1.0 Regulatory Foundation: Indonesia's NEK Framework
PERPRES 110/2025 ("Penyelenggaraan Instrumen Nilai Ekonomi Karbon dan Pengendalian Emisi Gas Rumah Kaca Nasional") establishes Indonesia's comprehensive Carbon Economic Value (NEK) framework to implement the country's Nationally Determined Contribution (NDC) under the Paris Agreement. The regulation supersedes PERPRES 98/2021, PERPRES 61/2011, and PERPRES 71/2011, consolidating all carbon market mechanisms into a unified governance structure.
Matrix 1.1: Key Definitions Under PERPRES 110/2025
TermNationally Determined Contribution
Indonesian TermNDC
DefinitionNational commitment for global climate change mitigation updated periodically to achieve Paris Agreement objectives
Pasal 1(1)
TermCarbon Economic Value
Indonesian TermNEK (Nilai Ekonomi Karbon)
DefinitionValue attributed to each unit of greenhouse gas emissions from human and economic activities
Pasal 1(3)
TermCarbon Allocation
Indonesian TermAlokasi Karbon
DefinitionPermitted quantity of carbon dioxide equivalent (CO₂e) emissions during a specified period according to national capacity
Pasal 1(2)
TermGreenhouse Gas
Indonesian TermGRK (Gas Rumah Kaca)
DefinitionAtmospheric gases (natural or anthropogenic) that absorb and re-emit infrared radiation
Pasal 1(4)
TermCarbon Unit
Indonesian TermUnit Karbon
DefinitionCertified emission reduction and/or sequestration result through domestic/international certification or GHG Emission Quota, expressed in tons CO₂e
Pasal 1(18)
TermCarbon Trading
Indonesian TermPerdagangan Karbon
DefinitionMarket-based mechanism to reduce GHG emissions through buying and selling Carbon Units
Pasal 1(22)
TermCarbon Exchange
Indonesian TermBursa Karbon
DefinitionSystem regulating Carbon Trading records and Carbon Unit ownership status
Pasal 1(29)
TermCarbon Levy
Indonesian TermPungutan Atas Karbon
DefinitionState levy (central/regional) imposed on goods/services/activities with carbon potential or emissions causing negative environmental impacts
Pasal 1(30)
As defined in Pasal 1(3), Nilai Ekonomi Karbon (NEK) represents "nilai terhadap setiap unit emisi gas rumah kaca yang dihasilkan dari kegiatan manusia dan kegiatan ekonomi" (value attributed to each unit of greenhouse gas emissions from human and economic activities). This pricing mechanism forms the economic foundation for Indonesia's climate mitigation strategy across six designated sectors.
2.0 NEK Instrument Categories: Four-Pillar Framework
Pasal 55 establishes four primary NEK instruments, creating a diversified approach to carbon pricing and climate finance.
Matrix 2.1: NEK Instruments and Mechanisms
Instrument Type1. Carbon Trading
Indonesian TermPerdagangan Karbon
MechanismMarket-based buying/selling of Carbon Units
Mandatory/VoluntaryMandatory for Regulated Installations; Voluntary for offset projects
Implementation ChapterBAB 3 Pasal 56-60
Pasal 55(1)(a), 55(2)
Instrument Type1a. GHG Emission Trading
Indonesian TermPerdagangan Emisi GRK
MechanismTrading of GHG Emission Quotas among Business Actors
Mandatory/VoluntaryMandatory for Regulated Installations
Implementation ChapterPasal 56-57
Pasal 55(2)(a), Pasal 56
Instrument Type1b. GHG Emission Offsetting
Indonesian TermOffset Emisi GRK
MechanismEmission reductions to compensate for emissions elsewhere
Mandatory/VoluntaryVoluntary
Implementation ChapterPasal 58-60
Pasal 55(2)(b), Pasal 58
Instrument Type2. Performance-Based Payment
Indonesian TermPembayaran Berbasis Kinerja
MechanismIncentives for verified GHG emission reductions and co-benefits
Mandatory/VoluntaryVoluntary
Implementation ChapterPasal 61
Pasal 55(1)(b), Pasal 61
Instrument Type3. Carbon Levy
Indonesian TermPungutan Atas Karbon
MechanismState levy on carbon-intensive goods/services/activities
Mandatory/VoluntaryMandatory per separate legislation
Implementation ChapterPasal 62-64
Pasal 55(1)(c), Pasal 62
Instrument Type4. Emerging Mechanisms
Indonesian TermMekanisme Lain
MechanismTechnology-driven instruments aligned with scientific developments
Mandatory/VoluntaryTBD
Implementation ChapterFuture regulation
Pasal 55(1)(d)
Pasal 55(1) states: "Penyelenggaraan instrumen NEK dilakukan dengan menggunakan mekanisme: a. Perdagangan Karbon; b. Pembayaran Berbasis Kinerja; c. pungutan Atas Karbon; dan/atau d. mekanisme lain sesuai dengan perkembangan ilmu pengetahuan dan teknologi." This flexible framework allows Indonesia to adopt emerging carbon pricing tools as climate science and technology evolve.
