Major Overhaul of Indonesia’s Carbon Regulatory Framework

Introduction

After a few years of trial and error since the launch in 2021 of its carbon pricing framework, the Government of Indonesia enacted Presidential Regulation No. 110 of 2025 on the Implementation of Carbon Economic Value Instruments and National Greenhouse Gas Emissions Control (“PR 110/2025”). This regulation revokes and replaces Presidential Regulation No. 98 of 2021 (“PR 98/2021”), which for four years had formed the bedrock of Indonesia’s carbon pricing and greenhouse gas ("GHG") emissions control regime. Please refer to our previous article here for an overview of the previous framework under PR 98/2021.

The new regulation arrives at a time when global attention on the credibility and effectiveness of carbon markets is at a peak following COP 30 which focused on further operationalizing carbon markets under the Paris Agreement (Article 6), emphasizing the need for high-integrity credits, and linking domestic and international markets, with new coalitions forming (such as the Carbon Market Coalition). Countries have been converging around internationally aligned carbon governance systems, in part to ensure the integrity of domestic emissions reduction claims and in part to secure access to rapidly expanding international demand for high-quality carbon units. Indonesia, with its vast natural carbon sinks, rising domestic emissions profile, and growing pipeline of renewable and decarbonisation projects, has every incentive to position itself as a jurisdiction capable of generating both compliance-grade and voluntary-market carbon units, and of doing so in a way that can withstand international scrutiny.

As many commentators and market participants have observed over the past 4 years, despite initial attempts at developing a comprehensive carbon regulatory framework, the implementation of a carbon market in Indonesia has been slow to materialise and, regulatory uncertainty around international carbon trading has affected transactions and investments in a sector in which Indonesia offers significant potential. It was therefore timely to do a re-set of the regulatory and investment framework to offer better clarity and investor confidence and allow for enhanced integration with international carbon markets.

This is what Indonesia aims to achieve with the issuance of PR 11/2025 which is a substantial instrument spanning 103 articles across 9 main chapters each addressing a distinct aspect of the national climate and carbon governance framework. The new regulation delivers a more structured and internationally compatible framework, providing greater legal certainty and aligning Indonesia’s climate policy instruments with its enhanced Nationally Determined Contribution ("NDC") commitments. PR 110/2025 marks a shift from fragmented coordination prevailing under the previous regime towards a more centralized governance model and introduces the concept of "carbon allocation" as the foundation for emissions planning. The regulation also expands eligibility for carbon trading, clarifies institutional oversight and governance, and transitions registry functions to the new national platform for the issuance and tracking of carbon units (SRUK).

This article provides an overview of the main changes and structural improvements introduced by PR 110/2025, and presents key takeaways for stakeholders looking to invest or participate in Indonesia's carbon market. 

Structure of PR 110/2025

Future Implementing Regulations

PR 110/2025 acts as an umbrella regulation setting out the key pillars and principles of Indonesia's new carbon framework but is to be complemented by a number of implementing regulations including:

• Joint ministerial regulation on the national carbon trading roadmap: sets content, preparation, and determination procedures for the roadmap coordinated by the steering committee.
• Minister of Environment regulation on SRUK (the new platform for carbon units): to govern recording of carbon units and trades in SRUK and any interface with the carbon exchange.
• Minister of Finance policies for carbon levy/tax.

1. Background and Rationale for the New Regulation

As foreshadowed in the introduction, the new framework promulgated through PR 110/2025 aims at addressing the following factors:

• Evolving Climate Commitments: Indonesia’s climate policy has matured, with more ambitious NDC targets and a greater emphasis on both mitigation and adaptation.
• Legal and Practical Gaps: PR 98/2021, while groundbreaking at the time it was issued, was found to be insufficient and ineffective in addressing certain legal, technical, and market needs, particularly in relation to international trading (compliance and voluntary).
• Integration with National Development: The new regulation seeks to better integrate climate action with sustainable economic development and the transition to a greener economy.

PR 110/2025 establishes a more detailed and structured framework for the implementation of carbon economic value instruments and GHG emissions control.¹ Under PR 98/2021, these functions were recognized, but spread across multiple institutional tracks that were not always adequately synchronized in implementation. This resulted in legal ambiguity regarding the holder of authority over certification, registry, and, critically also, on the possibility and technicalities of cross-border trading.

Where PR 98/2021 was conceptual and broad, often leaving gaps that sectoral ministries were meant to fill with their own implementing regulations, PR 110/2025 appears to be far more integrated. There is a noticeable shift from a “policy declaration” style of regulation to a more operationalised and market-friendly framework. As an evidence of this shift, the new regulation introduces terms that investors will recognise from other functional carbon markets, such as carbon units, emissions quotas, unit registries, and corresponding adjustments.

