Indonesia Carbon Market: Investment Opportunities in Carbon Credits and Trading

Indonesia’s carbon market is one of the most significant investment frontiers in Southeast Asia, offering foreign investors direct access to carbon credits, emissions trading, and nature-based project finance across the world’s third-largest tropical forest nation. With Presidential Regulation No. 110 of 2025 overhauling the country’s carbon governance framework and IDX Carbon opening to international buyers in January 2025, Indonesia has structurally repositioned itself as a viable and high-potential carbon market for global investors.

This guide explains how Indonesia’s carbon market works, which investment pathways are available to foreign nationals, what regulatory requirements apply, and how to enter the market through a compliant legal structure.

Understanding Indonesia’s Carbon Market Structure

Indonesia operates a dual-track carbon market: a mandatory compliance market under its Emissions Trading System (ETS) and a voluntary carbon market (VCM) that now includes provisions for international trade. Both tracks operate through IDX Carbon, the carbon exchange launched in September 2023 and operated by PT Bursa Efek Indonesia (Indonesia Stock Exchange) under supervision of the Financial Services Authority (OJK).

The compliance market assigns technology-specific emission caps, called PTBAE-PU, to coal-fired power plants connected to the PLN grid. Facilities that emit less than their cap can sell the surplus. Those that exceed it must purchase additional allowances. In its first operating year, the scheme covered 99 coal-fired plants representing approximately 37% of total national power capacity.

The voluntary market handles carbon credits known as SPE-GRK (Sertifikat Pengurangan Emisi Gas Rumah Kaca), which certify verified emission reductions from projects in forestry, renewable energy, peatland restoration, and other sectors. These credits can be purchased by domestic or international buyers for offsetting purposes.

Also Read: Carbon Tax in Indonesia: A Key Step Towards a Greener Economy

The New Regulatory Framework: What Changed?

The legal foundation of Indonesia’s carbon market underwent a significant overhaul in late 2025. Presidential Regulation No. 110 of 2025, which revoked and replaced Presidential Regulation No. 98 of 2021, introduced several changes that directly affect foreign investors.

International Trading Is Now Permitted Without NDC Prerequisites

Under the previous framework, international carbon trading required Indonesia to first achieve its Nationally Determined Contribution (NDC) targets in the relevant sector before credits could be exported. This effectively blocked most international transactions. PR 110/2025 removes this condition, allowing Indonesian project developers and international buyers to transact immediately across forestry, renewable energy, methane reduction, waste management, and blue carbon sectors.

Corresponding Adjustment (CA) and Non-CA Units Are Both Recognized

PR 110/2025 introduces a clear distinction between CA units (authorized for transfer under Article 6 of the Paris Agreement, which require an accounting adjustment in Indonesia’s national climate commitments) and non-CA units that remain within the domestic voluntary market. This dual-track approach allows private buyers to acquire voluntary offsets without triggering diplomatic-level adjustments, while sovereign-level transfers under Article 6.2 bilateral agreements remain available for government counterparties.

A Centralized Registry Is Being Established

Authorities are consolidating multiple existing registries into a single national platform called SRUK (Sistem Registri Unit Karbon). This is designed to prevent double counting, ensure transparent tracking of each carbon unit, and meet international standards required to attract institutional investors.

International Standards Are Formally Recognized

In 2025, Indonesia signed Mutual Recognition Agreements (MRAs) with Gold Standard (May 2025) and Verra (October 2025). Under the Verra MRA, projects registered under the Verified Carbon Standard (VCS) Program can now simultaneously register in Indonesia’s national SRN-PPI registry, enabling credit issuance to be linked to the country’s national oversight system. This significantly expands the pipeline of investable, internationally credible carbon projects in Indonesia.

Also read: Top Sustainable Investment Opportunities in Indonesia by Sector

Investment Opportunities in Indonesia’s Carbon Market

Foreign investors can approach Indonesia’s carbon market through several distinct pathways. Each involves different capital requirements, risk profiles, and regulatory entry points.

Nature-Based Solutions and REDD+ Projects

Indonesia holds some of the world’s largest remaining tropical forests, peatlands, and mangroves. Reducing Emissions from Deforestation and Forest Degradation (REDD+) projects generate credits by protecting these ecosystems from conversion. Historically, REDD+ projects accounted for 78% of Indonesia’s carbon credit supply under international standards. However, REDD+ projects face a current restriction: as of mid-2025, forestry sector projects are not yet eligible to issue and trade credits under the domestic SPE-GRK framework, though the government has signaled this will change. Investors entering REDD+ should structure projects in anticipation of regulatory clearance while registering under the Verra VCS program through the MRA pathway.

Renewable Energy Credits

Projects in solar, hydropower, geothermal, and biomass energy that reduce grid-level emissions can generate tradeable carbon credits alongside energy revenue. The Indonesian government actively supports renewable energy investment through tax holidays of up to 20 years for eligible clean energy projects. Renewable energy credits are among the more liquid categories on IDX Carbon, given the ETS compliance demand from power sector participants.

