Reshaping Indonesia’s Carbon Governance: Presidential Regulation No. 110 of 2025 concerning the Implementation of Carbon Economic Value Instruments and National Greenhouse Gas Emission Control

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Four years have passed since Indonesia first introduced its landmark regulatory framework and guideline on the implementation of carbon pricing through the issuance of Presidential Regulation No. 98 of 2021 concerning Implementation of Carbon Economic Value for the Achievement of Nationally Determined Contribution (“NDC”) Targets and the Control of Greenhouse Gas (“GHG”) Emissions in National Development (“PR 98/2021”). The issuance of PR 98/2021 itself marked Indonesia’s concrete step in translating its commitment under the Paris Agreement into its very own national policy, which is aimed at reducing GHG emissions, and ultimately, achieving the NDC targets as outlined in the regulation.

Ever since the issuance of the PR 98/2021, the Government of Indonesia, led by the Ministry of Environment, along with other sectoral ministries, has been actively working on to operationalize the country’s carbon economic value (Nilai Ekonomi Karbon – “NEK”) framework. These efforts have included, amongst others, through the issuance of sector-specific implementing regulations, the establishment and adjustment of institutional structures, as well as the development of mechanisms and infrastructure necessary to support the effective implementation of PR 98/2021.

However, despite the ongoing efforts, the operationalization of PR 98/2021 has not been without challenges. Given the relatively new and rapidly evolving nature of carbon pricing, the implementation process has encountered several hurdles, which ranges from, technical gaps in aligning with international carbon trading mechanisms, to regulatory uncertainties surrounding the voluntary carbon market.

Therefore, to address the above challenges and to accelerate the progress in achieving Indonesia’s NDC, the Government of Indonesia has recently issued Presidential Regulation No. 110 of 2025 concerning Implementation of Carbon Economic Value Instruments and National Greenhouse Gas Emission Control (“PR 110/2025”), aimed at strengthening the implementation framework of carbon pricing and providing greater clarity for stakeholders, especially investors.

In this ARMA Update, we shall discuss the main points introduced by the PR 110/2025.

Key Updates:

A. National Carbon Allocation and Carbon Reserves

The PR 110/2025 introduces Carbon Allocation (Alokasi Karbon), which is the amount of carbon dioxide equivalent (CO₂e) emissions permitted during a certain period in accordance with national capacity. ¹ This Carbon Allocation is based on several factors, including periodic data from sectoral GHG emission inventories over a certain period, the National Long-Term Development Plan (Rencana Pembangunan Jangka Panjang Nasional), the National Medium-Term Development Plan (Rencana Pembangunan Jangka Menengah Nasional), as well as economic and climate change control considerations. ²

In addition, the Carbon Allocation also takes into account the Carbon Reserve (Karbon Cadangan), which is an amount of carbon allocated at the national level to manage risks in achieving the NDC target ³, which is presumed to be of the same concept with “buffer” obligations as stipulated under PR 98/2021’s implementing regulation, namely the Minister of Environment and Forestry Regulation No. 21 of 2022 (“MOEF Reg 21/2022”).

A Carbon Allocation that has been determined by the relevant minister or head of agency through a joint decision may be revised if certain conditions occur. These include changes in national or sectoral development policies related to climate change, the addition of new activity data, changes in GHG emission factors, or modifications to methodologies for activity data and/or emission factors that significantly affect GHG emission calculations. Once established, the Carbon Allocation serves as the basis for the planning, preparation, and determination of the NDC. ⁴

B. Additions to the Sector and Sub-Sector’s Classification

A sector refers to an NDC sector that encompasses areas of activity related to GHG emissions, while a subsector refers to an NDC subsector that encompasses sub-areas of activity related to GHG emissions. Under the new PR 110/2025, the list of sectors and sub-sectors has been expanded from that under PR 98/2021, which is as follows: ⁵

