Jakarta – The administration of President Prabowo Subianto does not appear to be serious in preventing the climate emergency by reducing the greenhouse gas emissions. Instead of reducing deforestation and encouraging industry to adopt environmentally friendly policies, the government is relying on carbon trading, an instrument that has proved unable to mitigate the climate crisis in many nations.
This policy direction is reflected in the Second Nationally Determined Contribution (NDC) document, which will be handed over to the United Nations Framework Convention on Climate Change (UNFCC) at the UN Climate Change Conference in Brazil in November 2025. In this forum, the government plans to show off 50 million tons of carbon dioxide equivalent (CO2e) certificates resulting from Indonesia's carbon dioxide emission reductions in the international voluntary market from 2021.
The government's climate strategy is reinforced by the issuance of Presidential Regulation No. 110/2025 concerning the Implementation of Carbon Economic Value Instruments and the Control of National Greenhouse Gas Emission. This regulation serves as the legal basis for establishing a voluntary carbon market in Indonesia, which was previously unrecognized. Through this mechanism, companies can freely sell or buy carbon via negotiation without government intervention. In the previous regulation, the buying and selling of carbon had to be acknowledged by the government as an emission reduction claim.
It is true that the carbon trading system is globally recognized as one of the instruments to mitigate climate change. The European Union and a number of developed nations have implemented it. However, there is a dark side to carbon trading that cannot be ignored.
A number of studies show that carbon trading policies often encourage greenwashing, a marketing strategy to project an environmentally friendly image. By participating in carbon trading, companies are striving for legitimacy and strengthening their reputation as a green industry, even though they have not significantly reduced their emissions. Such a camouflage strategy even allows companies to make a profit on the capital markets.
Furthermore, there is a significant gap between government policies and implementation on the ground. This is caused by several factors, including poor mechanisms for monitoring greenhouse gas, inefficiencies in governance, and the lack of clear allocations of capital to achieve emission reduction targets. Many major companies have chosen this shortcut by buying cheap carbon credits from developing nations such as Indonesia and Brazil, rather than investing in low-emission technologies.
This came to light thanks to research carried out in 2021 by Oxford Net Zero, a cross discipline initiative from the University of Oxford, Britain. Of more than 4,000 companies around the world that were investigated – all on the Forbes Global 2000 list – only 20 percent actually met the net zero criteria, namely reduction of emissions to zero.
In the end, carbon trading is only a transitional tool for dirty industries to turn themselves into clean industries. It cannot become the main mechanism for reducing emissions. The main efforts should be in preserving forests, preventing deforestation, and building sustainable industries. Without all of this, the government's net zero commitment will only be green jargon on paper.
– Read the Complete Story in Tempo English Magazine
Source: https://en.tempo.co/read/2061954/the-dark-side-of-carbon-tradin