Also Read: Investment Incentives for Green Tech and Renewable Energy Projects in Indonesia

Carbon Capture, Utilization, and Storage (CCUS)

Presidential Regulation No. 14 of 2024 opened the CCUS sector to investment in Indonesia’s oil, gas, and industrial sectors. Companies that invest in CCUS infrastructure can generate carbon credits from verified emissions captured and stored, which can then be traded on domestic or international markets. This is a technically complex and capital-intensive entry point, better suited to institutional investors and energy majors already operating in Indonesia’s hydrocarbons sector.

Trading on IDX Carbon as a Registered Participant

Foreign investors can register as Carbon Exchange Service Users on IDX Carbon under OJK Regulation No. 14 of 2023 (POJK No. 14/2023). By end of 2024, registered participants had grown to 100, up from just 16 at the exchange’s launch. Once registered, participants can buy and sell both emission quotas and carbon credits on the platform. Note that foreign entities face a 20% ownership cap on carbon exchange organizers themselves, but participation in trading is not similarly capped.

Bilateral Government-to-Government Carbon Trade (Article 6.2)

Indonesia signed a Mutual Recognition Arrangement with Japan for bilateral carbon credit trading under Article 6.2 of the Paris Agreement, the first of its kind globally under the Paris framework. Similar arrangements are expected with other countries. This pathway is typically pursued by large corporations or sovereign wealth funds collaborating with government counterparties, rather than private project developers entering independently.

How Foreign Investors Enter Indonesia’s Carbon Market Legally

Foreign nationals cannot directly operate carbon projects or establish trading entities in Indonesia without a licensed local legal structure. The standard vehicle is a PT PMA (Perseroan Terbatas Penanaman Modal Asing), Indonesia’s foreign-owned limited liability company.

A PT PMA gives foreign investors a legal presence in Indonesia, the ability to hold assets and contracts, employment of local and expatriate staff, and access to government licensing systems including the OSS (Online Single Submission) platform managed by BKPM. For carbon project developers, the PT PMA structure is also required to register projects with the SRN-PPI national carbon registry and to apply for SPE-GRK credit issuance.

Setting up a PT PMA involves meeting a minimum investment plan of IDR 10 billion, appointing at least two shareholders, one director, and one commissioner, and selecting the appropriate KBLI (Indonesian Business Classification) code aligned with the investor’s carbon-related activities. For investors unfamiliar with the OSS system and BKPM approval process, navigating these requirements without local expertise typically leads to delays and compliance gaps.

For foreign investors looking to structure their market entry correctly, InvestinAsia’s PT PMA registration service covers the full incorporation process, from KBLI selection and notarial deed to OSS licensing and ongoing compliance support. With more than 380 in-house professionals and active operations in Jakarta and Bali, InvestinAsia handles the technical and administrative steps so investors can focus on building their carbon project pipeline.

Market Scale and Investor Expectations

Indonesia’s carbon market is still in early development. By September 2025, two years after IDX Carbon’s launch, the cumulative transaction value reached IDR 78 billion (approximately USD 4.9 million), with only eight projects listed and 132 registered participants. The average spot price stood at around IDR 67,047 per tonne of CO2e, roughly USD 4, which is well below prices in more mature markets like the EU ETS.

Despite modest current volumes, the market’s structural potential is substantial. Indonesia is estimated to be capable of generating up to 1 billion carbon credits, and the government has set a goal of generating USD 1 billion in carbon credit sales by the time of COP30. The Ministry of Environment and Forestry has projected that forestry-sector offset transactions alone could reach approximately IDR 3.2 trillion (around USD 200 million) in 2025 once forestry credits are formally cleared for trading.

Investors entering at this stage accept liquidity risk in exchange for positioning advantage in what is expected to become one of Asia’s most significant carbon markets as the full-scale ETS expands beyond the power sector and the forestry credit framework is finalized.

Also Read: Indonesia’s Positive Investment List: Opportunities for Investors

Key Risks Foreign Investors Should Assess

Indonesia’s carbon market carries several risk factors that differ from traditional asset classes.

Regulatory Evolution Risk

The framework has changed significantly since 2021, and further implementing regulations under PR 110/2025 are still being developed. Ministry of Environment and Forestry implementing rules on project approval, credit issuance, and international trading procedures were under active drafting as of early 2026. Investors should monitor regulatory updates from the Kementerian Lingkungan Hidup dan Kehutanan (KLHK) and OJK closely.

Double-Counting Risk

Critics of Indonesia’s carbon market have raised concerns about the same emission reductions being counted both as domestic NDC progress and as internationally transferred credits. The new SRUK centralized registry and the CA/non-CA distinction in PR 110/2025 are designed to address this, but the system is not yet fully operational. Investors should conduct careful project-level due diligence and work with reputable certification bodies such as Verra or Gold Standard.

