Indonesia sits on one of the world’s largest reserves of agricultural biomass, yet much of it is still burned or left to decompose in the open, releasing carbon that undermines the very climate targets the country has committed to. For businesses operating under tightening ESG requirements and investors watching net-zero trajectories, this gap between stated ambition and ground-level reality is a serious risk.
The policy landscape has been moving quickly. Presidential Regulation No. 110 of 2025 (Perpres 110/2025) now provides a more structured legal foundation for Indonesia’s carbon economic value framework, replacing the earlier Perpres 98/2021. However, regulations setting the rules of the game do not automatically generate the infrastructure, the verified projects, or the market confidence needed to make a green economy function in practice.
This is where the conversation needs to shift from declaration to implementation. Understanding what a green economy actually requires, and how mechanisms like carbon markets and biochar projects fit into that picture, is no longer just academic interest. For policymakers, researchers, and business leaders in Indonesia, it is becoming a strategic necessity.
What is a Green Economy?
The term gets used often, but its meaning can vary depending on who is using it and in what context. At its core, a green economy refers to an economic system that generates growth and human well-being while significantly reducing environmental risks and ecological scarcity. The United Nations Environment Programme (UNEP) defines it as one that is low-carbon, resource-efficient, and socially inclusive.
In practical terms, this means decoupling economic output from carbon emissions and from the degradation of natural systems. It is not about slowing growth, but about redirecting investment and innovation toward activities that produce long-term value without externalizing environmental costs onto future generations.
For a country like Indonesia, with its combination of rich biodiversity, rapidly expanding industrial base, and high dependence on commodity sectors, the green economy framework offers both a constraint and a competitive advantage. The question is no longer whether to transition, but how fast and through which mechanisms the transition can realistically happen.
Key Sector Opportunities in Indonesia’s Green Economy
Indonesia’s economic structure creates a distinct set of entry points for the green economy, spanning energy systems, land use, financial markets, and carbon mechanisms. Each sector carries different risk profiles and readiness levels, which is why strategic prioritization matters for both public and private actors.
1. Renewable Energy and Energy Efficiency
Indonesia has a renewable energy potential estimated at over 3,600 gigawatts across solar, geothermal, hydropower, and wind sources, according to data from the Ministry of Energy and Mineral Resources. Despite this, fossil fuels still dominate the national energy mix, with coal accounting for more than 60 percent of electricity generation in recent years.
The opportunity for businesses lies in energy efficiency investments and in the expanding policy support for renewable power purchase agreements. As the cost of solar and battery storage continues to fall globally, the economics of switching are becoming increasingly favorable for energy-intensive industries across manufacturing, mining, and agribusiness sectors in Indonesia.
2. Sustainable Agriculture and Biomass Waste Management
Agriculture contributes roughly 14 percent of Indonesia’s national greenhouse gas emissions, while also generating enormous quantities of biomass residue from crops like rice, sugarcane, oil palm, and corn. Most of this residue is currently burned in the field or left to decompose, both of which release carbon dioxide and methane into the atmosphere.
Redirecting agricultural waste biomass into productive uses is one of the highest-leverage opportunities in Indonesia’s green economy. Technologies like biochar production and biomass-to-energy conversion can transform a waste liability into a verified carbon asset, while simultaneously improving soil health and reducing input costs for farmers.
3. Carbon Markets and Carbon Removal
Indonesia’s carbon market is taking shape under the regulatory architecture established by Perpres 110/2025, which provides clearer rules around carbon economic value, carbon trading eligibility, and the participation of private sector actors. The market now encompasses both a compliance segment, covering mandatory emitters, and a voluntary segment for companies pursuing net-zero commitments ahead of regulatory timelines.
Carbon removal solutions, particularly those based on durable carbon sequestration such as biochar carbon credits, are gaining traction among corporate buyers who need credits that align with recognized international carbon certification standards. The willingness to pay for high-permanence, measurable carbon removal is rising as corporate buyers face greater scrutiny from investors and civil society over the quality of their offset portfolios.
4. Green Financing and ESG Instruments
Indonesia’s financial regulators have been building out the infrastructure for sustainable finance, including green bond frameworks and ESG disclosure requirements that are gradually being tightened for publicly listed companies. The green bond and sustainability-linked bond market in Indonesia reached significant volumes in recent years, with sovereign green sukuk issuances drawing strong international demand.
For businesses, ESG compliance in Indonesia is shifting from a reputational consideration to a financing condition. Lenders and institutional investors are increasingly pricing in climate risk, which means that companies without credible decarbonization roadmaps may face higher costs of capital over the medium term.
