Indonesia Sets Up Rules for Carbon Credit Trading Under Article 6

The minute

Indonesia is advancing plans to become one of the world’s leading suppliers of high-quality carbon credits under Article 6 of the Paris Agreement.

The government intends to establish a dedicated Article 6 methodology panel to set standards for credit generation and transactions. The panel will include scientists, researchers, and technical experts who will review how carbon projects measure emissions reductions, checking whether project methods follow both Indonesian rules and international standards.

A national nesting framework is also planned, with the government aiming to complete it within 12 to 18 months. The framework will integrate subnational and project-level activities into a unified carbon accounting system.

Why it matters

Article 6 defines how countries can trade carbon credits internationally, but clear national rules remain scarce. By building its own methodology panel and nesting framework, Indonesia is creating the institutional infrastructure needed to supply credits that meet emerging international quality standards.

The moves signal Indonesia’s intent to leverage its vast forest and land-based mitigation potential within a structured, transparent system. A nesting framework helps prevent double counting by aligning individual projects with national emissions targets, a key concern for buyers seeking credible offsets.

The International Emissions Trading Association (IETA) estimates that Article 6 could reduce the cost of meeting global climate targets by as much as $250 billion every year by 2030, and could channel billions of dollars into developing countries that supply high-quality emissions reductions.

The scale of Indonesia’s carbon assets

Indonesia holds about 95.5 million hectares of forest, making it home to the third-largest tropical rainforest in the world, after Brazil and the Democratic Republic of the Congo. The country also contains the largest mangrove forests on Earth, covering about 3.44 million hectares, or around 20% of the world’s total mangrove area. Mangroves can store several times more carbon per hectare than many tropical forests.

Indonesia also has one of the world’s largest tropical peatland areas. Together, its forests, mangroves, and peatlands store billions of tonnes of carbon. The country’s Forestry and Other Land Use (FOLU) Net Sink 2030 program aims for a net carbon sink of 140 million tonnes of CO₂ equivalent (MtCO₂e) by 2030 through reducing deforestation, restoring forests, protecting peatlands, restoring mangroves, and improving land management.

How the nesting framework works in practice

The nesting framework connects individual carbon projects with Indonesia’s national greenhouse gas inventory. When a forest project earns carbon credits, the corresponding emissions reductions are recorded in the country’s climate accounts. This prevents the same tonne of CO₂ from being claimed by both the project developer and the national government.

For credits to be traded internationally under Article 6, Indonesia must issue what are called Corresponding Adjustments. This means the country adds back the sold emissions reductions to its own national tally, so the buyer country can count them instead. Without this step, a credit sold abroad would appear to reduce emissions in both countries simultaneously.

Project developers operating in Indonesia will need to register their activities within this unified system. Their baseline calculations and monitoring methods will be reviewed by the new methodology panel before credits can be approved for international sale.

The domestic market these rules build on

Indonesia launched IDXCarbon, its national carbon exchange, in September 2023. Companies register carbon projects and report emissions through the government’s National Registry System (SRN-PPI). By July 2025, IDXCarbon had recorded over 1.6 million tonnes of CO₂ equivalent traded, with a total transaction value of about IDR 77 billion (roughly US$4.7 million). More than 100 organizations had joined the market as registered users.

The new methodology panel and nesting framework build on these existing systems to bridge the gap between domestic trading and international Article 6 transactions.

International demand and early signals

In July 2026, Verra said it expects to issue at least 20 million tonnes of CO₂ equivalent from three Indonesian forestry projects under the country’s updated carbon market rules. According to Ecosystem Marketplace, the global Forestry and Land Use sector maintained stable transaction volumes in 2024 even as the broader voluntary carbon market dropped 25% in volume, and the sector captured 87% of all supplier demand inquiries. The World Bank found that highly rated forest conservation and reforestation credits continued to command price premiums in 2025.

Brazil’s parallel approach

Indonesia is not the only large forest country building Article 6 infrastructure. Brazil has been developing its own regulated carbon market through legislation that creates a national emissions trading system (known by the Portuguese acronym SBCE). Brazil’s framework also requires that any carbon credits sold internationally receive Corresponding Adjustments against its national inventory, following the same double-counting prevention logic Indonesia is now formalizing. For project operators in Brazil, the practical consequence is similar: credits intended for cross-border Article 6 transactions must pass through a government-supervised registry and accounting process before they can be transferred to a buying country.

The common mistake and what remains unresolved

The most common error for project developers entering Article 6 markets is treating voluntary market credits as automatically eligible for international compliance trading. They are not. A credit generated under a voluntary standard (such as Verra’s VCS or Gold Standard) does not carry a Corresponding Adjustment unless the host country government explicitly authorizes it. Without that authorization, the credit cannot be used by another country toward its climate targets under the Paris Agreement.

What remains unresolved is how quickly Indonesia’s methodology panel will be operational and whether the 12 to 18 month timeline for the nesting framework will hold. The rules governing which project types qualify for Article 6 authorization, and the fees or revenue-sharing arrangements between the government and project developers, have not yet been published. These details will determine whether the framework attracts large-scale investment or stalls in implementation.

Full details are available via CarbonCredits.com.