Indonesia’s ambition of using carbon markets to help finance biodiversity conservation will require more than voluntary carbon trading, with stronger demand, credible governance and greater regulatory certainty needed to attract investment and compete with the economic drivers of deforestation, speakers said at the Indonesian edition of Eco-Business’ flagship Unlocking capital for sustainability conference on Wednesday.
Panellists at the discussion, titled Can carbon markets be a lifeline for Indonesia’s threatened biodiversity?, said voluntary carbon markets have helped build capacity, but cannot on their own generate sufficient revenue to protect forests and ecosystems over the long term.
Indonesia, home to some of the world’s largest tropical forests, peatlands and mangrove ecosystems, has sought to position itself as a regional carbon market player as it works towards its enhanced climate target of cutting emissions by 31.89 per cent by 2030 based on its its own efforts, or 43.2 per cent with international support.
The country launched IDXCarbon, its official carbon exchange, in September 2023 under the supervision of the Financial Services Authority, OJK. But analysts and market participants say trading activity remains limited, underscoring the challenge of turning regulatory ambition into liquidity and conservation finance. Indonesia currently has an emissions trading system but no carbon tax.
“The voluntary carbon market is not enough,” said Götz Martin, chief executive of nature based solutions and biochar at agricultural giant Golden Agri-Resources.
Citing the Katingan peatland project in Central Kalimantan as an example, Martin said carbon credits currently trade at around US$10 per tonne, leaving relatively modest returns after project costs and financing are deducted.
The Katingan Mentaya project, one of Indonesia’s best-known forest carbon projects, protects more than 150,000 hectares of carbon-rich peatland in Central Kalimantan and has often been cited as an example of how carbon finance can support large-scale ecosystem protection.
“What is left from that money is a handful, and it’s not enough to essentially kind of compete with commodity-based, mineral-driven deforestation,” he said.
Instead, Martin said projects need access to markets with mandated demand and tighter supply, allowing carbon prices to better reflect the multiple benefits forests provide.
“The aim is to go into… areas where there is a mandated demand with supply lag… and push them into a level which really allows to serve the multipurpose of standing forests, which is keeping carbon in place, being a host for biodiversity, and being a host for forest-dependent communities.”
Robert Satrya, head of investment, financing and international relations at the Indonesia Carbon Trade Association, echoed that view. He also suggested that Indonesia should not frame voluntary and compliance markets as competing models.
“Voluntary markets will drive innovation, while compliance will provide scale,” he said.
For Indonesia, the opportunity lies in combining both through national frameworks and international mechanisms such as Article 6 of the Paris Agreement, while expanding nature finance beyond carbon credits alone.
Article 6, which allows countries to cooperate on emissions reductions and trade mitigation outcomes, has become increasingly important for countries seeking to attract climate finance while maintaining accounting safeguards to avoid double counting.
“I believe in the future, we will rely on nature finance that reward biodiversity resilience, water security and community benefits alongside carbon,” Satrya said.
The discussion comes as governments, investors and conservation groups seek ways to close a large global nature-finance gap. Reports by international organisations have estimated that hundreds of billions of dollars a year will be needed globally to halt and reverse nature loss, far beyond what public finance alone can provide.
Speakers also stressed that stronger market governance would be essential if Indonesia hopes to attract international capital for decarbonsiation.
Istiana Maftuchah, deputy director at Indonesia’s OJK, said ensuring the credibility of carbon credits was central to building investor confidence.
“The integrity of unit carbon is very important in our market,” she said, adding that OJK’s role is “to ensure the credibility of carbon trading activity,” particularly in the secondary market.
She highlighted the need for robust traceability, transparent disclosure and safeguards against double counting, while noting that OJK works closely with other ministries overseeing measurement, reporting and verification, and carbon credit issuance.
OJK has said Indonesia’s carbon exchange is intended to support the country’s climate targets by providing trading infrastructure that prioritises transparency, liquidity, efficiency and ease of access. The exchange sits within a wider carbon-pricing framework that includes sectoral trading rules, a national registry and potential links to international carbon markets.
Maftuchah also said Indonesia hopes to launch carbon units from nature-based projects and a new national carbon registry this year, alongside greater participation from businesses pursuing net-zero targets.
“The long-term success of the carbon market depends on stronger participation from business,” she said.
While biodiversity credits have attracted growing attention globally, Martin cautioned against creating a separate biodiversity credit market before carbon markets mature. Biodiversity credits are designed to reward measurable improvements in ecosystems or species conservation, unlike carbon credits, which represent verified reductions or removals of greenhouse gas emissions.
“I think that to establish now a separate biodiversity credit on top of a voluntary carbon credit will add complications,” he said, arguing that buyers are already confused by the wide range of carbon methodologies and quality standards.
Instead, he said carbon projects delivering stronger biodiversity outcomes should command higher prices within existing carbon markets rather than through an entirely separate crediting system.
Satrya added that biodiversity credits should complement, rather than replace, carbon markets, with the long-term goal being “creating the integrated finance… rather than isolated environmental products.”
Across the discussion, panellists agreed that Indonesia’s forests generate value extending well beyond carbon storage. The challenge now, they said, is creating market structures capable of recognising those broader ecosystem benefits while maintaining environmental integrity and attracting enough capital to conserve them at scale.
