The Indonesian government is currently providing the opportunity for indigenous forest administrator and forests under the Social Forestry management scheme to take part in carbon trading under certain requirements.
Minister of Environment and Forestry No. 7 of 2023 concerning Procedure for Carbon Trading for the Forestry Sector stated that carbon trading can be applied in state forests, forests under certain permit, indigenous forests, and social forest.
The Ministry of Environment and Forestry allowed holders of Forest Utilization Business Permits to take part on carbon trading under the condition that the holder of the permit has secured other certificates such as the forest produce legality certificate, or forest product statement document in accordance with prevailing laws and regulations.
Requirements for carbon trading
However, for Social Forest administrators, only administrators that have obtained silver level certificate that may take part in carbon trading.
In addition, Social Forest administrator and indigenous forest administrator are obliged to have associate partner that has experience or expertise in carbon measuring and calculation, project management or access to carbon market.
Article 5 of the Minister of Environment and Forestry No. 7 of 2023 stated that carbon trading will be carried out through emission trading and offsetting greenhouse gas emission.
Businesses engaging in carbon trading and offset must draft a Climate Change Mitigation Action Plan Document before applying for a carbon trading license.
International carbon trade
The Ministry of Environment and Forestry also provide the opportunity for international carbon trading with certain limitations on the amount of carbon that can be traded.
The international carbon trade limit will be adjusted in accordance with the emission reduction target stated in the Nationally Determined Contribution (NDC) document.
Eligibility for international carbon trade
It should be noted that not all forest areas can take part in international carbon trade. Forest areas that may take part in international carbon trading must have applied result-based payment (RBP) scheme or has made international commitment equivalent to an RBP.
Currently, one of the ongoing RBP project is located in East Kalimantan with a total value of U$20.9 million which equals to IDR 313 billion.
