Diving into Carbon Pricing in Indonesia’s Marine Sector

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Authors

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Indonesia, as one of the world's largest archipelagic nations, has taken a pioneering step toward climate change through the issuance of Minister of Marine Affairs and Fisheries Regulation No 1 of 2025 concerning Procedures for Implementing Carbon Pricing in the Marine Sector (“MOMAF Reg 1/2025”). This regulation outlines the procedures for implementing Carbon Pricing (Nilai Ekonomi Karbon – “NEK”) in the marine sector, reinforcing the Indonesia's commitment to its Nationally Determined Contributions (“NDC”) under the Paris Agreement. By integrating carbon trading and result-based payments, this regulation offers a dual mechanism to mitigate greenhouse gas emissions while fostering sustainable economic growth in the marine and fisheries industries.

Key Provisions of the Regulation

The primary goal of MOMAF Reg 1/2025 is to establish a comprehensive framework for managing carbon emissions in the marine sector, ensuring:

1. Greenhouse Gas (“GHG”) Emissions Reduction – utilizing the sequestration potential of blue carbon ecosystems (such as mangroves, seagrasses, and coral reefs) to mitigate emissions.
2. Economic Incentives – implementing carbon trading and result-based payments to promote sustainable marine practices.
3. Global Standards Alignment – ensuring compliance with international carbon market standards and Indonesia’s NDC targets.

Implementation Mechanisms

MOMAF Reg 1/2025 provides a structured approach to implement NEK, divided into two core mechanisms ^[1] that are designed to establish a robust and dynamic framework for reducing greenhouse gas emissions and promoting sustainable practices in the marine sector, which are:

1. Carbon Trading

A market-based mechanism that facilitates the buying and selling of carbon credits to incentivize emission reductions. The regulation includes the following specifics:

1. The framework supports carbon trading, both domestically and internationally. This facilitates the creation of competitive opportunities for Indonesian stakeholders. ^[2]
2. In line with previous regulations regarding carbon trading, this regulation outlines two primary modes of trading for the marine sector: ^[3]
• Emissions Trading Scheme (“ETS”): Entities with excess emissions can purchase credits from those with surpluses within emission caps.
• Offset Mechanisms: Companies can compensate for their emissions by supporting verified projects that reduce or sequester greenhouse gases.
3. Transactions can occur on regulated carbon exchanges ^[4] or through direct agreements between parties, known as Direct Trading. This flexibility allows businesses to tailor trading strategies based on their operational needs and market conditions. ^[5]
4. Compliance with the regulation includes: ^[6]
• Adhere to an upcoming roadmap for carbon trading in the marine sector;
• Maintain a buffer for emission reductions to account for uncertainties. This refers to the buffer obligations set forth under the Minister of Environment and Forestry Regulation No. 21 of 2022 regarding the Guidelines of Carbon Pricing Implementation, in which certain percentages of the certified emission reductions are put on reserve, in accordance with the form of trading that is conducted, as we have summarized in this Update;
• Registering all transactions and activities in the National Registry System for Climate Change Control (Sistem Registrasi Nasional Pengendalian Perubahan Iklim – “SRN PPI”);
• In the form of Greenhouse Gas Emission Reduction Certificate (Sertifikat Pengurangan Emisi Gas Rumah Kaca – “SPE-GRK”) certifications for offsets as well as cross-sector trading, or surplus allowances of Technical Approval for Emission Cap – Business Actor (Persetujuan Teknis Batas Atas Emisi - Pelaku Usaha – “PTBAE-PU”) for emissions trading.
5. Additional Provisions for International Carbon Trading: ^[7]
• Strategies and plans aligned with Indonesia’s NDC must be submitted and approved by relevant authorities;
• Exporting credits requires the achievement of NDC targets to allow international trading proof of meeting domestic emission reduction targets and authorization by the Ministry of Environment;
• International transactions must include corresponding adjustments using electronic formats to avoid double counting.
6. Moreover, MOMAF Reg 1/2025 also allows inter-sectoral trading between marine and other industries, expanding market opportunities.

Moreover, the PTBAE-PU for the marine sector, which is a limit or quota of emission for business actors that can be used for emission trading, will be issued through a decree from the Minister of Marine Affairs and Fisheries. ^[8]

2. Result-Based Payments

Result-Based Payments (“RBP”) serve as direct incentives for achieving measurable greenhouse gas emission reductions or carbon sequestration. This mechanism encompasses:

1. Payments are provided for the management and protection of blue carbon ecosystems, specifically: ^[9]
• Mangroves.
• Seagrasses (lamun).
• Other ecosystems are categorized as blue carbon, as defined by scientific advancements. ^[10]
2. Payments are allocated based verified reductions in GHG emissions, increases in carbon absorption or storage, and actions taken within marine conservation zones, coastal areas, small islands, and designated preservation zones.
3. Climate change mitigation activities in these areas are carried out by units designated by the Minister of Marine Affairs and Fisheries and involve strict verification procedures.
4. Payments under this mechanism do not result in the transfer of carbon rights, preserving the sovereignty of national resources.

Beneficiaries under the RBP mechanism includes the governmental institutions such as ministries and local agencies, registered business actors in the marine and fisheries sector; non-governmental organizations, educational institutions, as well as local communities, traditional communities, and indigenous communities. ^[11]

Measurement, Reporting, and Verification (MRV)

MOMAF Reg 1/2025 establishes a robust Measurement, Reporting, and Verification (“MRV”) framework to ensure accountability and transparency in implementing NEK in the marine sector. ^[12] The MRV framework applies to both carbon trading and RBP mechanisms.