3.0 Carbon Trading Framework: Mandatory and Voluntary Markets
Matrix 3.1: Carbon Trading Participant Obligations
Participant CategoryBusiness Actors with Regulated Installations
Indonesian TermPelaku Usaha dengan Instalasi yang Diatur
Obligation TypeMandatory
Key Requirements- Participate in GHG Emission Trading
- Hold Carbon Exchange account
- Possess GHG Emission Quota
Compliance MechanismCap-and-trade system
Pasal 56(2)
Participant CategoryOffset Project Developers
Indonesian TermPelaku Usaha Offset
Obligation TypeVoluntary
Key Requirements- May trade voluntarily
- Must hold Carbon Exchange account for trading
Compliance MechanismProject-based credits
Pasal 56(3)
Participant CategoryAll Carbon Traders
Indonesian TermSemua Pelaku Perdagangan
Obligation TypeUniversal
Key Requirements- Account registration on Carbon Exchange (Bursa Karbon)
- Transaction recording in SRUK
- MRV compliance
Compliance MechanismSRUK registration
Pasal 65, 67
According to Pasal 56(2), businesses with Regulated Installations must: "a. mengikuti Perdagangan Emisi GRK; b. memiliki akun pada Bursa Karbon; dan c. memiliki Kuota Emisi GRK" (participate in GHG Emission Trading, hold a Carbon Exchange account, and possess GHG Emission Quota). This creates a mandatory compliance market distinct from voluntary offset markets.
Matrix 3.2: Carbon Exchange Infrastructure
ComponentBursa Karbon (Domestic SPE GRK)
FunctionCarbon Exchange for domestic SPE GRK Carbon Units (domestic buyers)
Responsible AuthorityMinister of Environment
CoverageDomestic-to-domestic SPE GRK transactions
Pasal 65(2)(a)
ComponentBursa Berjangka (All Carbon Units)
FunctionFutures exchange for SPE GRK and non-SPE GRK Carbon Units
Responsible AuthorityBursa Berjangka (Futures Exchange)
CoverageDomestic-to-domestic all Carbon Unit types
Pasal 65(2)(b)
ComponentBursa Berjangka (GHG Quota)
FunctionFutures exchange for GHG Emission Quota trading
Responsible AuthorityBursa Berjangka
CoverageInter-participant quota trading
Pasal 65(2)(c)
ComponentSRUK
FunctionCarbon Unit Registry System
Responsible AuthorityMinister of Environment
CoverageAll Carbon Unit registration, issuance, tracking, deactivation
Pasal 67
Pasal 65(2) establishes a two-tiered carbon exchange system: "Bursa Karbon sebagaimana dimaksud pada ayat (1) huruf a dikelola oleh: a. Menteri, untuk perdagangan Unit Karbon SPE GRK yang berasal dari dalam negeri dengan pembeli di dalam negeri; b. Bursa berjangka, untuk perdagangan Unit Karbon SPE GRK dan Unit Karbon non-SPE GRK yang berasal dari dalam negeri dengan pembeli di dalam negeri; dan c. Bursa berjangka, untuk perdagangan Kuota Emisi GRK antarpeserta." This dual structure separates government-managed domestic SPE GRK trading from broader futures market operations.
4.0 International Carbon Transfers: Authorization and Corresponding Adjustment
Matrix 4.1: Cross-Border Carbon Unit Transfer Requirements
Transfer ElementAuthorization
Indonesian TermOtorisasi
RequirementMandatory ministerial approval for international Carbon Unit transfers
AuthorityMinister of Environment
RationaleProtect national NDC integrity
Pasal 70(1)
Transfer ElementAuthorized Purposes
Indonesian TermKepentingan yang Diperkenankan
Requirement- NDC fulfillment for other countries
- International mitigation obligations
- Other approved purposes
AuthorityMinister
RationaleEnsure legitimate climate finance
Pasal 70(2)
Transfer ElementCorresponding Adjustment
Indonesian TermCorresponding Adjustment
RequirementAccounting adjustment to Indonesia's NDC to prevent double counting
AuthorityGovernment of Indonesia
RationaleParis Agreement Article 6 compliance
Pasal 70(3)
Transfer ElementParis Standards
Indonesian TermStandar Paris
RequirementCorresponding Adjustment must follow Paris Agreement standards
AuthorityPer Paris Agreement
RationaleInternational accounting integrity
Pasal 70(4)
Pasal 70(1) mandates: "Unit Karbon yang dialihkan kepada pihak lain di luar wilayah Indonesia wajib memperoleh Otorisasi dari Menteri" (Carbon Units transferred to parties outside Indonesia must obtain Authorization from the Minister). This gatekeeping mechanism ensures Indonesia retains control over Carbon Units that could be claimed toward other countries' NDCs.