2. Carbon Allocation and Alignment with NDC Planning

One of the most meaningful changes is the introduction of the concept and mechanism of carbon allocation. Under PR 98/2021, sectoral emissions limits existed conceptually, but they were not embedded in a unified national process and lacked a clear allocation mechanism across sectors.

PR 110/2025 mandates that newly introduced carbon allocations serve as the basis for NDC planning and target setting. The carbon allocation mechanism establishes the permissible amount of carbon dioxide equivalent (CO2e) emissions for specific periods, determined in accordance with national capacity.² The allocation process is based on (i) regularly updated sectoral GHG inventory data, (ii) economic considerations, (iii) climate change mitigation efforts, as well as (iv) the availability of national carbon reserves in order to make Indonesia’s NDC targets more achievable.

Ministries are required to incorporate allocations directly into NDC planning, with each sector having to implement emissions budgets that are traceable to national targets.³ The allocation framework is applied at both sectoral and installation levels, directly connecting national emissions ceilings to regulated entities and aims to provide a measurable basis for NDC implementation.⁴

Additionally, the new regime includes further focus on processes to achieve NDC implementation. The regulation mandates the preparation of detailed roadmaps, including baselines, targets, scenarios, governance structures, funding needs, and technology requirements.⁵ These roadmaps are intended to serve as an operational planning tool, linking national climate commitments to sectoral action plans, implementation timelines, and institutional responsibilities. This includes provisions to ensure coordination of target setting and action planning at the national, sectoral, provincial, and (where relevant) district/city levels, with clearer timelines and responsibilities.⁶

3. Certification and Use of Carbon Units

PR 110/2025 introduces more detailed rules for the certification and use of carbon units:

• GHG Emission Reduction Certificate (Sertifikat Pengurangan Emisi GRK or "SPE GRK"): The regulation formalizes the process for issuing SPE GRK, which serve as the basis for trading and result-based payments. The issuance of carbon units is now subject to more rigorous documentation and validation requirements. Businesses seeking to obtain SPE GRK from GHG emissions offsets must submit either:
  
  • Climate Change Mitigation Action Plan Document (DRAM)⁷ for domestic certification; or
  • Project Planning Document (DPP) for international certification.⁸

These documents must include details on project design, compliance with relevant standards, and the specifics of emissions reduction or absorption.

• Eligibility and Use: SPE GRK can be used for compliance, voluntary offsetting, reporting, and as proof of environmental performance for green financing.⁹
• International Standards and Trading: One of the key changes introduced by PR 110/2025 is the recognition of carbon units issued both domestically and through international certification schemes. PR 110/2025 provides that carbon units traded internationally can be issued based on national standards, the United Nations Framework Convention on Climate Change ("UNFCCC"), or other international standards.¹⁰

Importantly also, international trades that do not require corresponding adjustments and do not require government authorization are now legally recognized under PR 110/2025. This removes a significant gap that existed under the previous regime which hindered voluntary carbon projects by creating ambiguity over whether units generated in Indonesia could be exported or purchased and traded by international buyers. Critically also, international carbon trading can commence without waiting for Indonesia’s NDC targets to be achieved (to the contrary of the requirements which applied under the previous regime of PR 98/2021). This marks a strategic shift that allows Indonesian developers and projects to reach international markets immediately and supports the commercial viability of projects across a range of mitigation sectors, including forestry, blue carbon, renewable energy, methane reduction, waste management, and other sectors.

Additionally, PR 110/2025 broadens the definition of recognised carbon units to include units issued under international certification schemes, alongside domestically issued SPE-GRK. Projects certified under international carbon trading schemes (such Verra, Gold Standard, and other global voluntary carbon standards) must be registered via the DPP route, obtain sectoral approval, and have their carbon units recorded in the national registry, whereas for international transfers under the Article 6 framework, authorization from the Ministry of Environment (with recommendation from the relevant ministers) and a corresponding adjustment are additionally required.¹¹  However, unlike the situation which prevailed under PR 98/2021, PR 110/2025 does not expressly require mutual recognition arrangements with international standards bodies, leaving certain procedural and institutional questions to be addressed through future implementing regulations.

4. New Carbon-Unit Registry

Under PR 98/2021, the National Registry System for Climate Change Mitigation (Sistem Registri Nasional Pengendalian Perubahan Iklim or “SRN PPI”) attempted to serve as both an NDC-tracking system and a carbon-unit registry. In practice, this created confusion and made it difficult to integrate Indonesia’s units with international systems.

