How Indonesia can avoid the carbon credits gimmick

Indonesia secured commitments for only US$2.75 million in carbon credits at the COP30 climate summit in Brazil in November 2025, despite arriving with a pipeline of around 90 million tonnes of potential credits valued at nearly US$960 million. The outcome signals that Indonesia’s carbon credit strategy is built on weaker foundations than policymakers have acknowledged.

Indonesia’s Carbon Credit Strategy Faces Challenges

In theory, carbon markets generate revenue from conservation and improved land management. Forests preserved, peatlands restored, and emissions avoided can be converted into tradable credits. For Indonesia, this promises climate finance without hindering development. However, COP30 highlighted the gap between the concept and its implementation, with ongoing disputes regarding integrity, quality, standardization, and interoperability.

These technical issues are compounded by a deeper credibility problem. Independent analysts rate Indonesia’s national climate commitments as “critically insufficient,” requiring limited real emissions cuts. Credits generated against weak baselines do not represent additional climate action, merely shifting numbers without reducing overall emissions. Inconsistent enforcement and ambiguous compliance provisions under Paris Agreement Article 6 further increase uncertainty, making potential buyers hesitant.

Equity Concerns and Environmental Outcomes

Equity concerns also play a role. Indigenous peoples and local communities, who have traditionally managed Indonesia’s forests, are largely excluded from carbon finance. Weak land tenure recognition, unclear legal standing, and unequal bargaining power limit their participation, potentially leading to corporate projects overriding customary claims and criminalizing traditional livelihoods.

Environmental outcomes have been mixed. Fires continue to affect peatland landscapes in Indonesia, including areas targeted by restoration and climate-related interventions. In some cases, project baselines have significantly overstated deforestation risk, resulting in credits being issued without meaningful change. A narrow focus on measurable carbon outcomes has encouraged avoided-deforestation and plantation-style approaches that often deliver limited biodiversity or ecosystem resilience benefits.

Strengthening Indonesia’s Carbon Market Framework

Indonesia now has a national carbon market framework, including a presidential regulation on carbon economic value and a national registry intended to improve transparency. While these are meaningful steps, they do not yet constitute an independent market regulator. Baseline setting and verification still rely heavily on voluntary standards, with limited state capacity to investigate or penalize malpractice.

Indonesia has also opened the door to international trading under Article 6, clarifying how credits can move across borders. However, this progress isn’t matched by binding national or sectoral emissions limits. Without overall emissions reductions, it’s difficult to prove that individual projects generate genuine reductions, necessitating a strengthening of Indonesia’s Nationally Determined Contribution and its translation into enforceable sector plans.

Even well-designed credits struggle to compete with agriculture, mining, and infrastructure projects offering faster and higher returns. Carbon prices remain below the real economic value of forest conservation, explaining why deforestation persists in project areas. Therefore, markets need to be complemented by direct ecosystem payment schemes targeted at high-risk landscapes.

Although social safeguards exist, they are too weak to secure durable credits. Consultation and benefit-sharing measures cannot resolve disputes rooted in unclear tenure or unequal power. Legal recognition of indigenous and community land and carbon rights is crucial, both for justice and market stability. Secure rights would allow communities to own credits and negotiate transparently with buyers.

Indonesia’s performance at COP30 should serve as a warning. The country has outlined a carbon market but not yet established the institutions to make it credible. The next phase must prioritize stronger enforcement, alignment with real national emissions reductions, social legitimacy, and proof that Indonesian credits represent measurable climate outcomes, not just projections.

Indonesia should build a resilient, Paris-aligned system with conservative baselines, independent state-accredited verification, strong anti-fraud enforcement, and legally protected indigenous and community land and carbon rights, rather than waiting for clearer global rules. The country needs carbon markets as a disciplined public-interest tool, anchored in stronger national climate ambition and supported by direct conservation finance where markets fall short.