New Regulation on Carbon Trading in the Forestry Sector

Following the issuance of Presidential Regulation No. 110 of 2025 on the Implementation of Carbon Economic Value (Nilai Ekonomi Karbon/NEK) Instruments and the Control of National Greenhouse Gas (“GHG”) Emissions (“Perpres 110/2025”), several implementing regulations are being drafted. The Ministry of Forestry (“Kemenhut”) is revising Regulation of the Minister (“Permen”) of Environment and Forestry (Lingkungan Hidup dan Kehutanan – “LHK”) No. 7 of 2023 on Procedures for Carbon Trading in the Forestry Sector (“PermenLHK 7/2023”).

“The amendment to Regulation of the Minister of LHK on carbon trading in the forestry sector must be aligned with Perpres 110/2025. Some of the key highlights include adjustments to the scope of carbon trading implementation,” said Laksmi Wijayanti, the Director-General of Sustainable Forest Management.

Referring to the Draft of PermenLHK on Procedures for Carbon Trading through GHG Emission Offsets in the Forestry Sector (“Draft PermenLHK”) obtained by Hukumonline, one of the key provisions concerns the definition of actors involved in carbon trading through GHG emission offsets. Article 5 paragraph (2) of the Draft PermenLHK stipulates that business actors consist of: holders of Forest Utilization Business License (Perizinan Berusaha Pemanfaatan Hutan – “PBPH”) and holders of right-to-manage, holders of social forestry management approvals, customary law communities, forest owners, and holders of Environmental Service Utilization Business License (Perizinan Berusaha Pemanfaatan Jasa Lingkungan/PB-PJL) for Carbon.

Meanwhile, Article 52 paragraph (1) of the Draft PermenLHK also regulates the financing of GHG emission offset trading through domestic and foreign carbon trading conducted by PBPH holders and right-to-manage holders. The financing of such carbon trading may be carried out through several mechanisms, namely forward contracts, as well as brokerage systems and infra systems, in accordance with procedures stipulated under the applicable laws and regulations.