Indonesia's Carbon Credit Market Is Opening Up.

New regulations under PP 110/2025 have removed key barriers for international participation in Indonesia's forestry carbon sector — creating a narrow but significant window for early movers.

A Market in Transition

Indonesia is home to the world's third-largest tropical rainforest. For years, foreign firms have looked at the country's vast forest protection potential as a source of high-quality carbon credits — but regulatory complexity, restrictive eligibility rules, and unclear export mechanisms kept most at arm's length.

That is starting to change. The Indonesian government's new regulation, PP 110/2025, has fundamentally restructured the carbon credit framework. Participation is no longer limited to entities holding a Sertifikat Penurunan Emisi (SPE), and the previous requirement to first meet internal emission reduction targets before trading has been eliminated. The regulatory philosophy has also shifted — from a purely climate-driven framework to one that explicitly balances climate objectives with economic viability.

For foreign firms exploring forest protection carbon projects, the pathway now runs through the Ministry of Forestry under the non-SPE route. This is the most applicable entry point for international entities.

How the Scheme Works: Voluntary, Not Compliance

Indonesia's compliance carbon market — the Emission Trading Scheme (ETS) —currently covers only the energy sector. For forestry, carbon credits from forest protection activities sit within the voluntary carbon market (VCM) framework.

Under the previous regulation (PP 98/2021), the system distinguished between mitigation (compliance-based, within a government-set cap) and offsets (voluntary credits sold to compensate for emissions elsewhere). Forest protection activities have always fallen on the offset side, and PP 110/2025 makes that pathway considerably more accessible.

What PP 110/2025 Changes

Non-SPE entities — including foreign firms — can now participate directly without needing an emission reduction certificate. The requirement to achieve internal reduction targets before trading has been removed. Non-SPE entities are now permitted to use internationally recognized methodologies such as Verra or Gold Standard — a critical change for export oriented projects.

The Multi-Activity Requirement

One detail that catches many newcomers off guard: under Indonesia's Multi Usaha Kehutanan (MUK) framework, carbon activities within forest concessions cannot be proposed as standalone projects. Every application must bundle at least two activities together.

The most common pairings are carbon with non-timber forest products (HHBK) or livelihood programs, and carbon with biodiversity and environmental protection initiatives. The non-carbon component is designed to deliver tangible benefits to local communities — and in practice, it can also support premium pricing on the resulting credits. Biodiversity and environmental protection is now a recognized qualifying activity under the latest WTIM framework.

This isn't just a regulatory checkbox. Projects with strong community benefit sharing and biodiversity co-benefits are increasingly what buyers are looking for in the voluntary market — so the bundling requirement can actually strengthen your credits' market position.

Methodology: International Standards Are Now on the Table

For projects aimed at cross-border sale, methodology choice is decisive. Two pathways exist: The government-prescribed methodology will be mandatory for projects within the Mandatory Carbon Market (MCM) scope. However, it carries a significant limitation — it is unlikely to be recognized internationally, which makes it unsuitable for credits intended for export.

The international methodology pathway, using standards like Verra or Gold Standard, remains valid for projects outside the MCM scope, provided they comply with Indonesian regulations. This was not available to non-SPE entities under the previous rules. The Ministry of Forestry has already established working precedent through three Kalimantan-based projects developed under Verra Gold Standard methodology.

This isn't just a regulatory checkbox. Projects with strong community benefit sharing and biodiversity co-benefits are increasingly what buyers are looking for in the voluntary market — so the bundling requirement can actually strengthen your credits' market position.

For any foreign firm planning to sell credits to buyers in Australia, Europe, Japan, or other international markets, developing under Verra or Gold Standard is strongly recommended. Proponents may also propose their own methodology, provided it falls within the recognized pathways and complies with the target country's regulations.

Exporting Credits: Three Conditions to Clear

Cross-border sale of Indonesian carbon credits is possible — but three conditions must all be satisfied before any transaction can proceed.

1. No Government of Indonesia State Claim

No Government of Indonesia State Claim If the Indonesian government counts specific credits toward its own national emission reduction targets, those credits cannot simultaneously be exported. This must be confirmed at the project level before structuring any deal. Credits not subject to a state claim are freely exportable.

2. Buyer Country Qualification Requirements

The target market must accept the credits under its own standards. Australia, for example, maintains stricter qualification requirements than some bilateral frameworks. Historically, this has been a bottleneck for Australian buyers seeking Indonesian carbon at scale. Indonesia does not restrict export on its end — the constraint lies in meeting the importing country's criteria.

3. Internationally Recognized Methodology

Government-prescribed Indonesian methodologies are unlikely to be accepted by foreign buyers or regulators. Projects targeting international markets should be developed under Verra or Gold Standard to ensure acceptance.

The Window Is Narrow — and Early Movers Have Advantages

Interest is already substantial. Both domestic and international entities are moving to enter the Ministry of Forestry process, and some are already at the credit insurance stage, indicating they are close to finalizing their project structures.

At the same time, many experienced developers and NGO-affiliated parties are still working through the implications of the new regulation. Detailed technical guidance has not been fully disseminated yet. This creates a genuine window: early movers who engage directly with the Ministry stand to benefit from direct guidance and potentially favorable zoning allocations in priority regions like Kalimantan and Riau — areas with established precedent and documentation for forestry carbon projects.

The Ministry of Forestry is actively receiving expressions of interest now. PP 110/2025 is in effect, and the implementing Ministerial Regulation (PerMen) providing further technical detail is in its final stages. The formal application window is effectively open.

What You'll Need to Prepare

While the full document checklist will be finalized with the forthcoming PerMen, submissions are expected to require a formal application to the Ministry of Forestry, proof of land asset or concession rights (PBPH or equivalent), a project description covering all proposed MUK activities, a carbon accounting methodology, and a beneficiary agreement for community benefit-sharing.

For foreign entities, navigating the regulatory pathway, structuring the MUK bundling requirements, and selecting the right methodology and project location are the critical decisions that shape everything downstream — from credit quality and pricing to export eligibility.