PR 110/2025 now introduces a new Carbon Unit Registry System (Sistem Registri Unit Karbon or "SRUK"), which is aimed to be a dedicated registry specifically for carbon units. SRUK must provide transparent, real-time, traceable, and permanent records of issuance, transfer, and retirement, and it must be interoperable with international registries. All carbon trading and emission offset must now be recorded in the SRUK.¹² This is one of the most welcome improvements from a market perspective because it directly addresses concerns about double counting, inconsistent unit histories, and lack of visibility over carbon-unit provenance. The establishment of SRUK further centralizes and streamlines the registration and tracking of carbon units, enhancing institutional oversight and market integrity.¹³ It remains to be seen how the registry will be implemented in practice and whether a brand new website and online system is developed and launched, or whether the existing SRN-PPI online platform is to be repurposed to include the SRUK registry.

5. Introduction of GHG Emission Quotas, Refined Carbon Market Mechanisms and Economic Instruments

One of the structural weaknesses of PR 98/2021 was the lack of a clear mechanism for issuing tradable emissions units to regulated facilities. The concept of “Upper Emission Limits” did not translate effectively into a tradable market instrument.

PR 110/2025 introduces GHG Emission Quotas which are allocated through the carbon allocation framework (see point 2 above) and function as compliance-grade tradable units. This represents an important step towards a full cap-and-trade system. Installations covered under the emissions-trading regime will receive quotas, monitor their emissions, and trade surplus or deficit quotas in the market. It is also intended for installations that exceed their allocated quotas to eventually be subject to a carbon-tax.

PR 110/2025 does not impose an immediate financial or criminal penalty for exceeding GHG emission quotas. This is a stark difference from PR 98/2021 which previously provided administrative sanctions for businesses that did not register their climate change mitigation actions on the SRN PPI. However, as mentioned above, the carbon tax should eventually be implemented in practice, and administrative sanctions may be further specified in some of the upcoming implementing regulations.
 
PR 110/2025 also further refines and expands the suite of "carbon economic value instruments" which was initially introduced by PR 98/2021, including:

Other Notable Updates:

• Trading Platforms: Carbon trading can occur via a designated carbon exchange (bursa karbon) or direct transactions, provided they are recorded in the national registry.¹⁸  This provides long-awaited legal certainty for bilateral transactions, which were in a “grey zone” under PR 98/2021.
• Multi-sector and Cross-sector Trading: The regulation enables multi-sector and cross-sector trading, supporting market liquidity and efficiency.¹⁹

Under PR 98/2021, carbon economic value was essentially a conceptual umbrella. It allowed for instruments such as carbon units and result-based payments but did not structurally distinguish between them. PR 110/2025 replaces this with a clearer classification. Carbon economic value is now implemented through specific instruments and actions such as carbon trading, GHG Emission Trading, GHG Emission Offsetting, Result-Based Payments, carbon levies, and other evolving mechanisms.

This reclassification matters because it provides improved legal clarity for commercial arrangements. For example, an industrial operator seeking to acquire offsets can now map its mitigation strategy with clearly defined regulatory categories, rather than relying on broad or abstract concepts. In the same way, financial institutions can better assess the risk profile of emissions-related investments when legal instruments are properly defined.

6. A Wider Scope of Regulated and Supported Activities, Including Blue Carbon and Oil & Gas

PR 110/2025 expands the scope of Indonesia’s NDC sectors and sub-sectors. The addition of the blue carbon sector is both commercially and environmentally significant. Indonesia contains some of the world’s largest mangrove and seagrass ecosystems, and the blue-carbon inclusion creates regulatory recognition for a class of carbon-removal activities that presents substantial international demand potential.

The addition of the oil and gas sub-sector signals Indonesia’s intention to include upstream and midstream emissions within the country’s formal GHG management system. For oil and gas operators, this may eventually translate into more explicit reporting and quota-based obligations, but it also provides opportunities for methane reduction, flare gas capture, and carbon capture and storage (CCS) projects to be formally recognised within the national system and potentially monetized.

7. Robust Measurement, Reporting, and Verification (MRV) and Transparency Requirements

A cornerstone of the new framework is the enhancement of Measurement, Reporting, and Verification ("MRV") systems and processes. MRV requirements under PR 98/2021 were kept high-level and left substantial discretion to sectoral ministries. Under PR 110/2025, they are more structured, consistent and tied to registry obligations. PR 110/2025 mandates integrated, transparent, and periodic measurement, reporting, and verification of emissions, mitigation, and adaptation actions.²⁰

The transition from SRN PPI to SRUK for carbon unit registration is aligned with these objectives and aimed to improve traceability and real-time data management.

