Beyond Reduction: The Essential Role of Carbon Credits in Indonesia's Path to Net-Zero

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.