Is Indonesia’s Carbon Market a Climate Solution or a Smokescreen?
As the world gathers for COP30 in Brazil, Indonesia is making headlines—but not necessarily for the right reasons. The country is aggressively positioning itself as a global leader in the carbon market, hosting daily ‘Sellers Meet Buyers’ sessions and pushing for international commitments. But here’s where it gets controversial: critics warn that Indonesia’s carbon credits might be nothing more than ‘hot air,’ failing to deliver real, lasting climate benefits. And this is the part most people miss: while Indonesia chases carbon profits, it risks distracting itself—and the world—from the urgent need for genuine climate finance and emissions reductions.
Indonesia’s ambitions are undeniable. With a claimed 13.4 billion metric tons of potential carbon credits, it could become one of the world’s largest carbon suppliers, wielding significant influence over global markets. At COP30, the country is promoting about 90 million metric tons of credits, valued at up to $957 million. Companies like state-owned oil and gas giant Pertamina see this as a golden opportunity to expand their low-carbon portfolios. But beneath the glossy surface lies a troubling reality.
The Problem with ‘Hot Air’
Carbon credits are meant to represent measurable, additional reductions in greenhouse gases. However, a 2024 meta-analysis of 2,300 projects found that fewer than 16% actually delivered on their promises. The core issue? ‘Hot air’—credits that appear to reduce emissions but don’t correspond to real, lasting declines. This often occurs when a country’s climate targets are so weak that they don’t require meaningful action. Indonesia’s nationally determined contribution (NDC) under the Paris Agreement is rated ‘critically insufficient,’ allowing emissions to rise rather than fall. As a result, reductions claimed through offset projects may not represent anything additional.
Juliette de Grandpré, a senior expert at the NewClimate Institute, explains, ‘For countries like Indonesia, this means they could potentially inject ‘hot air’ into the system—emission reductions that don’t represent real cuts. Once this hot air enters the system, any country can buy it and count it toward their own targets, which could actually increase global emissions.’
Forest Credits: High Risk, Low Reward?
Indonesia’s most marketable credits come from its vast forests and land-use sector, which store enormous amounts of carbon. However, these credits are among the riskiest. Proving that a forest conservation project is truly additional is notoriously difficult, and incorrect baselines can lead to overcrediting. Leakage—where deforestation simply shifts elsewhere—adds another layer of uncertainty. A 2023 Science study found that over 90% of credits from major forest projects failed to offset emissions, and even genuine reductions were often overstated.
Greenpeace Indonesia warns that the country risks repeating these mistakes. ‘If Indonesia fails to reduce emissions, particularly from the forest and land-use sector, the carbon value the government boasts about could end up being worth zero,’ says Iqbal Damanik, the group’s climate and energy campaign manager. Ongoing forest fires and deforestation further undermine the credibility of these credits.
A Distraction from Real Climate Finance?
While Indonesia chases carbon profits, environmentalists argue that it’s losing sight of the bigger picture. Under the Paris Agreement, wealthy nations are obligated to provide climate finance to developing countries. However, carbon markets are increasingly being used as a loophole, allowing rich countries to offset emissions rather than cut them. This dynamic, critics say, distracts developing nations like Indonesia from demanding the finance they need to adapt to climate impacts.
Kjell Kühne, director of the Leave It in the Ground Initiative (LINGO), puts it bluntly: ‘Carbon trading isn’t doing any good for the world. It depends on pollution continuing. If we actually solved the problem, there would be no more carbon trading.’
The Bigger Question
As Indonesia pushes its carbon market agenda, a critical question arises: Are carbon credits a genuine climate solution, or are they enabling business as usual? Should developing countries like Indonesia prioritize selling credits to wealthy nations, or should they focus on securing real climate finance and reducing their own emissions? What do you think? Is Indonesia’s approach a step forward, or a dangerous distraction? Share your thoughts in the comments below—let’s spark a conversation that could shape the future of global climate action.
