Monetizing Indonesia’s Forests
Commentary by Wayne Forrest
An important delegation came to DC last week to attend a World Bank workshop on Indonesia’s progress to create a high value carbon trading market. A few years ago I commented that its new capital city, Nusantara –carved out of a previously logged rainforest region of Kalimantan—was “Indonesia’s Moonshot”, a showcase for the country to create a zero carbon, “green city”, at the intersection of development, sovereignty, and climate finance. This effort rivals that one.
If Indonesia can get it right, its millions of hectares of carbon sinks could provide $billions in residual income, while preserving the lungs of the world. While the current US government does not believe in climate change and the creation of carbon markets, Indonesia’s clearly does.
Its vast rainforests, peatlands, and mangroves are emerging as one of the world’s most significant untapped carbon assets. As global demand for carbon credits rises, these ecosystems offer a compelling opportunity to generate revenue while supporting climate goals. The government is asserting control over how credits are issued, traded, and exported. This reflects a broader strategic objective: treating carbon not just as an environmental instrument, but as a regulated national resource akin to commodities like palm oil or coal.
On April 14th, The World Bank gathered all the major government players in one place for this meeting: Indonesian Stock Exchange (IDX), Financial Services Authority (OJK), State Electric Company (PLN), Ministry of Environment and Forestry, Parliament all led by Indonesia’s Ambassador to the US, Indroyono Soesilo. Key members included Prabowo’s Special Envoy for International Trade and Multilateral Cooperation, Mari Pangestu; DPR (Parliament) Vice Chair, Sari Yuliati; and Indonesian Stock Exchange(IDX) President, Jeffrey Hendrick. The meeting also included forestry expert Frances Seymour and representatives of leading project developers Terra Capital and Gold Standard.
What I heard Tuesday was Indonesia’s strong commitment to a hybrid carbon trading system (including a carbon trading platform as well as voluntary trades) echoed by plenty of international cheerleaders. By July 2026, it expects to transition from a low volume/illiquid trading system limited to energy/power and local players, to a high volume liquid market that will include also its huge forest conservation and “blue ocean” assets. It will be open to international companies. One day soon we may see Google, Microsoft, or Delta Airlines offsetting their emissions by preventing the destruction of a large area of Indonesian rainforest or financing the reconditioning of an of peatlands or fragile mangrove. Governments, private players, and local people will share in the revenue.
- Key points of the discussion:
Indonesia’s Parliament backs the government’s effort but is concerned about “carbon colonialism” and lack of transparency/credibility. It sees the carbon market within the framework of gotong royong, Indonesia’s spirit of “togetherness”. - Indonesia is not simply exporting carbon credits into an open global marketplace.
- Unlike the voluntary carbon market built around standards such as Verra’s Verified Carbon Standard, Indonesia is constructing a sovereign system.
- In the next few months, the government expects to complete its national carbon asset registry under the Ministry of Environment and Forestry based on blockchain technology. This will prevent double counting.
- A “whole of government” approach is key to building trust, especially at local levels where the rights of indigenous people’s may be involved.
- Indonesia stock exchange (IDX) is empowered by Presidential regulation 110 (September 2025) to operate a carbon trading market. The regulation formalizes how carbon assets are measured, regulated, and traded, allowing for cap and trade, carbon exchanges, different pricing mechanisms, and international transfers.
- Indonesia’s recent record of slowing deforestation helps build international confidence. It needs to maintain and improve its score.
Yet the path to monetization is complex, shaped by competing systems, regulatory uncertainty, and credibility concerns. Restoration or protection projects can generate substantial volumes of credits, particularly where avoided emissions from peat degradation are significant. In theory, this positions Indonesia to become a dominant supplier in global carbon markets. This creates both opportunity and risk. On the positive side, a centralized system could improve credibility, reduce double counting, and potentially strengthen pricing power. Government oversight may also ensure that revenues are shared with local communities and aligned with national climate commitments. On the risk side, the coexistence of global voluntary standards and Indonesia’s domestic system introduces friction. A project approved under an international standard may not be recognized domestically or may face restrictions on selling credits abroad.
I suspect the realization of Indonesia’s “sustainable dreams” won’t occur overnight; its not a gold rush. Like Nusantara itself Indonesia’s carbon markets will take time to develop. Much trial and error will be experienced along the way. Hopefully this imperative will not clash with other initiatives that test the land conservation practices on which it rests. These include plans for large scale food/energy estates (see the article on page 3).
Ultimately, monetizing Indonesia’s forests sits at the intersection of environmental science, financial markets, and national policy. The upside is substantial: a scalable mechanism to fund conservation and generate economic value. Success will depend on navigating sovereign control, ensuring credit integrity, and aligning with evolving global market expectations. Those in the World Bank conference room instilled a lot of confidence.
(The above remarks are the author’s and may not reflect the views of AICC or its members.)