Pasal 70(3) requires: "Dalam hal Unit Karbon dialihkan kepada pihak lain di luar wilayah Indonesia, Pemerintah melakukan Corresponding Adjustment pada NDC Indonesia" (When Carbon Units are transferred to parties outside Indonesia, the Government conducts Corresponding Adjustment to Indonesia's NDC). This implements Article 6.2 of the Paris Agreement, preventing the same emission reduction from being counted toward both Indonesia's and another country's NDC commitments.
5.0 Forward-Looking Implications: Sectoral Impact and Carbon Market Development
Matrix 5.1: Sectoral Application of NEK Instruments
NDC SectorEnergy
Indonesian TermEnergi
Primary NEK InstrumentCarbon trading (mandatory for power plants), carbon levy
Business ImpactPower generation, oil & gas must comply with emission quotas or purchase Carbon Units
Regulatory PathwaySector-specific quotas under Pasal 56
NDC SectorWaste
Indonesian TermLimbah
Primary NEK InstrumentCarbon trading (voluntary offset), performance-based payment
Business ImpactWaste-to-energy projects eligible for offset credits and climate finance
Regulatory PathwayOffset mechanisms under Pasal 58-60
NDC SectorIndustrial Processes & Product Use
Indonesian TermIPPU
Primary NEK InstrumentCarbon trading (mandatory for regulated facilities), carbon levy
Business ImpactIndustrial facilities subject to cap-and-trade, carbon tax on products
Regulatory PathwayQuota allocation per Pasal 56
NDC SectorAgriculture
Indonesian TermPertanian
Primary NEK InstrumentPerformance-based payment, carbon trading (voluntary offset)
Business ImpactRegenerative agriculture can generate offset credits, receive climate finance
Regulatory PathwayPasal 61 climate finance
NDC SectorForestry
Indonesian TermKehutanan
Primary NEK InstrumentPerformance-based payment, carbon trading (voluntary offset), international transfers
Business ImpactREDD+ projects, mangrove restoration eligible for carbon credits and international buyers
Regulatory PathwayPasal 70 authorization for ITMOs
NDC SectorMarine & Fisheries
Indonesian TermKelautan dan Perikanan
Primary NEK InstrumentPerformance-based payment, carbon trading (voluntary offset)
Business ImpactBlue carbon projects (mangroves, seagrass) can access voluntary markets
Regulatory PathwayPasal 61, 70
PERPRES 110/2025 supersedes the previous NEK regulatory framework (PERPRES 98/2021) as stated in Pasal 100: "Pada saat Peraturan Presiden ini mulai berlaku: a. Peraturan Presiden Nomor 98 Tahun 2021 tentang Penyelenggaraan Nilai Ekonomi Karbon untuk Pencapaian Target Kontribusi yang Ditetapkan secara Nasional dan Pengendalian Emisi Gas Rumah Kaca dalam Pembangunan Nasional... dicabut dan dinyatakan tidak berlaku." This consolidation creates regulatory certainty for carbon market participants.
Stakeholder Implications:
- Heavy Industries: Must register Regulated Installations, obtain GHG Emission Quotas, and participate in mandatory carbon trading
- Project Developers: Can access voluntary carbon markets through offset mechanisms and performance-based climate finance
- Financial Institutions: Bursa Berjangka (Futures Exchange) gains authority to operate carbon trading platforms
- International Buyers: Must obtain ministerial Authorization for Indonesian Carbon Units, triggering Corresponding Adjustment
PERPRES 110/2025 positions Indonesia as a significant player in international carbon markets under Article 6 of the Paris Agreement, while maintaining sovereign control over emission reductions through the Otorisasi and Corresponding Adjustment framework. The regulation's four-pillar NEK framework provides multiple pathways for carbon pricing, accommodating both mandatory compliance markets and voluntary climate finance mechanisms.
Official Source
Peraturan Presiden Nomor 110 Tahun 2025 tentang Penyelenggaraan Instrumen Nilai Ekonomi Karbon dan Pengendalian Emisi Gas Rumah Kaca Nasional
Enacted: October 10, 2025
Lembaran Negara: 2025/172
https://peraturan.bpk.go.id/Details/TBD
Superseded Regulations:
- PERPRES 98/2021 (Penyelenggaraan Nilai Ekonomi Karbon)
- PERPRES 61/2011 (Rencana Aksi Nasional Penurunan Emisi GRK)
- PERPRES 71/2011 (Penyelenggaraan Inventarisasi GRK Nasional)
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Law Database
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