At the COP30 climate summit in Brazil in November 2025, Indonesia arrived with a pipeline of around 90 million tonnes of potential carbon credits, expecting nearly US$960 million in transactions. Yet it secured commitments for only US$2.75 million. This was not simply a disappointing week of negotiations; it signaled that Indonesia’s carbon credit strategy rests on weaker demand, credibility and governance foundations than its policymakers acknowledge.
Carbon markets cannot replace strong governance, ambitious national climate commitments and credible enforcement.
In theory, carbon markets turn conservation and improved land management into tradable revenue. Forests kept intact, peatlands restored, and emissions avoided are converted into credits that countries can sell. For Indonesia, this promises climate finance without stalling development. In practice, however, COP30 exposed the widening gap between idea and implementation, with unresolved disputes over integrity, quality, standardisation and interoperability still shaping the market.
These technical weaknesses intersect with a deeper credibility problem. Independent analysts rate Indonesia’s national climate commitments as “critically insufficient,” meaning they require only limited real emissions cuts. Credits generated against weak baselines do not represent additional climate action; they simply shift numbers without reducing total emissions. Under Paris Agreement Article 6 trading, inconsistent enforcement and ambiguous compliance provisions deepen this uncertainty, making many buyers reluctant to pay for reductions that may not truly exist.
Equity concerns compound the risk. Indigenous peoples and local communities, which have managed many of Indonesia’s forests for generations, remain largely excluded from carbon finance. Weak land tenure recognition, unclear legal standing and unequal bargaining power limit their participation. As trading expands, corporate projects could override customary claims, restricting access and criminalising traditional livelihoods.
Environmental outcomes have also been mixed. Fires have continued to affect peatland landscapes in Indonesia, including areas targeted by restoration and climate-related land interventions. In several documented cases, project baselines significantly overstated deforestation risk, allowing credits to be issued without meaningful change on the ground. Meanwhile, a narrow focus on measurable carbon outcomes has encouraged avoided-deforestation and plantation-style approaches that often deliver limited biodiversity or ecosystem resilience benefits.
None of this means Indonesia should abandon carbon markets. It means they must stop being treated as an easy shortcut to climate funding and instead function as a tightly regulated public policy tool. Carbon markets cannot replace strong governance, ambitious national climate commitments and credible enforcement.
Indonesia now has a national carbon market framework, including a presidential regulation on carbon economic value and a national registry intended to improve transparency. These are meaningful steps, but they do not yet amount to an independent market regulator. Baseline setting and verification still depend heavily on voluntary standards, with limited state capacity to investigate or penalise malpractice. This framework must evolve into a credible authority with real enforcement power.
Indonesia has built the outline of a carbon market but not yet the institutions to make it credible.
Indonesia has also opened the door to international trading under Article 6, clarifying how credits can move across borders. But this progress is not matched by binding national or sectoral emissions limits. As long as emissions rise overall, it becomes difficult to prove that individual projects generate genuine reductions. Strengthening Indonesia’s Nationally Determined Contribution, and translating it into enforceable sector plans, is a technical necessity.
At the same time, expectations placed on carbon markets exceed what price signals can realistically deliver. Even well-designed credits struggle to compete against agriculture, mining and infrastructure projects that offer faster and higher returns. Carbon prices remain below the real economic value of conserving forests, helping explain why deforestation can still occur in project areas. Markets therefore need to be complemented by direct ecosystem payment schemes targeted at high-risk landscapes.
Although social safeguards exist on paper, they remain too weak to secure durable credits. Consultation and benefit-sharing measures cannot resolve disputes rooted in unclear tenure or unequal power. Projects on contested land face conflict, reversals and reputational damage that undermine permanence. Legal recognition of indigenous and community land and carbon rights is therefore both a justice imperative and a market stability requirement. Where rights are secure, communities should own credits and negotiate transparently with buyers.
Indonesia’s weak performance at COP30 should be read as a warning, not merely a disappointment. The country has built the outlines of a carbon market but not yet the institutions to make it credible. The next phase must prioritise consolidation: stronger enforcement, alignment with real national emissions reductions, social legitimacy, and proof that Indonesian credits represent measurable climate outcomes rather than optimistic projections.
A common argument is that Indonesia cannot move decisively without clearer global rules. In reality, waiting carries greater risk. The global carbon system is likely to remain fragmented for years, favouring countries that establish credible domestic frameworks early. Indonesia should therefore 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.
Indonesia does not need carbon markets as a political slogan or financial experiment. It needs them as a disciplined public-interest tool, anchored in stronger national climate ambition and supported by direct conservation finance where markets fall short. The real choice is between rapid expansion that compromises integrity, or a high-standard, rights-based market capable of earning global trust. Only the latter will prevent another disappointing summit, and turn Indonesia’s forests into credible climate assets rather than accounting exercises.