Under the new registry structure:

We would expect an overarching umbrella regulation as well as implementing ministerial regulations to be issued on this topic to ensure consistent and standardised MRV methodologies across sectors.

8. Strengthened Governance and Institutional Arrangements

A further major innovation introduced by PR 110/2025 is the establishment of a Steering Committee (Komite Pengarah) with a clear mandate to provide policy direction, coordinate efforts across various line ministries, and oversee the implementation of carbon economic value instruments and GHG control.²¹

The committee is chaired by the Coordinating Minister for Food Affairs (Menteri Koordinator Bidang Pangan)²², with vice-chairs from the economic and infrastructure portfolios, and includes a broad array of relevant ministers and agency heads and must report to the President at least once a year.

9. Transitional and Repeal Provisions

As most regulations, PR 110/2025 includes a set of transitional provisions:

• Adjustment Period: Existing national and regional action plans, carbon units, and international agreements must be adjusted to comply with PR 110/2025 within one year.²³
• Revocation of Previous Regulations: PR 110/2025 formally revokes PR 98/2021 as well as certain earlier regulations on the same topic (Presidential Regulation No. 61 of 2011 on National Action Plan for Reducing Greenhouse Gas Emissions and Presidential Regulation No. 71 of 2011 on Implementation of the National Greenhouse Gas Inventory).
  
  However, some of their respective implementing regulations remain in force to the extent they do not conflict with the new provisions and have not yet been replaced.²⁴  For example, this means that Ministry of Environment and Forestry Regulation No. 21 of 2022 ("MOEF 21/2022") which currently governs MRV procedures, project documentation, registration processes and technical methodologies, continues to apply during the 1 year transition period. The transitional reliance on MOEF 21/2022 ensures regulatory continuity until a new ministerial-level implementing regulation is issued, at which point, migration and sector-level enforcement will be fully harmonized.
• Existing Carbon Units: Carbon units already recorded in SRN-PPI remain valid and will be migrated to SRUK. This avoids disruption to ongoing projects or transactions, which is particularly important for developers and buyers engaged in multi-year verification cycles.

Further Regulations to be Issued

As mentioned in the Introduction to the structure of PR 110/2025 (on page 2), this overarching regulation calls for the issuance of certain implementing regulations to provide further detail, processes and requirements on some of the key instruments and measures provided for under the new framework. The Ministry of Forestry is currently preparing a major regulation on Procedures for Carbon Trading in the Forestry Sector which elaborates on the operational implementation of forestry-sector carbon offsets and will establish detailed procedures for registration, validation, verification, and authorization of carbon units (SPE-GRK and non-SPE GRK), emphasizing risk management and coordination between national and international trading mechanisms.  

Conclusion – Key Takeaways

PR 110/2025 marks a clear step forward and improvement of Indonesia’s carbon governance regime. By replacing PR 98/2021, the new regulation provides a more detailed, integrated, and internationally compatible framework, with stronger governance, clearer procedures and, importantly, enhanced opportunities for market participation.

Businesses and other stakeholders across relevant sectors should familiarize themselves with the new requirements to assess their compliance status and, where necessary, proactively engage in the transitional process with the previous regime under PR 98/2021.

For investors and project developers (and their potential lenders), PR 110/2025 is a material development and presents both immediate opportunities and longer-term strategic prospects. It not only signals Indonesia’s commitment to developing a more functional (and active) carbon market, but it also provides regulatory clarity on how carbon units are generated, traded, accounted for, and recognised both domestically and internationally. The new framework creates clearer pathways for participation in both domestic compliance markets and international voluntary markets. Importantly also, the introduction of the concepts and mechanisms of Carbon Allocation and GHG Emission Quotas, the new SRUK registry, expanded sectoral coverage, and enhanced MRV requirements, all contribute to significantly strengthening the integrity and functionality of the system.

PR 110/2025 provides a more robust and coherent legal foundation for current and future decarbonisation projects. While its ultimate success will depend on the issuance of detailed implementing regulations over the next few months and actual implementation and oversight by the relevant line ministries (including through the Steering Committee), PR 110/2025 positions Indonesia as a credible jurisdiction capable of generating high-quality carbon units and participating more actively in global carbon markets.

Appendix

Comparison Table between PR 98/2021 and PR 110/2025