Enviro News Asia, Jakarta — Indonesia must strengthen its control over carbon trading and ensure that the development of the domestic carbon market supports national interests, Environment Minister and Head of the Environmental Control Agency (LH/BPLH) Moh Jumhur Hidayat said.
Jumhur made the statement during a technical guidance session on the governance of implementing Carbon Economic Value (NEK) in Bogor on September 1, 2026. He stressed that the government needs a comprehensive understanding of the carbon trading roadmap to prevent gaps that could expose Indonesia to manipulation in the global carbon market.
According to Jumhur, knowledge of carbon market mechanisms must be shared not only among central government institutions but also across regional administrations. Governors and regents, he said, need sufficient understanding of carbon trading because regional governments are increasingly required to provide clarity to businesses operating in their respective areas.
“Governors and regents also want to know what carbon trading is,” Jumhur said.
To establish a common understanding among government officials, Jumhur instructed the preparation of a practical “carbon handbook.” The guide is expected to explain carbon trading terminology, regulations, market participants and governance mechanisms in language that can be easily understood by officials at both the national and regional levels.
“We must all understand it. We cannot fail in knowledge because if we do, we can be manipulated,” Jumhur said.
Clear Emission Caps Needed for Domestic Carbon Market
Jumhur also emphasized that a functioning domestic carbon market requires clear emission limits, or caps, as the foundation of an emissions trading system.
He explained that the cap-and-trade mechanism works by establishing a maximum emission allowance for companies. Businesses that exceed their permitted limits would need to obtain additional allowances from companies that have successfully kept their emissions below their respective limits.
For example, if a company receives an emission allowance of 100 units but records emissions of 150 to 200 units, it would need to compensate for the excess by purchasing allowances from companies that have reduced their emissions below their permitted levels.
“Emissions trading is cap and trade. We set the limits, and companies can sell their allowances to companies that are below the limit. Without clearly defined limits, it cannot work,” Jumhur said.
The government is therefore expected to strengthen coordination among ministries and agencies in establishing precise emission caps. The approach is intended to ensure that the domestic carbon market does not become merely a platform for trading carbon commodities but serves as an environmental policy instrument.
KLH/BPLH views the carbon market as a mechanism that can encourage businesses to improve environmental management and achieve measurable reductions in greenhouse gas emissions.
The development of a stronger domestic carbon market is also part of Indonesia’s broader effort to ensure that carbon resources and economic opportunities generated from emissions reductions remain aligned with national interests while supporting the country’s climate commitments. (*)
