From Conservation to Carbon: Unlocking Carbon Opportunities in Indonesia’s Conservation Areas

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Authors

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Background

One of the key developments in Indonesia's natural resources conservation framework came through Law No. 32 of 2024, which amended the decades-old Law No. 5 of 1990 on Conservation of Natural Resources and Their Ecosystems. The amendment expressly recognizes the utilization of environmental services within conservation areas, including carbon environmental services.

As part of its implementation, the Ministry of Forestry issued the Minister of Forestry Regulation No. 27 of 2025 on Environmental Services Utilization in Nature Reserve Areas, Nature Conservation Areas, and Game Reserves ("MOF Reg 27/2025"), which was recently amended by the Minister of Forestry Regulation No. 7 of 2026 ("MOF Reg 7/2026"). While MOF Reg 27/2025 establishes the broader framework for environmental services utilization in conservation areas, MOF Reg 7/2026 appears specifically aimed at accelerating carbon environmental services activities and facilitating carbon trading in conservation areas. This is in-line with Minister of Forestry Regulation No. 6 of 2026 on Procedures for Carbon Trading through Forestry Sector Emission Offsets ("MOF Reg 6/2026"), which provides further clarity on carbon trading implementation in the forestry sector.

Business License for Utilization of Carbon Environmental Service in Conservation Areas

Under the MOF Reg 27/2025, the activity of utilizing carbon environmental service, specifically in National Park (Taman Nasional -- "TN")[1], Grand Forest Park (Taman Hutan Raya -- "Tahura")[2], Nature Recreation Park (Taman Wisata Alam -- "TWA")[3], and Game Reserve (Taman Buru)[4], is classified as a business under KBLI 02209 (Other Forestry Business) in the high risk category, and accordingly requires the Business Identification Number (Nomor Induk Berusaha -- "NIB") and license for the business. As for the specific license type, it shall be in the form of a business license referred to as the Business License for Utilization of Carbon Environmental Services (Perizinan Berusaha Pemanfaatan Jasa Lingkungan Karbon -- "PB-PJL Carbon").

The activities covered under the PB-PJL Carbon license refer to carbon offset mechanisms involving carbon units generated from the implementation of climate change mitigation measures.[5] Such measures may include efforts to enhance carbon stocks through ecosystem restoration activities, peatland restoration, and improvements to peatland water management systems.[6] In addition to such measures, the holder of a PB-PJL Carbon license shall also prevent the deforestation and degradation of forests and/or peatlands, as well as through conservation of carbon stocks.[7]

Mandatory Levies for PB-PJL Carbon

Prior to its amendment, MOF Reg 27/2025 stipulated that holders of PB-PJL Carbon licenses were subject to mandatory payments in the form of fees (iuran) and levies (retribusi). However, the regulation did not clearly distinguish the concept and scope of each type of payment, other than specifying the applicable proof of payment requirement for the PB-PJL application process, whereby proof of fees payment applied to activities in National Parks, TWA, and Game Reserves, while proof of levies payment applied to PB-PJL activities in Tahura.[8]

Through MOF Reg 7/2026, the Government has now provided clearer definitions and distinctions for each type of payment, as follows:[9]

• Carbon PB-PJL Fees (Iuran PB-PJL Karbon), defined as fees imposed on business licenses granted to business entities conducting commercial activities under carbon environmental services in National Parks, Tahura, and TWA.
• Carbon PB-PJL Levies (Pungutan PB-PJL Karbon), defined as levies imposed on each carbon trading transaction conducted by holders of PB-PJL Carbon carrying out carbon environmental services activities within their business activity areas.

The introduction of these definitions is significant as it clarifies that the Carbon PB-PJL Fees apply to the obtainment of the PB-PJL Carbon license itself, whereas the Carbon PB-PJL Levies apply to each carbon trading transaction conducted by PB-PJL Carbon holders. Further, the terminology of the levy has also been revised from "retribusi" to "pungutan". While "pungutan" generally carries a broader meaning under Indonesian regulatory practice, with "retribusi" commonly regarded as one form of "pungutan", the regulation does not expressly clarify the rationale for this change in terminology.

Aside from the addition of these definitions, the remaining provisions generally remain unchanged, including the transitional provision under which, pending the issuance of the applicable tariff for the Carbon PB-PJL Fees and Carbon PB-PJL Levies, business actors are only required to submit a commitment to make such payments through an integrity pact.[10] For project developers, this may provide greater licensing certainty and flexibility in transaction timing during the early phase of the carbon market.

Clarified Commercial Requirements for Carbon Trading Activities

As discussed above, activities conducted under a PB-PJL Carbon license are intended to facilitate carbon trading through carbon offset mechanisms. Under the initial version of MOF Reg 27/2025, two of the conditions imposed on such carbon trading were the prohibition on the transfer of ownership of carbon credits and the prohibition on trading carbon stocks. These concepts appeared more consistent with a results-based payment mechanism rather than a conventional carbon offset transaction.

