Largest Forest Area #8: Indonesia is Still Struggling to Meet Global Carbon Credit Needs

The demand for carbon credits is increasing every year. For a country with forest areas that ranks number 8 in the world, Indonesia should be one of the big players in supplying the need for these carbon credits. So, why is Indonesia still struggling to trade carbon credits?

Many parties, including multinational companies, want to buy carbon credits from Indonesia. Unfortunately, Indonesia currently cannot supply many carbon credits. Only a few companies focus on producing and providing carbon credits. The reasons are various, but mainly due to a lack of awareness of climate change and green business importance. The community still prioritizes Industrial Plantation Forests (IPF or HTI), which are extractive forests. The industrial plantation forests are considered more accurate and promising in profit. While in fact, restorative forest businesses can also generate tremendous profits such as from carbon credits provision if appropriately managed. Let's look at the few companies that successfully issue carbon credit trading transactions, such as the Katingan Mentaya Project (KMP), Rimba Raya Conservation, and the Sumatra Merang Peatland Project. They serve customers from various regions, such as the Netherlands, USA, Germany, and Japan, and also industries such as oil and gas companies. They trade the carbon credits in the voluntary carbon market and can get profits from it. 

Delay in Selling Carbon Credit

Furthermore, lacking carbon credits producers and providers is not the only problem. The delays in selling carbon credits are also the reason for Indonesia's limited in supplying carbon credits. Previously, carbon trading was not prohibited, but Indonesia had no legal basis for issuing and trading any carbon credits. Therefore, the Indonesian government is trying to regulate carbon trading to make it safer and more convenient for all parties by ratifying the Presidential Decree on the Economic Value of Carbon (NEK) No. 98 of 2021. But on the other hand, it makes the existence of some draft laws that still need to be discussed by the government. This reason makes the carbon credits trading in Indonesia currently on hold. Luckily, the restoration activities are still ongoing because it uses permits for ecosystem restoration, the IUPHHK-Ecosystem Restoration, which has not changed since 2008. When the new regulations are applied, every provider can sell the carbon credit issued in this moratorium period.

Concrete Solutions for Indonesia's Carbon Credit Issues

Indonesia's limitations in supplying carbon credits require concrete solutions. We have to maximize forest utilization not only in the extractive areas but also in restorative areas, which can produce carbon credits. We can also increase the participation of multiple stakeholders onshore. These stakeholders are such as concessions (land owners) and project developers. By this, we can boost the carbon credits supply because even trade will not be able to run without an adequate supply.

Remember, Indonesia is still in the process of implementing the carbon market. However, abundant natural resources, regulations related to carbon, and support from various parties can make Indonesia an excellent market for local and global carbon credit transactions even before a proper market is in place.

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