Unlocking carbon markets in Indonesia

Recognised as one of the world’s 17 “megadiverse” countries by UNEP-WCMC, Indonesia’s ecosystems provide critical ecosystem services, which are vital for both local livelihoods and global climate stability. However, the dual pressures of economic growth and a burgeoning young population have driven deforestation and ecosystem degradation, exacerbated by rising commodity prices that incentivise land conversion for mining and agriculture. Between 2001 and 2023, Indonesia lost 19% of its tree cover, while annual emissions surged by 131%, underscoring the urgency of sustainable solutions. To achieve its vision of a “Golden Indonesia 2045”, meet its Nationally Determined Contributions (NDCs), and advance the Sustainable Development Goals (SDGs), carbon markets can play a key part in Indonesia. Carbon markets place a price or value on greenhouse gas emissions, which incentivise emitters to lower their carbon
intensity and invest in green innovation, as well as drive funding to protect and restore natural ecosystems.

Indonesia has long been a leader in global carbon markets, ranking as the 5th largest issuer of carbon credits under the Kyoto Protocol’s Clean Development Mechanism (CDM)6 and 6th largest issuer of credits in the voluntary carbon market, mainly through REDD+ and Improved Forest Management (IFM) projects. However, in recent years, international carbon financing to Indonesia has effectively come to a halt following a series of regulations by the former administration aimed at improving the governance of such projects and ensuring NDC alignment under the Paris Agreement. While these efforts have strengthened the oversight of carbon crediting projects, it has also stalled international carbon financing flows supporting conservation measures and low-carbon development in Indonesia.

As Indonesia now moves into the next phase of its NDC implementation, the new administration has a vast opportunity to unlock international carbon markets to support its sustainable growth targets. This whitepaper outlines the pathways Indonesia can take to meet its carbon financing needs, ensuring a
well-functioning carbon market framework that can drive both economic prosperity and global climate action.

source:

https://www.ieta.org/resources/papers/unlocking-carbon-markets-in-indonesia/