Indonesia does not lack green ambition. What it lacks is coordination.
For years, the country has spoken about green growth as if it were a parallel agenda – adjacent to, but separate from, industry and trade.
Climate policy is discussed in environmental forums. Industrial policy is negotiated elsewhere. Trade strategy moves on its own track. Each serves different stakeholders, speaks a different language and responds to different incentives.
That fragmentation is no longer sustainable. In a global economy where competitiveness is increasingly shaped by carbon intensity, supply chain standards and access to green finance, separating “green” from industry and trade is not just inefficient. It is a strategic error.
Indonesia’s challenge today is not choosing between growth and sustainability. It is recognising that the two can no longer be pursued in isolation. From rainforests and mangroves to nickel reserves, geothermal potential and renewable energy resources, Indonesia is often described as one of the world’s most asset-rich countries for the green transition.
On paper, this should place it at the center of global decarbonisation efforts. In practice, endowment alone guarantees nothing. What matters is whether these assets can be translated into economic capability that markets can trust, finance and scale.
That translation has been uneven. Part of the problem lies in an unresolved contradiction: green policy is expected to deliver environmental outcomes, while industry and trade policy are expected to deliver jobs, exports and growth. When these agendas are not aligned, green initiatives struggle to scale, and competitiveness suffers.
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“Green” has been treated as something separate from how the economy actually works. The false divide between environmental ambition and industrial reality is holding the country back.
Silos that weaken competitiveness
Indonesia’s low-carbon policy ecosystem has developed largely within think tanks, NGOs and specialised government units. These actors often possess strong technical knowledge, robust data and international credibility.
But they frequently lack pathways to scale, commercialise or integrate their ideas into industrial decision-making. Industry and trade policy, meanwhile, remains largely disconnected from this expertise.
Key stakeholders shaping manufacturing, export strategy and investment promotion are rarely exposed to the full implications of carbon standards, nature-related risk or green finance requirements emerging in global markets.
The result is a set of siloed policies serving different constituencies: low-carbon policy that struggles to move beyond planning documents, and industrial policy that risks falling behind evolving global standards. If Indonesia wants to be competitive, this divide must be broken.
Green policy cannot sit in environmental ministries alone. Trade and industry policy cannot ignore carbon constraints. Competitiveness now sits at the intersection of all three.
Carbon policy without an industrial anchor
This fragmentation is most visible in the way carbon markets are discussed. Carbon trading is often presented as an inevitable solution, even though the supporting infrastructure like data systems, measurement standards and verification capacity remains uneven.
For many businesses, particularly MSMEs, carbon markets remain abstract and inaccessible. This matters because Indonesia’s economy is overwhelmingly MSME-based. These firms account for the vast majority of businesses and a significant share of employment and GDP.
Yet most green frameworks are designed with large emitters in mind. How emissions are measured, reduced or monetised at smaller scales remain unclear. Without integration into industrial upgrading strategies, carbon policy risks being perceived as an added cost rather than a driver of transformation.
No country has decarbonised simply by pricing carbon. Pricing changes incentives, but it does not modernize factories, electrify logistics or retool supply chains. Carbon becomes economically meaningful only when it shapes how firms invest.
Nature-based solutions and low-carbon technology are not the same
Another source of confusion lies in how Indonesia discusses its green assets. Nature-based solutions; forests, peatlands and mangroves are often conflated with low-carbon technology such as renewables, batteries and industrial decarbonisation tools.
They operate under very different business models, risk profiles and growth dynamics. Nature-based solutions rely heavily on governance, land-use certainty and credible measurement. They generate value through conservation, avoiding emissions and ecosystem services.
Low-carbon technologies, by contrast, depend on infrastructure, energy systems, skills and industrial clustering. Treating them as interchangeable weakens both.
Indonesia needs a clearer narrative that recognises these differences. One possible pathway is spatial and regional differentiation: identifying which regions are best suited for nature-based economic models, and which are positioned to host low-carbon industrial and technological ecosystems. Without such clarity, policy risks spreading limited resources too thinly and satisfying neither agenda.
Are Indonesia’s green assets still abundant?
There is also a more uncomfortable question that policy discussions often avoid. Are Indonesia’s green assets still as abundant as assumed? Deforestation, peat degradation and land conversion have already pushed several ecosystems toward critical thresholds.
In parts of Sumatera, Kalimantan and Papua, environmental degradation has translated directly into economic losses through flooding, disrupted supply chains and damaged livelihoods. These are not abstract environmental costs. They are failures of development planning.
Romanticising Indonesia’s natural wealth risks delaying hard decisions. If green assets are treated as inexhaustible, policy urgency weakens. If they are recognized as finite and fragile, the economic case for protection and upgrading becomes sharper.
Competitiveness demands alignment
Global markets are already enforcing alignment. Europe’s carbon border mechanism, China’s emissions trading system and tightening supply chain standards are reshaping investment and trade flows. Firms that cannot demonstrate credible emissions data and transition pathways risk losing access to key markets.
Indonesia’s policy challenge is to ensure that its green framework reinforces, rather than undermines, export competitiveness. Alignment does not mean copying foreign rules. It means ensuring domestic systems are recognized, credible and interoperable. Finance will follow clarity.
Investors do not expect perfection, but they need direction. They need to know which sectors are expected to transition first, where policy will remain stable and how green and industrial strategies reinforce each other.
Transition finance, particularly for emissions-intensive sectors, will only scale if firms see a clear pathway to remain competitive while decarbonising. The same applies to MSMEs. If green growth excludes most of the economy, it will fail both politically and economically.
Breaking the false divide Indonesia’s competitiveness problem is not that it is going green. It is that “green” has been treated as something separate from how the economy actually works. The false divide between environmental ambition and industrial reality is holding the country back. Green growth cannot be a parallel agenda, discussed in isolation and implemented in silos.
It must be embedded in industry, trade and investment decisions. The prize is substantial. Done right, decarbonisation becomes a source of competitive advantage, not a constraint. Done poorly, it becomes a cost without a return. Indonesia still has options. But clarity, coordination and credibility are no longer optional. They are the foundations of competitiveness in a low-carbon world.
Dr. William Sabandar is Chief Operating Officer of the Indonesian Business Council (IBC) and President of Intelligent Transport System (ITS) Indonesia.