1. Measurement is conducted to establish:
1. Baseline GHG emissions for comparison.
2. PTBAE-PU allocations for emissions trading.
3. Achievements in emission reductions and increased carbon absorption or storage.
2. All measurement data must be submitted through the SRN PPI and related Ministry reporting systems. Reports must detail baseline data, reduction achievements, and other relevant metrics.
3. Verification is conducted by:
1. Validation and verification bodies for carbon trading activities.
2. Designated ministry units for RBP activities
3. Validation and verification bodies involved in carbon trading must have demonstrated expertise in marine and fisheries sectors and meet criteria established under applicable regulations.

ARMA Notes

MOMAF Reg 1/2025 introduces a forward-thinking strategy for achieving environmental and economic sustainability in Indonesia’s marine sector. Notably, it formally includes the regulation of blue carbon ecosystems, such as mangroves and seagrasses, which are critical not only for carbon sequestration but also for coastal resilience and biodiversity.

However, in considering the scope of MOMAF Reg 1/2025, it is necessary to examine its intersection with Minister of Environment and Forestry Regulation No. 7 of 2023 (“MOEF Reg 7/2023”), particularly concerning the governance of mangrove ecosystems within the broader framework of carbon trading and mitigation efforts.

MOEF Reg 7/2023 explicitly designates mangrove ecosystems as part of the forestry sector’s carbon trading mechanism which outlines that climate change mitigation actions include reducing deforestation and degradation of mangrove forests, as well as implementing rehabilitation and restoration initiatives. ^[13] Furthermore, MOEF Reg 7/2023 extend the regulatory scope to include both mangrove areas within state forests and those outside designated forest zones. This indicates that the Ministry of Environment and Forestry, now divided into Ministry of Environment (MOE) and Ministry of Forestry (MOF), retains authority over mangrove conservation, restoration, and carbon-related activities regardless of whether the mangrove ecosystems are located within or outside legally classified forest areas. ^[14]

Conversely, MOMAF Reg 1/25 provides a framework for the implementation of blue carbon projects in marine and coastal areas, including mangrove ecosystems under its NEK scope. Given this scope, a potential regulatory overlap arises, particularly concerning authority over mangrove-related carbon trading. Should MOEF Reg 7/2023 governs all aspects of mangrove conservation, rehabilitation, and carbon sequestration irrespective of location, while MOMAF Reg 1/25 introduces blue carbon governance mechanisms that include mangroves in marine and coastal areas, a question emerges regarding which ministry holds the primary authority over mangrove-based carbon projects.

The delineation of authority over mangrove ecosystems appears to be based on land classification rather than ecosystem function. The MOF’s jurisdiction is extensive, covering mangrove areas inside and outside forest zones, emphasizing conservation and mitigation efforts. Meanwhile, MOMAF’s regulatory role in blue carbon governance includes mangrove ecosystems but focuses more on leveraging their economic potential within the marine sector. This suggests that while the MOF oversees mangrove conservation and emissions reductions as part of the forestry sector’s carbon market, MOMAF may have regulatory influence over carbon initiatives tied to the economic utilization of mangrove ecosystems within marine and coastal zones.

While both regulations aim to facilitate carbon trading and ecosystem preservation, they are derived from different sectoral mandates. The MOF’s approach aligns with forestry-based mitigation strategies and ecosystem protection, while MOMAF’s blue carbon governance integrates marine and coastal economic activities.

To ensure the effective implementation of these regulations, a clear delineation of authority and coordinated policy efforts between the MOF and MOMAF are crucial. Establishing a harmonized framework that integrates both conservation and economic objectives will be essential in advancing Indonesia’s carbon governance while optimizing the role of mangrove ecosystems in achieving national and global climate commitments.

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1. Article 2 (2) of the MoMAF Reg 1/2025. ↩︎

2. Article 5 (1) of the MoMAF Reg 1/2025. ↩︎

3. Article 5 (3) of the MoMAF Reg 1/2025. ↩︎

4. IDXCarbon is the first official carbon exchange in Indonesia. IDXCarbon is registered and supervised by Otoritas Jasa Keuangan. Currently, carbon unit that can be traded on IDXCarbon is PTBAE-PU and SPE GRK. IDXCarbon is run by the Indonesia Stock Exchange. ↩︎

5. Article 5 (4) of the MoMAF Reg 1/2025. ↩︎

6. Article 5 (5) of the MoMAF Reg 1/2025. ↩︎

7. Article 5 (6) of the MoMAF Reg 1/2025. ↩︎

8. Article 7 (4) of the MoMAF Reg 1/2025. ↩︎

9. Article 14 (1) of the MoMAF Reg 1/2025. ↩︎

10. including but not limited to salt marshes, estuaries, brack water marshes, coral reefs, etc. ↩︎

11. Article 19 (1) of MoMAF Reg 1/2025. ↩︎

12. Article 20 of the MoMAF Reg 1/2025. ↩︎

13. Article 3 (3) of MOEF Reg 7/2023. ↩︎

14. Article 4(1) and (2) of MOEF Reg 7/2023. ↩︎

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Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.

Go to

1. Key Provisions of the Regulation
2. Implementation Mechanisms
3. Measurement, Reporting, and Verification (MRV)
4. ARMA Notes

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