PR 98/2021	PR 110/2025
The sectors consist of: a. energy b. waste c. industrial processes and product use d. agriculture e. forestry f. other sectors in accordance with the development of science and technology	The sectors consist of: a. energy b. waste c. industrial processes and product use d. agriculture e. forestry f. blue carbon g. other sectors in accordance with the development of science and technology
The subsectors consist of: a. generators b. transportation c. buildings d. solid waste e. liquid waste f. waste g. industry h. rice fields i. livestock j. plantation k. forestry l. peat and mangrove management; and/or m. other sub-sectors in accordance with the development of science and technology	The subsectors consist of: a. generators b. oil and gas c. transportation d. buildings e. solid waste f. liquid waste g. waste h. industry i. rice fields j. livestock k. plantation l. forestry m. peat and mangrove management n. blue carbon management o. other sub-sectors in accordance with the development of science and technology

Notably, the amendment formally includes “blue carbon” as a distinct sector in addition to the existing five. Correspondingly, several new sub-sectors have been added, particularly under the energy and blue carbon categories. These changes indicate a broader and more specific approaches to emission reduction mitigation and action.

C. New Direction: Leveraging NEK Instruments in Pursuit of NDC Targets Achievement

Under PR 98/2021, the implementation of NEK was intended as a mechanism to support climate mitigation and adaptation actions. It was emphasized that NEK could be carried out through various mechanisms, including carbon trading, result-based payments, carbon levies, or other evolving approaches. ⁶ As a development, the PR 110/2025 has narrowed down and deepened this framework by specifying the instruments of NEK rather than NEK itself. ⁷ The term “NEK Instrument” indicates that the regulation now governs the specific tools or market mechanisms (e.g., carbon trading, carbon tax, result-based payment, and others) rather than the general administration of NEK.

Further, PR 110/2025 introduces an explicit link between offset activities and NDC accounting, aligning Indonesia’s domestic system with international rules under the United Nations Framework Convention on Climate Change (“UNFCCC”). Notably, it mandates that all emission reductions generated through NEK instruments must be counted toward the national NDC target unless a Corresponding Adjustment (“CA”, under Article 6 of the Paris Agreement) has been made. ⁸

D. Government Policies for Carbon Trading

Under the PR 110/2025, it is stipulated that the Indonesian government shall take the following actions in terms of implementing carbon trading: ⁹

1. the preparation and establishment of the national carbon trading roadmap;
2. the implementation of the carbon exchange in accordance with the provisions of laws and regulations;
3. the regulation of the use of state revenue derived from carbon trading; and/or
4. the administration of carbon transactions.

Notably, the inclusion of a national carbon trading roadmap represents a new development not found in PR 98/2021. Previously, the roadmap existed only within specific sectors, particularly in the forestry sector which was issued back in 2023 through the Minister of Environment and Forestry Decree No. SK 1027/MENLHK/PHL/KUM.1/9/2023. The expansion of its scope to the national level signifies a more comprehensive and coordinated approach to Indonesia’s carbon market policy. The detailed procedures for preparing and determining this national roadmap will later be governed by a joint ministerial regulation, coordinated through a steering committee involving the Minister of Environment and other relevant ministers.

The second element, the implementation of the carbon exchange, has already begun in practice. Indonesia has taken concrete steps over the past few years to establish and operationalize its carbon exchange platform, namely IDXCarbon.

As for the use of state revenue from carbon trading, this concept is not entirely new. PR 98/2021 already stipulated that such revenue constitutes non-tax state revenue (penerimaan negara bukan pajak or PNBP) derived from fees on the sale and purchase of carbon units.

Lastly, the administration of carbon transactions refers to the recording and documentation of all carbon trading activities. The system for carbon transaction administration has also been further developed under the new framework, as will be discussed in the next section.

E. Two-Layered Carbon Registries: SRN-PPI and SRUK

The PR 110/2025 introduces a notable structural and functional change in Indonesia’s carbon data and registry systems. Previously, the National Registry System for Climate Change Control (Sistem Registri Nasional Pengendalian Perubahan Iklim – “SRN PPI”) was a single, web-based platform managing data and information related to climate change mitigation, adaptation, and the NEK. ¹⁰ It served as the comprehensive system for tracking both climate actions and carbon-related activities nationwide.