MOF Reg 7/2026 has now removed the aforementioned restrictions from MOF Reg 27/2025, thereby providing greater clarity on the implementation of carbon trading under the PB-PJL Carbon framework. Accordingly, the conditions for the implementation of carbon trading are now as follows:[11]

1. align with the forestry sector carbon trading roadmap;
2. satisfy carbon trading eligibility criteria, including additionality, permanency, and leakage prevention;
3. fulfil obligations under the relevant license, including annual work plans, ecosystem restoration, and area protection and security measures;
4. apply greenhouse gas emission offset mechanisms in the form of natural carbon removal, carbon sequestration, or other permitted mitigation actions;
5. incorporate biodiversity and social impact assessments;
6. implement social and cultural safeguard principles, including free, prior, and informed consent (FPIC);
7. establish safeguard mechanisms;
8. adhere to the benefit-sharing arrangements with conservation management units and local communities;
9. demonstrate ESG-related competencies; and
10. possess qualifications relating to the implementation of carbon economic value (NEK) instruments.

The aforementioned requirements place greater emphasis on internationally recognized carbon project principles, aligning domestic licensing requirements more closely with standards commonly expected in the voluntary carbon market and by international carbon credit buyers. In addition, the regulation now provides greater clarity that carbon trading conducted by PB-PJL Carbon holders may involve the transfer of ownership of carbon credits, consistent with the nature of carbon offset mechanisms.

Post-Licensing Compliance Obligations

Once PB-PJL Carbon is issued to its holder, they shall be subject to range of ongoing compliance obligation. In general, PB-PJL Carbon holders are required to conduct carbon environmental services activities in accordance with conservation principles, biodiversity sustainability, and soil and water conservation requirements. In addition, holders must fulfil various operational, financial, reporting, and documentation obligations under the regulation.

From a documentation and deliverables perspective, PB-PJL Carbon holders are required to:[12]

1. prepare and register the relevant mitigation action document (Dokumen Rencana Aksi Mitigasi -- "DRAM") or project design document (Dokumen Perencanaan Proyek -- "DPP") within 6 (six) months after obtaining the PB-PJL Carbon license;
2. prepare and submit a five-year PB-PJL Carbon work plan (RP-PJL Karbon) and annual activity plans;
3. submit annual reports on the implementation of PB-PJL Carbon activities to the relevant authorities;
4. submit spatial and non-spatial data relating to the carbon environmental services activities;
5. submit validation reports for the DRAM or DPP issued by an independent validation body;
6. submit verification reports for climate change mitigation actions issued by an independent verification body; and
7. submit reports on carbon trading transactions within 14 (fourteen) days after the transaction is conducted.

Operationally, PB-PJL Carbon holders are also required to fulfil non-tax state revenue obligations, build facilities and infrastructures, implement area protection and security measures, allocate funding for conservation and community empowerment activities, maintain state-owned infrastructure and area boundary markers, facilitate governmental supervision activities, and obtain the relevant recommendation or approval from the Minister of Forestry for the issuance of carbon units in accordance with the prevailing laws and regulations.

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Footnotes

[1] National Park shall mean a nature conservation area with an original ecosystem, managed under a zoning system, and utilized for the purposes of research, science, education, cultivation support, and the utilization of environmental conditions (Art. 1 point 15 of MOF Reg 27/2025). ↩

[2] Tahura shall mean a nature conservation area designated for the collection of plants and/or wildlife, whether natural or artificial, native and/or non-native species, which is utilized for the purposes of research, science, education, cultivation support, and the utilization of environmental conditions (Art. 1 point 16 of MOF Reg 27/2025). ↩

[3] TWA shall mean a nature conservation area utilized for the purposes of research, science, cultivation support, and the utilization of environmental conditions, particularly for nature tourism activities (Art. 1 point 17 of MOF Reg 27/2025). ↩

[4] Game Reserves shall mean forest areas designated for the organized conduct of hunting activities and may also be utilized for hunting tourism, as well as water and hydropower utilization (Art. 1 point 18 of MOF Reg 27/2025). ↩

[5] Article 490 (2) of MOF Reg 27/2025. ↩

[6] Article 492 (1) of MOF Reg 27/2025. ↩

[7] Article 492 of MOF Reg 27/2025. ↩

[8] Article 501 (1) of MOF Reg 27/2025. ↩

[9] Article 1 point 98a and 98b of MOF Reg 27/2025. ↩

[10] Article 495 (3) of MOF Reg 27/2025. ↩

[11] Article 510 of MOF Reg 27/2025. ↩

[12] Article 514 of MOF Reg 27/2025. ↩

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Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.

Go to

1. Background
2. Business License for Utilization of Carbon Environmental Service in Conservation Areas
3. Mandatory Levies for PB-PJL Carbon
4. Clarified Commercial Requirements for Carbon Trading Activities
5. Post-Licensing Compliance Obligations

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