The Indonesian Ministry of Environment and Forestry (“MOEF”) is continuing to develop the regulatory framework for carbon trading in Indonesia. First it issued an umbrella regulation, Presidential Regulation No. 98 of 2021 on Carbon Economic Value (the “CEV Regulation”), which was followed by MOEF Regulation No. 21 of 2022 (“MOEF Regulation 21/2022”).
Now the MOEF has issued MOEF Regulation No. 7 of 2023 regarding Procedures for Carbon Trading in the Forestry Sector (dated June 15, 2023) (“MOEF Regulation 7/2023”).
As with the preceding regulations, where carbon trading consists of emissions offset and emissions trading, MOEF Regulation 7/2023 focuses on regulating carbon trading transactions and activities arising from climate change mitigation activities in the forestry sector. This includes reduction of greenhouse gas (GHG) emissions through, among other measures, reduction of deforestation rate in forest and peatland areas, peatland restoration, mangrove rehabilitation, reforestation in former mining areas, construction of permanent nurseries, eco-riparian, and a list of other actions in the forestry sector.
MOEF Regulation 7/2023 introduces the following crucial points:
1. Carbon Trading Activities Limited to Forest Business License Holders and other Rights Holders
MOEF Regulation 7/2023 regulates that carbon trading in the forestry sector can only be performed by the following parties, subject to the relevant prerequisites:
Holders of forestry utilization business license (perizinan berusaha pemanfaatan hutan or “PBPH”), holders of management rights and forest ownership land rights (hutan hak). These parties will also need to have a sustainable forest management certificate, forest products legality certificate, or declaration of forest products, in accordance with the prevailing laws and regulations. Social forestry management approval holders with at least a silver classification in the implementation of social forestry, in accordance with the prevailing laws and regulations. Customary law communities, social forestry management approval holders, and communities holding forest ownership land rights (hutan hak). If these parties carry out GHG emissions offset and/or activities, they will receive assistance from the MOEF or be required to partner with a party that has expertise or experience in carbon measurement, project planning and implementation, and accessing carbon markets.
Looking at the above provisions from MOEF