Under the PR 110/2025, SRN PPI’s scope has been narrowed and clarified. It now focuses specifically on the provision and management of data and information regarding climate change mitigation and adaptation actions at the NDC level. ¹¹ The data recorded in SRN PPI include national, sectoral, sub-sectoral, and regional information related to GHG emissions and climate resilience. Once verified, the recorded information serves multiple purposes:

1. the basis for the Indonesian government’s recognition of the party responsible for implementing NEK instruments for their contribution to achieving the NDC targets;
2. the basis for the Indonesian government’s recognition of the contribution made by the implementing parties;
3. data and information on mitigation actions and resources related to the implementation of NEK instruments;
4. an effort to prevent double counting of Climate Change Mitigation Actions; and
5. reference material for tracking the transfer of emission reductions or carbon units.

The verified national, sectoral, sub-sectoral, and regional data then become the official reference for both national and international reporting, representing Indonesia’s unified data system for GHG emissions and climate resilience, which is synergized and coordinated by the Minister of Environment. ¹²

At the same time, the new regulation establishes a separate system; the National Carbon Unit Registry (Sistem Registri Unit Karbon – “SRUK”). SRUK is dedicated to the management of data and information specifically related to carbon units within the implementation of NEK instruments. ¹³ PR 110/2025 mandates that every carbon trading activity must be recorded in SRUK. ¹⁴ Likewise, carbon units generated from GHG emission offsets must also be registered in the SRUK system. Importantly, SRUK operates through a decentralized network system, ensuring that all data and transactions are transparent, traceable, real-time, permanent, and interconnected with other registry systems. ¹⁵

F. New Provisions on GHG Emission Trading

The new regulation introduces a major restructuring and deepening of Indonesia’s emission trading system. Under the PR 98/2021, the provisions on emission trading were relatively general. In contrast, PR 110/2025 brings significant institutional and technical enhancements. It establishes that GHG emission trading is to be organized by the relevant minister for each sector and sub-sector, formalizing ministerial authority and sectoral responsibility. The trading system now involves five key steps: ¹⁶

1. the preparation and designation of regulated installations (Instalasi yang Diatur), which refers to an installation that is required to participate in GHG emission trading; ¹⁷
2. the determination of emission ceilings (Batas Atas Emisi GRK) based on the national Carbon Allocation;
3. the establishment of emission quotas (Kuota Emisi, previously known as Persetujuan Teknis Batas Atas Emisi bagi Pelaku Usaha/PTBAE-PU in PR 98/2021’s implementing regulations), which refers to the amount of GHG emissions that may be released into the atmosphere by a regulated installation ¹⁸;
4. the specification of the portion of emission ceilings that can be compensated with offsets, and
5. the execution of emission quota trading.

Each regulated installation will have its own emission quota, forming the basis for mandatory participation in the trading scheme. The person responsible for each regulated installation must ensure that their GHG emissions do not exceed the prescribed ceiling during a given period. To comply, they may implement mitigation actions, purchase emission quotas from other installations, or acquire emission offsets. If an installation exceeds its emission ceiling despite these options, it becomes liable to pay a carbon tax, which links the carbon market mechanism with Indonesia’s fiscal policy framework. ¹⁹

Most notably, a new limitation has been added to the emission trading system. It is stipulated that Greenhouse Gas Emission Reduction Certificates (Sertifikat Penurunan Emisi Gas Rumah Kaca – “SPE-GRK”) cannot be issued from the remaining GHG emission quotas. ²⁰ This differs from the stipulations under PR 98/2021’s implementing regulation, namely the MOEF Reg 21/2022, which allows for SPE-GRK to be issued based on the performance resulting from the remaining PTBAE-PU. ²¹

Further procedural details will be set out in ministerial regulations, allowing for sector-specific adaptation.