Real Challenges Hindering the Acceleration of Indonesia’s Green Economy
Ambition at the policy level does not translate automatically into deployment at the project level. Several structural barriers continue to slow the pace at which Indonesia can capture the opportunities its green economy potential represents.
1. Data Gaps and MRV Capacity
Reliable measurement, reporting, and verification (MRV) of emissions and carbon removals remains one of the most persistent technical bottlenecks in Indonesia’s climate economy. Many project developers, particularly those working in smallholder agriculture or community forestry, do not have access to the monitoring infrastructure or technical capacity required to produce data that meets the standards of recognized international certification bodies.
Without credible MRV, projects cannot access carbon markets, cannot attract institutional finance, and cannot generate the co-benefits data that ESG-focused buyers increasingly require. Closing this gap requires both public investment in national MRV systems and private sector capacity building at the project level.
2. Regulatory Fragmentation and Policy Uncertainty
While Perpres 110/2025 provides an important legal foundation, the implementation of Indonesia’s carbon market still involves multiple ministries, agencies, and sub-national governments with overlapping jurisdictions. Coordination across forestry, agriculture, energy, and finance creates a complex regulatory landscape that can be difficult for investors and project developers to navigate with confidence.
Policy uncertainty at the sub-national level is a particular concern for long-duration projects like forestry and carbon removal initiatives, which require stable regulatory commitments over 10 to 30-year timeframes. The risk that policies could shift mid-project remains a material consideration in investment modeling.
3. Access to Financing for Mid-Scale Projects
Large infrastructure projects and small community-level initiatives both have relatively well-developed financing pathways, through development finance institutions on one end and microfinance or grant mechanisms on the other. Mid-scale green economy projects, however, those in the range of one to twenty million USD in project value, often fall into a financing gap where they are too large for community-focused funds and too early-stage or too small for institutional capital.
Biochar production facilities, distributed renewable energy installations, and sustainable agriculture programs typically operate in this mid-scale range. Developing blended finance structures and standardized project documentation to de-risk these opportunities is one of the more urgent needs in Indonesia’s climate finance ecosystem.
Read Also : What is Carbon Neutral? Definition, Mechanisms, and Regulations
The Role of Biochar in Accelerating Indonesia’s Green Economy
Biochar is produced through the thermochemical conversion of biomass at high temperatures in a low-oxygen environment, a process called pyrolysis. The result is a stable, carbon-rich material that can be applied to agricultural soils, where it locks carbon out of the atmosphere for centuries and measurably improves soil water retention and nutrient cycling.
For Indonesia specifically, biochar sits at the intersection of two major challenges: the management of abundant agricultural waste biomass and the need for durable, verifiable carbon removal. Rice husks, oil palm shells, sugarcane bagasse, and corn cobs are all viable feedstocks for biochar production, and they are available in enormous quantities across the archipelago.
From a carbon market standpoint, biochar carbon credits offer a level of permanence that many nature-based offset categories cannot match. Recognized international carbon certification standards now provide established methodologies for quantifying and certifying biochar carbon removal, and publicly auditable carbon registries allow buyers to verify the provenance and integrity of credits they purchase.
Beyond the carbon credit revenue stream, biochar also generates agronomic benefits that can support rural income and food security objectives, which aligns the mechanism with Indonesia’s broader sustainable development goals. This co-benefit profile makes biochar projects attractive not just as carbon investments, but as integrated rural development tools that fit within the country’s green economy agenda.
Corporate Strategies for Integrating the Green Economy into Business
Companies operating in Indonesia that take the green economy seriously need more than a sustainability report. They need a sequenced, measurable strategy that connects their operational reality to international climate standards while remaining aligned with Indonesia’s regulatory framework under Perpres 110/2025.
1. Setting an Emissions Baseline with the GHG Protocol
Before any credible decarbonization strategy can be built, a company needs to know where its emissions actually come from and in what quantities. The GHG Protocol provides the globally accepted accounting framework for this, covering Scope 1 (direct), Scope 2 (purchased energy), and Scope 3 (value chain) emissions categories.
Getting the baseline right is not merely a compliance exercise. It reveals which emission sources are most material, which suppliers carry the highest risk, and where efficiency interventions will generate the greatest return. For companies operating complex supply chains across Indonesian agriculture or manufacturing, this step often surfaces significant emissions that were previously invisible to management.
