Indonesia, where forests cover more than 120 million hectares, could become home to one of the world's largest carbon markets. Within the coming decade, Indonesia's carbon market could reach 258.7 trillion rupiah (or 4 billion US dollars) a year.
"Indonesia plans to begin selling carbon offsets shortly, and the authorities are currently working on recognising existing international standards," reports Reuters. The country's government halted cross-border trade in carbon dioxide at the end of 2021, choosing instead to give priority to meeting its carbon dioxide emission reduction targets by drawing up comprehensive rules on carbon emissions trading.
The Indonesian government launched a domestic carbon exchange in 2023. In January 2025 the exchange permitted the sale of carbon credit certificates to foreign buyers, but all the certificates on offer came from emission reductions achieved through energy projects.
"Trading in carbon offsets from forests managed by private companies and communities in the forestry sector will begin shortly," says Indonesia's forestry minister Raja Juli Antoni. The ministry he heads forecasts that in this year alone the carbon offset market could reach 3.2 trillion rupiah (or 200 million US dollars), and between 97.9 trillion and 258.7 trillion rupiah over the next decade.
"The government has set a target of concluding mutual recognition agreements with the international standards Verra, Gold Standard and Plan Vivo by May," a ministry representative told Reuters. This follows the fact that, before the 2021 rules came into force, some companies had been offering carbon offsets from nature-based projects in Indonesia. The companies were asked to discontinue these offers and to adopt the standard set by Jakarta, reports the industry association that has lobbied for recognition of the international standards.
"It has to be acknowledged: what we are selling is invisible, so the process, the participants and the certificates must be clear and acceptable to the market. For now, like it or not, we have to admit that Indonesia's certificate is not really clear," the chairman of the Indonesian Carbon Trading Association, Dr Riza Suarga, said at a session of Indonesia's parliament in February.
The new market will be established after Indonesia set itself the goal of reaching net zero greenhouse gas emissions by 2060 or sooner. At the G20 forum last year, the country's president Prabowo Subianto struck an optimistic note, saying that the country could reach this goal before 2050.
Indonesia has a variety of forest types
Of a total forest area estimated at roughly 120.5 million hectares, Indonesia has 19 different forest types. Indonesia's tropical rainforests are the third largest in the world after the Amazon and Congo rainforests. Indonesia's mangrove forests and peatlands are the largest in the world, which makes Indonesia one of the world's greatest biodiversity countries.
The Indonesian archipelago stretches along the equator. It lies between two continental tectonic plates – the Eurasian plate and the Australian plate. This location creates the conditions for biodiversity, as well as for a large number of animals and plants found only in Indonesia, making it the second largest, or megabiodiverse, country after Brazil.
Indonesia is home to a very large number of tree species. Its forests are home to hundreds of animal species. Indonesia has also identified 150 thousand insect species.
Indonesia's tropical rainforests, mangrove forests and peatlands absorb an enormous amount of carbon. The total amount of carbon stored by these three forest types is approximately 113.18 gigatonnes. These forests not only absorb carbon but also provide fresh air, water, food and shelter, and meet the needs of living creatures. Forests make a huge contribution to maintaining the balance of ecosystems and climate stability worldwide.
Although Indonesia's forest area is enormous, it is unfortunately also one of the five countries that have lost the most forest over the past 20 years. Changes in land use and illegal logging are considered the main causes of forest loss.
One solution for reducing deforestation is agroforestry. In an agroforestry system, trees are planted together with crops, which produces positive results and thereby supports the economic well-being of local communities. Traditional practice in what is known as social forestry, including agroforestry, has shown that it can meet a community's social and economic needs while also protecting the forest ecologically.