Can tropical rainforests benefit from surging voluntary carbon markets? The case of Indonesia

Countries that continuously improve the integrity of their carbon transactions will boost confidence and expand market opportunities with a wide array of actors. Indonesia can be one of these countries.

The market size for voluntary carbon offset has been experiencing a sharp growth over the past five years, with the highest valuation currently going to carbon credits produced from the forestry and land-use sector. Responding to this growing market appetite, countries with large tropical forests such as Brazil, the Democratic Republic of Congo (DRC) and Indonesia seemingly stand to gain.

These rainforest-rich countries have responded differently towards voluntary carbon markets. Brazil seems largely indifferent to participating in the REDD+ carbon credit boom, while the DRC is actively advocating for a fair price of forest carbon of $100 per metric ton, about 20 times higher than the current average of $4-6. Meanwhile, Indonesia’s response is rather ambiguous.

Indonesia has listed carbon pricing as one of the key climate finance instruments on its climate policy directions, recognizing the potential value of voluntary carbon markets. It is currently drafting an all-encompassing carbon credit presidential regulation and carbon tax law. However, the country also simultaneously canceled self-declared forest carbon projects to prioritize its nationally determined contributions (NDCs) without any clear and timely guidance for private carbon project developers, adding further uncertainties for carbon credit transactions.

Source: Climate Policy Initiative
Author: Tiza Mafira and Brurce Muhammad Mecca