University Sharia Economist Asserts Carbon Trading as a Legitimate Economic Right
Amidst the global climate crisis, carbon trading has emerged as one of the primary solutions to suppress greenhouse gas emissions. However, the halal status of this intangible commodity frequently raises questions among the Muslim community.
Addressing this issue, the Chair,am of the Department of Sharia Economics at the Faculty of Economics and Management (FEM) IPB University, Dr Khalifah Muhamad Ali, dissected the topic in depth during the Ramadan 1447 H Podcast organized by the Al Hurriyyah Mosque of IPB University.
“In Muamalah jurisprudence (Islamic civil law), the object of a transaction does not always have to be a physical object,” he stated during the session titled “Sharia Economic Review of Carbon Trading” on Monday (3/9).
Dr Khalifah explained that Islamic scholars permit transactions based on utilization (manfa’ah) as well as economic rights (haqq mālī). Therefore, carbon credits can be understood as an economic right stemming from emission reduction efforts, making their status legitimate as a transactional object under Sharia law.
The possible schemes for use in carbon exchange transactions include the bai’ al-huquq (sale and purchase of rights) contract as well as the ijarah contract, which focuses on benefits.
While acknowledging its legitimacy, he provided strictly defined conditions. Carbon trading can only be considered aligned with Muamalah jurisprudence if its implementation fulfills the principles of transparency and is substantiated by scientific verification regarding the volume of emission reductions.
“The system must truly uphold environmental goals. We must ensure that segments of the carbon market do not merely become a ‘license to pollute’ due to lack of proper supervision,” he emphasized.
He also highlighted that transactions in the carbon exchange must absolutely be free from elements of riba (usury), excessive gharar (uncertainty), and maysir (speculation). This is crucial considering the high volume of transactions in the national carbon exchange, which surged from 459.953 tons in September 2023 to 1.929.345 tons of CO2e by January 2026.
Furthermore, he reminded that protecting the Earth is essentially an act of worship. The concept of Maqashid Sharia (the objectives of Islamic law) is currently not limited to protecting religion, life, and wealth, but also places heavy emphasis on hifz al-bi’ah, or environmental preservation.
“Protecting the environment is not just an economic or policy issue, but also part of the spiritual mandate of humans as khalifah (stewards) on Earth. The economy of the future must not only be halal but also environmentally friendly,” he concluded. (/Rz) (IAAS/HNF)
