JAKARTA – Indonesia will begin full-scale operations of its national carbon market in June 2026, with active trading scheduled to commence in July.
The transition follows a period of regulatory alignment and infrastructure development intended to monetize the country’s vast natural carbon sinks while establishing a formal framework for emissions trading.
According to Muhamad Rifki Maulana, an economist at the Central Bank of Indonesia, the move is a decisive step toward “climate sovereignty,” utilizing concrete financial instruments to lead a green transition and reduce Indonesia’s reliance on externally priced carbon.
### Regulatory Framework and Market Access
The operationalization of the market is supported by a restructured governance architecture. Presidential Regulation No. 110/2025 updated the national carbon governance system, providing the legal basis for the market’s expansion and consolidating earlier rules on carbon pricing, results-based payments, and offset exports into a single national framework. The regulation also clarifies the roles of key ministries and the financial regulator in supervising carbon units and preventing double counting.
Further access was established in early 2026 through a ministerial regulation on forestry. This regulation created corridors for carbon trading within the forestry sector to reach international markets, including requirements for project registration, benefit-sharing with local communities, and alignment with Indonesia’s nationally determined contribution under the Paris Agreement. Maulana notes that these safeguards, combined with clearer export rules, were highly anticipated by global green investors seeking large-scale, jurisdictional crediting opportunities.
The regulatory backbone is designed to anchor pricing and eligibility on the domestic platform operated by the Indonesia Stock Exchange, known as IDXCarbon, which was first launched in 2023. Under the new rules, entities covered by mandatory caps, as well as voluntary project developers, are expected to channel a growing share of their transactions through this centralized market.
Infrastructure for the market has been developing since 2025:
- IDXCarbon: Connected to international buyers starting in early 2025, allowing cross-border spot and over-the-counter transactions in Indonesian carbon units.
- Standardization: Mutual recognition agreements were established with Verra and the Gold Standard to validate Indonesian carbon credits globally, reducing transaction costs for project developers and helping foreign buyers integrate Indonesian units into existing portfolios.
The national system is formally anchored in Indonesia’s broader environmental law framework and climate commitments, which are referenced in foundational government policy documents setting targets for reduced deforestation and net-zero emissions.
### 2025 Performance Metrics
Prior to the full-scale launch, IDXCarbon operated with limited activity throughout 2025 as a pilot platform. During this period, market participation was primarily restricted to state-owned enterprises within the power sector that were already subject to emissions caps and performance-based obligations.
Key data from the 2025 preliminary phase include:
- Average Price: Approximately IDR 67,000 per ton, equivalent to about USD 4 at prevailing exchange rates.
- Trading Volume: Relatively limited across the fiscal year, reflecting both the narrow pool of eligible participants and the absence of a fully implemented compliance cycle.
Officials and market participants viewed this pilot phase as a stress test for the exchange’s trading, registry, and monitoring systems rather than a signal of long-term liquidity. The 2026 rollout is expected to broaden participation to additional sectors, including industry and transport, once monitoring, reporting, and verification (MRV) requirements are fully in place.
### International Precedents in Carbon Trading
Maulana argues that the initial limitations of the Indonesian market are consistent with the trajectories of other global carbon markets and should not be interpreted as structural weakness.
The European Union launched the EU Emissions Trading System (EU ETS) in 2005. The system underwent a three-year trial period during which carbon prices collapsed toward zero due to an oversupply of free allowances. Following a redesign of allocations and the implementation of a price stabilization mechanism, the EU ETS now serves as a global benchmark with prices ranging between €60 and €80 per ton and a steadily tightening emissions cap.
Japan adopted a different model with the Green Transformation emissions trading scheme (GX-ETS) in 2023. The system operated as a voluntary mechanism for three years, allowing companies to set their own targets and build internal capacity without penalties and with a heavy emphasis on corporate disclosure.
When the GX-ETS became mandatory in April 2026, the results included:
- Participation: More than 700 active companies.
- Coverage: Over 50% of Japan’s national emissions.
- Investment: Support from over 150 trillion yen in public-private green transition investment over a decade.
Indonesian policymakers see these precedents as evidence that early volatility and modest volumes are typical in the initial years of a carbon market. Maulana suggests the key test will be whether Indonesia can steadily tighten caps, expand sectoral coverage, and align domestic prices with global benchmarks without triggering political backlash or energy-cost shocks.
### Natural Asset Valuation and Potential
Indonesia’s market position is based on its significant biological assets, including 120 million hectares of tropical forest, the world’s largest mangrove ecosystem, and extensive peatlands that store vast amounts of carbon below ground. Together, these ecosystems underpin both compliance credits for regulated entities and voluntary credits for international buyers seeking high-integrity nature-based solutions.
Maulana estimates the forestry sector’s potential at 26.5 million tons of CO₂e per year in tradeable emissions reductions and removals. If fully optimized through 2034, the transaction value could reach trillions of rupiah, supporting fiscal revenues, rural livelihoods, and long-term conservation financing if benefit-sharing mechanisms function as intended.
There is a significant gap between current domestic pricing and international benchmarks:
- Domestic Carbon Price: Approximately USD 4 per tonne on IDXCarbon during the pilot phase.
- International Blue Carbon (Mangroves): USD 15 to 35 per tonne in leading voluntary markets.
Bridging this gap is central to Indonesia’s strategy. Higher prices could increase state and community revenues from conservation while making compliance more costly for high-emitting sectors. Policymakers are therefore expected to calibrate supply, eligibility rules, and linkages with foreign markets cautiously as trading activity begins in earnest in July 2026.