G. New Provisions on GHG Emission Offset

The PR 110/2025 sets out several provisions regarding the offset mechanism, to replace the previous one established under PR 98/2021. In order to obtain carbon units for GHG emission offsets, business actors and/or activities that are not included within the regulated installations shall carry out the following steps: ²²

1. submit a Mitigation Action Design Document (Dokumen Rancangan Aksi Mitigasi Perubahan Iklim – “DRAM”, which is intended for national standards resulting in SPE-GRK carbon units) or Project Design Document (Dokumen Perencanaan Proyek – “DPP”, which is intended for international standards, resulting in non-SPE-GRK carbon units) to the relevant minister for registration;
2. have the DRAM or DPP validated by an independent validation agency;
3. implement the climate change mitigation action in accordance with the validated DRAM or DPP;
4. have the achievement of the Climate change mitigation action verified by an independent verification agency; and
5. submit the verification report on the achievement of the climate change mitigation action to the relevant minister.

The relevant minister is responsible for ensuring that business actors or activity owners fulfil all the required steps to obtain carbon units for GHG emission offsets. Once these requirements are met, the Minister of Environment issues SPE-GRK upon receiving a recommendation from the relevant minister. This adds an emphasis to the sectoral ministry’s role in the carbon trading scheme, by having them oversee their sector’s compliance with the offset mechanism as well as provide input to the SPE-GRK issuance.

Further, it is stipulated that for domestic carbon trading, the carbon units for GHG emission offsets may be issued based on national standards, UNFCCC standards, or other international standards. ²³ However, it is emphasized that non-SPE-GRK Carbon Units are issued by international standards bodies after completing the same above-mentioned steps and obtaining an approval from the relevant minister.

H. International Carbon Trading

A monumental provision was introduced in PR 110/2025, concerning international carbon trading. It is stated that foreign carbon trading shall consists of: ²⁴

1. Trading that requires authorization and CA, which includes:
   1. internationally linked GHG emission trading;
   2. GHG emission offset trading that meets the provisions of Articles 6.2 and 6.4 of the Paris Agreement; and
   3. voluntary GHG emission offset trading conducted to fulfil other international obligations; and
2. Trading that does not require authorization and CA, which includes GHG emission offset trading that is not used for the fulfilment of the NDC and/or other international obligations, whether carried out in accordance with Article 6.4 of the Paris Agreement or through voluntary GHG emission offset trading.

Further, it is regulated that such authorization is granted by the Minister of Environment, upon the recommendation of the relevant minister.

Another notable point, provisions regarding mutual recognition are not found in PR 110/2025. This is in contrast to the provisions contained in PR 98/2021 and MOEF Reg 21/2022 which establishes the framework for mutual recognition arrangements with other international standards. ²⁵ Instead, PR 110/2025 simply states that carbon units for GHG emission offsets traded in foreign carbon trading shall be issued based on national standards, the UNFCCC standards, or other international standards. This may suggest an openness to the use of international standards within Indonesia’s carbon market framework, provided that they align with national requirements.

I. Restructuring the Steering Committee

In order to provide policy direction, lead coordination, supervise, and evaluate the implementation of NEK instruments and GHG emission control in development, a Steering Committee shall be established, chaired by the Coordinating Minister for Food Affairs, which is tasked with providing policy guidance and leading cross-ministerial and/or institutional coordination on the implementation of NEK instruments to achieve the NDC and to control GHG emissions in the context of national development.

J. Transitional Provisions

The enactment of PR 110/2025 formally revokes PR 98/2021, marking a full regulatory transition to the new framework for the implementation of the NEK and GHG emission control. Despite this revocation, the regulation provides legal continuity by stipulating that all implementing regulations of PR 98/2021, namely the MOEF Reg 21/2022, shall remain valid and enforceable insofar as they do not conflict with or have not been replaced by PR 110/2025. In parallel, the government is mandated to issue new implementing regulations within one year from the promulgation of PR 110/2025, which will operationalize the new framework across sectors. ²⁶

Additionally, the regulation provides transitional provisions for both existing business actors and international arrangements. Business actors that already hold carbon units but have not yet participated in carbon trading or result-based payment mechanisms are required to comply with the new NEK instrument procedures within one year. Similarly, international agreements in the field of NEK that were approved by the Indonesian government prior to the enactment of PR 110/2025 must be aligned with the new framework within the same one-year timeframe. ²⁷

K. ARMA Commentaries

• NEK Instruments for NDC Achievement: This signifies that Indonesia is aligning its carbon market governance with international standards for transparency and compliance under the Paris Agreement. By explicitly connecting NEK instruments to NDC performance and establishing a ministerial oversight role, the new framework strengthens accountability and integrates carbon market activities directly into national climate planning.

