New Indonesian Presidential regulation no. 110 of 2025 enacted to replace Presidential regulation no. 98 of 2021

Major Shift in Indonesia’s Carbon Market: New Presidential Regulation No. 110 of 2025 Enacted

Legal Update – October 2025

Indonesia has taken a decisive step to accelerate and integrate its carbon market with global standards by enacting the much-anticipated Presidential Regulation No. 110 of 2025 on Implementation of Carbon Pricing Instruments and National Greenhouse Gas Emission Control (“PR 110/2025”). This landmark regulation immediately replaces the former Presidential Regulation No. 98 of 2021.

The enactment of PR 110/2025 follows the successful signing of Mutual Recognition Agreements (MRAs) with several major international carbon standards, including Verra, Gold Standard, Plan Vivo, and Global Carbon Council (GCC). This move signals the Indonesian Government’s strong commitment to strengthening the integrity, transparency, and interoperability of its domestic carbon market, positioning the nation for more active participation in international carbon trading and attracting substantial private sector investment in climate mitigation.

This update focuses on the critical changes affecting the carbon offset mechanism under the new regulation.

Key Enhancements and Market Opportunities under PR 110/2025

The new regulation introduces fundamental changes that significantly de-risk and unlock the potential of Indonesia’s carbon market:

1. Decoupling Carbon Trading from National Targets:
   • The Change: Carbon trading activities are no longer contingent upon the achievement of Indonesia’s Nationally Determined Contribution (“NDC”) targets.
   • The Significance: This is a crucial policy shift. The NDC represents Indonesia’s commitment under the Paris Agreement to reduce greenhouse gas emissions. By decoupling the market, the government enables earlier investment and immediate market participation, drastically reducing the regulatory risk and long waiting period previously associated with carbon credit generation.
2. Formal Acknowledgment of International Standards and Voluntary Carbon Markets (VCMs):
   • The Change: PR 110/2025 formally acknowledges and permits the use of international standards (like the MRA partners) and the Voluntary Carbon Market (VCM).
   • The Significance: This immediate acknowledgment provides a clear legal basis for local and international players already operating under these globally recognized standards, unlocking immediate opportunities for carbon project developers and investors.
3. Clear Rules for International Carbon Trading (Article 6 of the Paris Agreement):
   • The Change: The regulation establishes a clear distinction between carbon credits that are subject to Corresponding Adjustment (CA) under Article 6 of the Paris Agreement, and non-CA VCM credits.
   • The Significance: Corresponding Adjustment is a critical accounting mechanism that prevents “double counting” of emission reductions when they are traded internationally. This clarity is essential for integrity and compliance, particularly for projects aiming to sell credits to buyers in other countries who need them for national climate targets.
4. Establishment of a Centralized National Carbon Registry:
   • The Change: The introduction of a dedicated national carbon trading registry, the Sistem Registri Unit Karbon (“SRUK”), is mandated.
   • The Significance: SRUK will function as the central platform for all carbon transactions in Indonesia. Crucially, it will be designed to be interoperable with other global registry systems, ensuring transparency and facilitating seamless international transfers of carbon units.
5. Elevated Steering Committee Leadership:
   • The Change: The steering committee responsible for Carbon Pricing and Greenhouse Gas (GHG) Emission Control is now chaired by the Coordinating Minister for Food Affairs.
   • The Significance: Placing the committee under such a high-level ministerial coordination suggests an elevation of the carbon market’s strategic importance, likely aiming for better cross-sectoral coordination on climate policy, which has strong links to the land-use and agriculture sectors.

In summary, PR 110/2025 moves Indonesia from a cautiously regulated environment to an open, internationally integrated, and proactive carbon market player, poised to leverage its vast natural resources for global climate action.

source:

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