Liquidity and Price Risk

Current trading volumes on IDX Carbon are limited. The average carbon price of approximately USD 4 per tonne is well below prices at which most nature-based projects achieve commercial viability. Investors should model returns under conservative price scenarios and build in holding period flexibility.

Social and Community Benefit Obligations

Indonesian regulations require that carbon projects, particularly nature-based ones, demonstrate tangible benefit-sharing with local communities. Failure to meet this requirement can result in project rejection or reputational damage. This is especially relevant for REDD+ projects in areas where land rights and community interests may be contested.

Frequently Asked Questions

Can foreign companies directly buy carbon credits on IDX Carbon?

Yes. Following the opening of IDX Carbon to international buyers in January 2025, foreign entities can register as Carbon Exchange Service Users under OJK Regulation No. 14 of 2023 and purchase both emission quotas and carbon credits on the exchange. However, operating a carbon project that generates credits requires a PT PMA legal structure registered in Indonesia.

What is the difference between the ETS compliance market and the voluntary carbon market in Indonesia?

The ETS compliance market is mandatory for regulated industries, currently the power sector, where participants trade PTBAE-PU emission allowances based on assigned intensity caps. The voluntary carbon market involves SPE-GRK credits generated by verified emission reduction projects and purchased by companies or individuals seeking to offset their emissions voluntarily, including international buyers.

What regulation governs Indonesia’s carbon market in 2025 and 2026?

Presidential Regulation No. 110 of 2025 is the primary governing framework, replacing Presidential Regulation No. 98 of 2021. It is supplemented by Ministry of Environment and Forestry Regulation No. 21 of 2022 (still in effect where not contradicted), OJK Regulation (POJK) No. 14 of 2023 on carbon exchange operations, and forthcoming implementing regulations currently under development.

What is a corresponding adjustment and why does it matter for investors?

A corresponding adjustment (CA) is an accounting mechanism under Article 6 of the Paris Agreement that prevents a carbon credit from being counted twice: once by the buyer country and once by Indonesia toward its own climate targets. CA units are required for government-to-government trades under Article 6.2. For voluntary market buyers, non-CA units are available, meaning the transaction does not affect Indonesia’s NDC accounting. This flexibility is important because it allows corporate buyers to offset emissions without requiring diplomatic-level coordination.

How does a foreign investor set up a PT PMA to operate in Indonesia’s carbon market?

The process involves preparing a minimum investment plan of IDR 10 billion, selecting the correct KBLI business classification codes, drafting company articles with a licensed Indonesian notary, applying through the OSS system managed by BKPM, and obtaining the appropriate sector licenses. For carbon project developers, additional registration with the national SRN-PPI carbon registry is required. Working with an experienced corporate services firm significantly reduces the risk of errors that can delay the process.

Is Indonesia’s carbon market sector open to 100% foreign ownership under the PT PMA framework?

Carbon trading activities and project development are generally open to foreign investment under Indonesia’s Positive Investment List (Presidential Regulation No. 10 of 2021). However, foreign entities are limited to a 20% ownership stake in carbon exchange organizers themselves, such as IDX. For project development and credit trading as a participant, there is no similar foreign ownership cap, though investors should confirm the specific KBLI classification and any sector-specific conditions with a qualified adviser.

References

1. Institute for Energy Economics and Financial Analysis (IEEFA). (2025, October 15). Two years after launch, Indonesia’s carbon market struggles to find momentum. Retrieved from
https://ieefa.org/resources/two-years-after-launch-indonesias-carbon-market-struggles-find-momentum

2. Ashurst. (2025, December). Major overhaul of Indonesia’s carbon regulatory framework. Retrieved from
https://www.ashurst.com/en/insights/major-overhaul-of-indonesias-carbon-regulatory-framework/

3. Verra. (2025, October 2). Verra and Indonesia sign milestone agreement to advance carbon markets. Retrieved from

Verra and Indonesia Sign Milestone Agreement to Advance Carbon Markets

4. Climate Change Laws of the World. (2025). Presidential Regulation No. 110 of 2025 on Implementation of Carbon Economic Value Instruments and National Greenhouse Gas Emission Control. Retrieved from
https://climate-laws.org/document/presidential-regulation-no-110-of-2025-on-implementation-of-carbon-economic-value-instruments-and-national-greenhouse-gas-emission-control_d013

5. Kementerian Investasi / BKPM. (2021). Presidential Regulation No. 98 of 2021 on the Implementation of Carbon Pricing (English version). Retrieved from
https://jdih.maritim.go.id/cfind/source/files/perpres/2021/perpres-nomor-98-tahun-2021-english-version.pdf

6. International Carbon Action Partnership (ICAP). (2023). Indonesia establishes the legal framework for a domestic emissions trading system. Retrieved from
https://icapcarbonaction.com/en/news/indonesia-establishes-legal-framework-domestic-emissions-trading-system

7. Offset8 Capital. (2025, October 5). Indonesia carbon market 2025: ETS, credits and investment guide. Retrieved from

Indonesia Carbon Market: A Guide to Policy, Trading & Project Development