• Dual Administration System: The separation between SRN PPI and SRUK represents a significant institutional development: it delineates the functions of climate action monitoring (through SRN PPI) from carbon market administration (through SRUK). In practical terms, SRN PPI will remain the national platform for tracking progress toward emission reduction and adaptation targets under the NDC, while SRUK will operate as the authoritative system for the issuance, ownership, transfer, and cancellation of carbon units. This change also aligns Indonesia’s domestic systems with international practices, where emission tracking and carbon unit registries are managed as distinct but interoperable platforms to ensure transparency and prevent double counting. Further, this structure also mirrors the conceptual framework agreed at an international level for Article 6.2 guidance previously decided at the Conference of Parties (COP), which called for the establishment of a dual registry approach comprising of an international registry serving a tracking and accounting function, and registry services to enable the issuance and management of mitigation outcomes as units.

• Emission Trading Mechanism: Overall, the new framework under PR 110/2025 represents a transition towards a more mandatory, sectoral, and compliance-oriented system. Most notably, the new regulation introduces a stricter limitation within the emission trading system. The change implies that emission quotas are strictly compliance instruments, not sources of tradable credits. Businesses can still benefit from operating below their emission ceiling, but they can no longer convert the unused quota into tradable certificates. As a result, only verified, additional emission reductions, those that go beyond compliance requirements or are generated through dedicated mitigation projects, can be credited as SPE-GRK. In essence, this change aligns Indonesia’s system more closely with international best practices for emissions trading, where compliance units and offset credits are treated as distinct instruments with separate purposes and accounting rules.

• Emission Offset Mechanism: The introduction of the DPP in PR 110/2025 provides much-needed clarity for project developers using international standards such as Verra or Gold Standard, by formally distinguishing their documentation process from those following national standards (via DRAM). However, it also introduces an additional layer of oversight, projects under international standards must now obtain formal approval from the relevant sectoral ministry, while those under national standards require only a recommendation for SPE-GRK issuance. This distinction means that further implementing regulations will be necessary from each sectoral ministry to define the specific process, timeline, and criteria for obtaining both approvals and recommendations, ensuring smooth coordination and legal certainty for offset project proponents.

• International Carbon Trading Policies: The new provision brings greater clarity and structure to Indonesia’s international carbon trading framework. By explicitly distinguishing between transactions that require authorization and CA and those that do not, PR 110/2025 provides a clearer legal and procedural basis for participation in cross-border carbon markets, which is essentially as follows:

1. Trade requiring authorization and CA:
   • Applies to transactions intended for Internationally Transferred Mitigation Outcomes (“ITMO”).
   • Requires ministerial authorization (through recommendation) and CA at the national NDC level.
   • Opens the possibility for international voluntary participation for fulfilment of Other International Mitigation Purposes (OIMP).
2. Trade not requiring authorization and CA:
   • Covers Non-ITMO transactions, including those under Article 6.4 mechanisms (mitigation contribution units or MCUs) and voluntary carbon market activities.
   • Authorization is not required, but trading remains subject to future ministerial regulation for sectoral supervision.

   The new provision under PR 110/2025 provides greater clarity on the types of carbon units that may be traded internationally, distinguishing between those counted toward Indonesia’s NDC and those eligible for voluntary market participation. While PR 110/2025 establishes the foundational distinction between authorized and non-authorized international trades, the specific procedures for obtaining authorization and CA are to be anticipated, to clarify the process, timeline, and documentation required for authorization, as well as the institutional mechanism for recording and reporting CAs at the national NDC level. Notably, the PR 110/2025 also mandates further implementing regulation for trading that does not require authorization and CA, which is mandated to the sectoral ministry after coordination with the Steering Committee. The issuance of these implementing regulations will be critical to ensure coherence between authorized and non-authorized trading pathways, providing legal certainty for market participants.

