CDC2024: Indonesia’s Carbon Market Looks to Regulatory Clarity for Growth
More regulatory clarity is needed to tap into Indonesia’s carbon market potential following a moratorium on international trading that has stalled the market’s growth for years, participants at the Carbon Digital Conference 2024 held Dec. 9-11 in Jakarta, Indonesia, said.
Discussions at the event focused on aligning domestic standards with international frameworks and addressing barriers and opportunities to enable the market’s progress.
Vice Minister of Environment Diaz Hendropriyono emphasized the key task of improving the national carbon registry (SRN-PPI) in this effort, described as the backbone of Indonesia’s market infrastructure.
“It has to be user-friendly, cost-effective, and fast,” Diaz said on Dec. 11, stressing the need to reduce credit registration delays and cut transaction costs. Carbon projects in Indonesia must be registered in the SRN-PPI to be formally acknowledged and claimed for crediting.
Plans are underway to streamline project pre-feasibility stages and expand the number of validation and verification bodies (VVBs). “We currently have around five to six VVBs, and we are working to accredit nine more soon,” Diaz added. “The more VVBs we have, the more competition, which will hopefully lower prices and reduce bottlenecks.”
Indonesia has long been a key supplier to global carbon markets, particularly through nature-based solutions such as the Katingan Peatland Restoration and Rimba Raya REDD+ projects. A white paper released by PwC and the Indonesia Carbon Trade Association (IDCTA) last week projected that the country could generate 1.28 billion carbon credits by 2030, translating to $6.8 billion to $15.2 billion in corresponding adjustment revenue and $0.6 billion to $1.5 billion from non-corresponding adjustments.
While Indonesia is open to collaboration under Article 6 of the Paris Agreement, it will prioritize domestic climate goals. “Carbon trading must support the achievement of our NDCs,” Diaz said. The country has already signed bilateral agreements with players, including Japan, under the Joint Crediting Mechanism. However, certainty around corresponding adjustments remains essential to instill confidence among international participants.
Stakeholders noted Indonesia’s potential to meet global demand for carbon credits, including under Article 6 and the CORSIA aviation offsetting scheme. “There is interest from countries like Singapore and Japan in sourcing Article 6-compliant credits globally to fulfill their NDCs,” said Fam Wee Wei, Singapore’s Director of Carbon Mitigation and International Trade at the Trade and Industry Ministry, as well as from companies seeking credits to manage tax liabilities or for voluntary use.
Participants also underscored the need for mutual recognition between the SRN registry and international standards such as Verra and Gold Standard. They said this alignment is essential to facilitating the flow of high-integrity credits and restarting international trade.
“There are too many standards and methodologies,” said Dr. Riza Suarga, chairman of the IDCTA. “Tapping on existing methodologies can provide more assurance to secure investments as well.” Suarga noted that waiting for regulatory frameworks to solidify was a legitimate strategy for market participants.
Land title disputes were flagged as another critical risk to address. “Investors need assurance that land titles and ownership structures are clearly delineated,” said Fam Wee Wei. Without clarity, participants noted, such issuescould deter much-needed investment in the forestry sector, a cornerstone of Indonesia’s carbon credit pipeline. Still, Fam highlighted existing investor protection clauses within regional free trade agreements that provide a measure of assurance for Singaporean investors.
Despite these challenges, optimism remains. Indonesia’s new administration, which took office in October, and has signaled a commitment to restoring confidence in the country’s carbon market ecosystem.
The country is already preparing a growing pipeline of projects for registration, signaling significant supply potential. Developers noted that several forestry and mangrove projects are close to being credit-ready and awaiting regulatory clarity to proceed.
As of June, more than 260 projects were registered under the national registry, with energy (172) and forestry (45) projects dominating the list. According to the PwC-IDCTA white paper, an additional 75 projects, including 33 energy and eight forestry initiatives, have been verified.
“We have shortlisted and are ready to invest in several carbon projects in Indonesia, but regulatory certainty needs to come first before we do that,” one attendee said, adding that robust regulations aligned with international standards and registries will be key to supporting meaningful progress in Indonesia’s carbon markets.
The CDC2024 was organized by the IDCTA in partnership with IETA, JETRO and PwC.
Reporting by Melissa Goh, mgoh@opisnet.com
Editing by Hanwei Wu, hwu@opisnet.com
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