2. Adopting Science-Based Targets with SBTi
Once a reliable baseline exists, companies can commit to emissions reduction targets that are aligned with climate science through the Science Based Targets initiative (SBTi). SBTi targets are set in relation to the temperature pathways required to limit global warming to 1.5 degrees Celsius, which gives them external credibility with investors, customers, and regulators.
For Indonesian businesses, SBTi commitment also signals alignment with the direction that international supply chain requirements are moving. Multinational buyers and investors increasingly require their suppliers and portfolio companies to hold or pursue verified science-based targets, making SBTi adoption a market access consideration in addition to a climate one.
3. Integrating High-Quality Carbon Credits as a Bridge
Even with strong internal reduction targets, most companies will have residual emissions that cannot be eliminated in the near term due to technological or operational constraints. High-quality carbon credits, including biochar carbon credits that meet recognized international carbon certification standards, serve as a bridge mechanism during this transition period.
The Oxford Principles for Net Zero Aligned Offsetting provide useful guidance here: they recommend a gradual shift toward carbon removal credits over offset credits, and toward long-duration removal over short-duration storage. Biochar carbon credits, with their multi-century permanence profile, are well-positioned within this framework as a credible component of a corporate net-zero strategy.
Indonesia’s Green Economy and Opportunities for Foreign Investors
Indonesia presents a structurally compelling case for foreign capital looking for exposure to green economy growth. The combination of a large and expanding domestic economy, significant natural resource endowments, and a government with an explicit net-zero target by 2060 creates a multi-decade investment horizon with both compliance and voluntary market demand.
The carbon market infrastructure being built under Perpres 110/2025 is particularly relevant for investors interested in nature-based and engineered carbon removal. As the regulatory framework matures and aligns more closely with international standards recognized by bodies such as the ICVCM and its Core Carbon Principles, Indonesian carbon assets are likely to attract growing interest from global voluntary carbon buyers seeking supply in high-biodiversity, high-integrity project environments.
Foreign investors should, however, approach the market with a clear-eyed view of the structuring challenges. Land tenure complexity, sub-national regulatory variability, and the current data infrastructure limitations all require robust due diligence and local partner relationships that have demonstrated MRV capability. Projects that can demonstrate durable carbon removal, credible co-benefit reporting, and alignment with Indonesia’s national carbon accounting system under Perpres 110/2025 are best positioned to access international voluntary carbon market demand.
The convergence of ESG compliance pressure on multinational corporations, tightening import regulations in key export markets, and growing domestic regulatory ambition in Indonesia creates conditions where early movers in the country’s green economy can secure advantaged positions in supply chains, carbon markets, and green financing flows. The window for first-mover positioning in high-integrity carbon removal, particularly biochar, is still open, but it is not indefinitely so.
Discuss Indonesia’s Green Economy Opportunities with the Planet Carbon Team
Navigating Indonesia’s green economy requires more than general awareness of the opportunity. It requires project-level insight into MRV requirements, carbon market eligibility, biomass feedstock logistics, and regulatory alignment under Perpres 110/2025. These are details that look different depending on whether you are a corporate buyer, a project developer, a landowner, or an investor.
Planet Carbon works across the full cycle of biochar carbon project development, from feasibility and validation through to commercialization and credit issuance. If you are exploring where biochar carbon credits or carbon removal solutions fit into your organization’s strategy, the team is ready to work through the specifics with you.
Reach out to schedule a working discussion. There are no generic pitches here, just a focused conversation about what the numbers, the regulations, and the market realities actually mean for your specific situation.
Referensi:
- United Nations Environment Programme (UNEP): Definition and framework for the green economy – https://www.unep.org/regions/asia-and-pacific/regional-initiatives/supporting-resource-efficiency/green-economy
- Ministry of Energy and Mineral Resources, Republic of Indonesia: National renewable energy potential estimates – https://www.esdm.go.id
- Presidential Regulation No. 110 of 2025 (Perpres 110/2025): Legal basis for Indonesia’s carbon economic value and carbon market framework – https://peraturan.go.id/id/perpres-no-110-tahun-2025
- Science Based Targets initiative (SBTi): Framework for setting corporate emissions reduction targets aligned with climate science – https://sciencebasedtargets.org
- Integrity Council for the Voluntary Carbon Market (ICVCM): Core Carbon Principles for high-integrity voluntary carbon markets – https://icvcm.org
- Oxford Principles for Net Zero Aligned Offsetting: Guidance on the appropriate use of carbon credits in corporate net-zero strategies – https://www.smithschool.ox.ac.uk/research/oxford-offsetting-principles
- GHG Protocol: Corporate accounting and reporting standard for greenhouse gas emissions – https://ghgprotocol.org
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