• Mutual Recognition Statuses: The omission of explicit provisions on mutual recognition agreements (MRAs) represent a potentially more flexible approach towards the treatment of international standards within Indonesia’s carbon market. Under PR 98/2021 and MOEF Reg 21/2022, MRAs served as a legal bridge allowing domestic recognition of carbon units certified under international standards such as Verra, Gold Standard, or Plan Vivo. Rather than relying on bilateral MRAs, the new framework under PR 110/2025 may pave the way for a general recognition mechanism for international standards, subject to alignment with national requirements. However, the extent and manner of this recognition remain pending further implementing regulations, which are expected to clarify how international standards will interact with Indonesia’s national registry and carbon accounting systems.

• Overall Emphasis on Sectoral Ministry’s Role: The PR 110/2025 seemingly decentralizes operational authority by assigning each relevant minister the power to issue approvals or recommendations within their respective sectors. The centralized policy direction under the Steering Committee paired with sectoral execution creates a more balanced governance model. On the other hand, this arrangement also means that further sectoral regulations will need to be anticipated, as these will serve as the primary instruments governing the implementation of carbon trading within each sector. The implementation of the overall NEK framework will further depend on how swiftly and coherently these ministerial regulations are developed in the future.

• What We Expect: Following the enactment of PR 110/2025, several critical implementing regulations, including MOEF Reg 21/2022, the Minister of Environment and Forestry Regulation No. 7 of 2023 which is specific to the forestry sector, and all other implementing sectoral regulations, will likely need to be amended or aligned to reflect the new institutional and procedural framework.

Key areas that will require further clarification include the registration of voluntary carbon market projects within the newly established SRN PPI and SRUK systems, the revision of authorization and corresponding adjustment formats to match the new classification of trades (authorized vs non-authorized), and the criteria for project developers such as concerning project ownership linked with licensing requirements, as well as the applicability of international standards in connection with regulations under national laws. These regulatory adjustments will be essential to bridge existing gaps between the previous NEK framework and the new.

1. Article 1 (2) of PR 110/2025 ↩
2. Article 3 of PR 110/2025 ↩
3. Article 1 (17) of PR 110/2025 ↩
4. Articles 4–6 of PR 110/2025 ↩
5. Article 9 of PR 110/2025 ↩
6. Article 47 of PR 98/2021 ↩
7. Article 55 of PR 110/2025 ↩
8. Article 56 of PR 110/2025 ↩
9. Article 58 of PR 110/2025 ↩
10. Article 1 (14) of PR 98/2021 ↩
11. Article 1 (19) of PR 110/2025 ↩
12. Article 87 of PR 110/2025 ↩
13. Article 1 (20) of PR 110/2025 ↩
14. Article 58 of PR 110/2025 (duplicate reference) ↩
15. Article 65 of PR 110/2025 ↩
16. Article 62 of PR 110/2025 ↩
17. Article 1 (16) of PR 110/2025 ↩
18. Article 1 (15) of PR 110/2025 ↩
19. Article 63 of PR 110/2025 ↩
20. Article 88 (4) of PR 110/2025 ↩
21. Article 61 of MOEF Reg 21/2022 ↩
22. Article 65 of PR 110/2025 (duplicate reference) ↩
23. Article 67 of PR 110/2025 ↩
24. Article 68 (1) of PR 110/2025 ↩
25. Article 68 (3) of PR 110/2025 ↩
26. Articles 100–102 of PR 110/2025 ↩
27. Articles 98 and 99 of PR 110/2025 ↩

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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. National Carbon Allocation and Carbon Reserves
2. Additions to the Sector and Sub-Sector’s Classification
3. New Direction: Leveraging NEK Instruments in Pursuit of NDC Targets Achievement
4. Government Policies for Carbon Trading
5. Two-Layered Carbon Registries: SRN-PPI and SRUK
6. New Provisions on GHG Emission Trading
7. New Provisions on GHG Emission Offset
8. International Carbon Trading
9. Restructuring the Steering Committee
10. Transitional Provisions
11. ARMA Commentaries

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