Indonesia is becoming a key hub for environmentally focused investments. With an evolving regulatory framework and robust fiscal support, the country offers various incentives to attract projects in renewable energy, electric vehicles, and sustainable technology.
From tax holidays to carbon credit monetization, the government is fostering an ecosystem where clean energy can thrive.
Also read: Why Indonesia Remains an Attractive Foreign Investment Destination in 2025
Sector Overview: Indonesia’s Green Investment Push
Indonesia aims to become a global green economy leader by leveraging its mineral wealth, geographic potential, and policy reform. Its green energy drive spans solar, geothermal, hydro, biomass, and the rapidly advancing hydrogen sector. The government is aligning domestic climate goals with investment incentives to position Indonesia as a green tech powerhouse in ASEAN.
Tax Holiday Duration and Green Sector Eligibility
Indonesia provides tax holidays up to 20 years for green energy investments. The duration is tiered based on investment size:
- 5 years for Rp 500 billion to 1 trillion
- 10 years for Rp 5–15 trillion
- 20 years for investments over Rp 30 trillion
Eligible sectors include renewable power generation, green hydrogen, and electric vehicle manufacturing. Additional benefits include a 50% tax reduction for two years after the holiday ends.
Companies must:
- Be classified as a “pioneer industry”
- Have minimum capital thresholds
- Register through the OSS (Online Single Submission) system
- Obtain approvals from BKPM and Ministry of Finance
Also read: Top Indonesian Strategic Sectors for Tax Incentives in 2025
Carbon Market Access: Turning Emissions into Assets
Indonesia has officially launched its carbon trading system, allowing companies to trade carbon quotas (PTB) or carbon credits (SPE GRK) based on emissions and CO₂ absorption.
Key Mechanisms:
- Cap-and-trade: Firms buy/sell emission allowances.
- Carbon credits: Issued to low-emission projects, tradable for profit.
The exchange is run by IDX Carbon under the supervision of the Financial Services Authority (OJK). This system establishes Indonesia as the leading carbon trading market in the ASEAN region.
Also read: Carbon Tax in Indonesia: A Key Step Towards a Greener Economy
Opportunity for Green Investors:
Projects in afforestation, renewable energy, and industrial decarbonization can generate tradeable carbon credits, unlocking new revenue streams while contributing to emission targets.
Financial Instruments and Policy Support
Green Bonds
Indonesia has issued nearly US$878 million in green bonds, supporting sustainable infrastructure and energy projects. These are primarily issued by the government and select corporates (e.g., BRI, Sinarmas).
Just Energy Transition Partnership (JETP)
The Just Energy Transition Partnership (JETP) channels $20 billion in climate-related funding to support:
- Cap emissions at 250 MtCO₂ by 2030
- Achieve 44% renewable energy share by 2030
- Reach net-zero power emissions by 2050
This international partnership enhances Indonesia’s fiscal capacity to scale green infrastructure and supports blended finance structures.
Also read: What is ESG in Business: Meaning, Factors and Strategies
Strategic Sector Incentives
Green Hydrogen
A new framework under the Draft EBET Law provides:
- Tax holidays
- Carbon trading privileges
- Sector-specific regulations
Indonesia targets 9.9 million tons of hydrogen production annually by 2060, with major applications in energy, industry, and transport.
Electric Vehicles (EVs)
Key EV incentives include:
- 0% luxury tax through 2024
- 0% import duties until 2025
- VAT reductions for locally assembled EVs (1% VAT for >40% local content)
- Subsidies for e-buses with 20–40% local content
The initiative targets the production of 600,000 electric vehicles by 2030 and aspires to rank as the third-largest EV battery manufacturer globally.
Also read: Top Foreign Investment Sectors in Indonesia
Regulatory and Operational Streamlining
Online Single Submission (OSS)
All investment applications, including tax holidays and allowances, must be submitted via the OSS platform, ensuring transparency and inter-agency coordination.
Also read: How to Apply for Indonesia Investment Incentives via OSS
KEK and IKN Zones
Eco-friendly developments located in Special Economic Zones (KEK) or the new capital, Nusantara (IKN), benefit from extra incentives:
- Longer tax holidays (up to 20 years)
- Customs and VAT exemptions
- Extended land rights and infrastructure access
If you are considering starting a business in Indonesia, there are a number of resources and support services available to help you get started.
InvestinAsia is among the companies that specialize in aiding you with Indonesia company registration. We boast a team of seasoned experts who can guide you throughout the process of:
- Foreign company / PMA registration in Indonesia
- Indonesia representative office registration
- PT PMDN Set Up
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- Business registration number in Indonesia
- Indonesian Business Licenses
- Indonesia Trademark Registration
- Indonesia Tax Consultant and Compliance Services
If you are interested in starting a business in Indonesia, you can start by contacting us for FREE consultation.
Frequently Asked Questions (FAQ)
What is the main benefit of Indonesia’s tax holiday for green energy?
Full exemption of corporate income tax for up to 20 years, depending on investment scale and sector.
Can green energy firms access carbon credits in Indonesia?
Yes, through IDX Carbon. Projects that reduce or offset emissions can monetize carbon credits.
Which sectors are at the forefront of Indonesia’s green investment agenda?
Key focus areas include clean energy, electric mobility, hydrogen fuel technologies, and eco-friendly infrastructure.
How does the OSS system help investors?
OSS simplifies licensing, allows for unified submissions, and accelerates investment approvals.
Are there incentives specific to EV manufacturing?
Yes, including VAT cuts, import duty waivers, and luxury tax exemptions for compliant manufacturers.
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