Indonesia faces a unique climate challenge: balancing its commitment to reduce greenhouse gas emissions with the economic imperatives of a developing nation. As the world's eighth-largest emitter, Indonesia's path to net-zero requires strategies that acknowledge its distinct economic and environmental context.
The Economic-Environmental Balancing Act
Indonesia's major emitting sectors—energy, agriculture, waste management, Industrial Processes and Product Use (IPPU), and Forestry and Other Land Use (FOLU)—are vital to its economic growth. While emission reduction mandates exist across these sectors, they often represent an additional burden that conflicts with immediate economic goals.
Data from Indonesia's Bureau of Statistics (BPS) shows significant variability in emissions sources. Energy sector emissions consistently rise with economic growth, while forestry emissions fluctuate dramatically year-to-year. Despite ratifying the Paris Agreement in 2016, which led to a temporary decline in emissions, Indonesia's total emissions have gradually increased as energy demands grow with economic expansion.
The Challenge of Absolute Reduction
Indonesia's Nationally Determined Contribution (NDC) for 2030 represents a firm commitment to reduce emissions. However, the projected emissions under a Business-as-Usual (BAU) scenario suggest that achieving the NDC target through absolute reductions alone will be extremely challenging.
In 2010, Indonesia's baseline emissions showed the energy sector alone accounting for 453 million metric tons of CO₂-equivalent. Under the BAU scenario, energy sector emissions are expected to reach 1.669 billion metric tons by 2030—a dramatic increase that highlights the challenge of achieving absolute reductions in a rapidly growing economy.
Indonesia has developed two mitigation approaches: Counter Measure 1 (CM1), based solely on domestic initiatives, and Counter Measure 2 (CM2), which anticipates international support. Even with these measures, emissions remain high, raising concerns about the feasibility of meeting the NDC target through reductions alone.
Carbon Credits: A Practical Pathway
Carbon credits offer a practical, immediate solution for Indonesia to meet global climate commitments without compromising economic development. Unlike developed nations with established infrastructure and less reliance on natural resources, Indonesia's net-zero journey requires unique benchmarks that current global regulations may not fully address.
Carbon credits, when implemented properly and in conjunction with sustainable practices, provide a balanced approach that allows Indonesia to:
- Participate in global climate commitments while prioritizing economic growth
- Give high-emitting but economically critical industries time to evolve sustainably
- Utilize its vast forests as carbon sinks to generate credits through mechanisms like REDD+
Evidence for Effectiveness
Research from Trove Research demonstrates that carbon credits accelerate decarbonization efforts. Companies categorized as "material" users of carbon credits are reducing emissions at almost twice the rate of non-users—nearly 6% annually compared to just 3%. The data comes from a sample of approximately 350 companies using credits compared against 3,805 companies from similar industries and regions that don't use credits.
This pattern suggests that companies using credits are not only achieving reductions but doing so more consistently and effectively. The financial cost of purchasing carbon credits likely motivates corporations to reduce emissions, as putting a price on carbon strengthens the business case for investing in sustainable practices.
A Comprehensive Approach
While offsetting can contribute significantly to Indonesia's net-zero goal, it's important to note that offsets don't directly count toward the NDC, which measures only absolute domestic reductions. Carbon offsetting should be viewed as a complementary approach rather than a replacement for the strict reductions required by the NDC.
Indonesia's emission trend reached 57.35% by 2019, indicating continued growth despite regulations and international commitments. This trend underscores the need for a holistic strategy that incorporates both emission reduction and offsetting to manage total emissions while supporting economic growth.
Conclusion
For Indonesia and similar developing economies, carbon credits represent more than just a "loophole"—they're a vital tool in achieving climate goals while addressing economic realities. The research demonstrates that when integrated into dedicated decarbonization strategies, carbon credits can facilitate significant emission reductions while allowing for necessary economic development.
Rather than undermining climate goals, a balanced approach that combines absolute reductions with well-designed offsetting programs provides a feasible solution that addresses both environmental imperatives and economic needs—a critical consideration for nations like Indonesia navigating the complex path to a sustainable future.