When the former rebel leader Irwandi Yusuf became governor of Indonesia's Aceh province, he proclaimed a "green vision" for the war-torn region. Aceh's lush forests – still relatively pristine despite decades of civil conflict – would not be sacrificed for short-term profit, he promised. True to his word, he even chased down illegal loggers in his own jeep.

But, five years on, Mr Irwandi has dismayed supporters by authorising the destruction of a peat swamp forest which is one of the last refuges of the critically endangered Sumatran orang-utan. The move breaches a presidential moratorium – part of an international deal to save Indonesia's forests – as well as legislation protecting a conservation area where the Tripa swamp is located.

Aceh lies at the north-western tip of Sumatra, where three-quarters of the Tripa forest has already been replaced by palm oil plantations. Conservationists warn the remainder – home to the densest population of Sumatran orang-utans – is crucial to the ape's survival.

Global demand for palm oil is blamed for widespread forest destruction by the two main producers, Indonesia and Malaysia. The lowland forests, on Sumatra and Borneo, shelter the last orang-utans on the planet. The granting of a new permit to one of Indonesia's biggest palm oil companies, PT Kallista Alam, threatens another 4,000 acres of Tripa peatland. Although the area is comparatively small, the move could set a dangerous precedent, according to Ian Singleton, who runs the Sumatran Orang-utan Conservation Programme. "If this goes ahead, no forest is safe," he said.

Mr Irwandi, 51, used to be idolised by many Acehnese. He was a leader of the rebel movement, which fought for independence from Indonesia for 30 years, and was in prison in the capital, Banda Aceh, when the province was devastated by an earthquake and tsunami in 2004. The walls of his jail came crashing down. "I didn't escape from prison – it escaped from me," he said later. After fleeing the country, he helped negotiate the peace deal that granted Aceh limited autonomy and he became governor in 2006.

There are believed to be only 6,600 Sumatran orang-utans left in the wild, with up to 1,000 in Tripa on Aceh's west coast. Palm oil, along with the timber and paper industries, represents their biggest threat. The cheap and versatile oil is used in soap, biscuits and biofuels, and countless other products.

The peat swamps are renowned for their biodiversity and harbour a dozen endangered species including the white-handed gibbon, clouded leopard and giant soft-shelled turtle. They also hold massive carbon stocks which are released as trees are burnt and chopped down.

In Aceh, some locals call oil palm the "golden plant", the cash crop they hope will lift them out of poverty. In Tripa, though, the conversion of an ancient forest to a monoculture is causing hardship to communities, which depend on the peatland system for drinking water, fish and medicinal plants. Villagers, who accuse the palm oil companies of taking their land, have filed a criminal complaint against the governor.

Mr Irwandi – whose actions have been linked by some observers to his campaign to be re-elected next month – is also being sued by WALHI Aceh, an environmental group. "We're really disappointed with our governor," said Muhammad Nizar, the group's campaigns director. "It seems like he tries to get a good image in Indonesia and abroad, but he doesn't really care about the forest."

The two-year moratorium on new permits to log or convert primary forest and peatland was signed last May by the Indonesian President, Susilo Bambang Yudhoyono, as part of a $1bn (£637m) deal with Norway to reduce greenhouse gas emissions. Indonesia is one of the world's biggest carbon emitters, largely because of rampant deforestation.

But even without the moratorium, Tripa, a key orang-utan habitat because of its abundant fruit trees, should enjoy legal protection because it falls within a conservation area known as the Leuser Ecosystem. A vast swathe of tropical rainforest, it is the last place on earth where elephants, rhinos, tigers and orang-utans are found in one spot.

Mr Singleton said satellite imagery showed that Kallista Alam had been felling and draining the peat forest since 2010, long before the permit was granted. He alleged that the company had also lit illegal fires – seen by The Independent in June 2009 on Kallista's estate – to clear land in Tripa, designated a priority conservation site under the United Nations' Great Ape Survival Plan.

Environmentalists say orang-utans are under increasing pressure as their habitats and food sources shrink. The apes stray into fields on the edge of forests to raid fruit trees and are shot at by farmers, who capture their babies and sell them as pets. There are also claims orang-utans discovered in forests being cleared for palm oil are systematically slaughtered.

In the Indonesian part of Borneo, four employees of a palm oil company, Khaleda Agroprima Malindo, were arrested last month on suspicion of killing at least 20 orang-utans. Khaleda allegedly ordered its workers to carry out the "pest control" programme, offering a bounty of 1m rupiah (£72) per orang-utan. Those arrested include the senior estate manager and a supervisor. The company has denied the allegations.

The controversy in Aceh is embarrassing for President Yudhoyono, who stressed to an international conference in Jakarta last September the need to "walk the talk ... not just talk the talk" in relation to protecting Indonesia's forests.