03 Oct 2026 · TAMA Insight
Indonesia Establishes Carbon Trading Framework for the Waste Sector
Indonesia has established a dedicated framework for carbon trading in the waste sector through Minister of Environment/Head of the Environmental Control Agency Regulation No. 11 of 2026 on…
Indonesia has established a dedicated framework for carbon trading in the waste sector through Minister of Environment/Head of the Environmental Control Agency Regulation No. 11 of 2026 on Procedures for Carbon Trading in the Waste Sector (“Permen 11/2026”).
Permen 11/2026 was stipulated on 12 August 2026 and promulgated on 14 August 2026, on which date it entered into force. The regulation implements the broader national framework for economic instruments for carbon and greenhouse gas emissions control under Presidential Regulation No. 110 of 2025.
The regulation establishes specific arrangements for carbon trading in the waste sector, covering domestic and international carbon trading, emissions trading and emissions offsets, the establishment of regulated installations and emissions quotas, carbon unit registration through the Carbon Unit Registry System (Sistem Registri Unit Karbon or “SRUK”), and transitional treatment for existing offset activities.
1. Scope of the Waste Sector Carbon Trading Framework
Permen 11/2026 applies specifically to waste-sector activities covered by Indonesia’s Nationally Determined Contribution (NDC) framework.
The regulated subsectors comprise industrial solid waste, industrial and domestic wastewater, and domestic solid waste. Carbon trading in these subsectors may be conducted through a carbon exchange and/or direct trading.
Where carbon trading is conducted through a carbon exchange, the utilisation and trading of carbon units must be recorded in an integrated manner with SRUK as well as with the relevant carbon exchange operator. Direct trading is likewise conducted through the relevant platform or carbon-unit certification scheme, with the utilisation and transaction of carbon units recorded through SRUK.
This structure places SRUK at the centre of the recording framework for carbon units generated and traded in the waste sector.
2. A Sector-Specific Carbon Trading Roadmap
Permen 11/2026 requires the Minister/Head to prepare and establish a carbon trading roadmap for the waste sector.
The roadmap is developed through the determination of greenhouse gas emissions baselines, climate mitigation targets, carbon reserves, carbon allocation, and the sectoral scope of climate mitigation actions.
Carbon reserves are determined by taking into account annual greenhouse gas inventory reports, historical emissions data, scientific and technical information concerning uncertainty, and socioeconomic considerations. Carbon allocation, in turn, considers periodic emissions inventory data, national development plans, and economic and climate-control considerations.
The roadmap must provide, among other matters, an overview of the waste-sector carbon trading framework, the sector’s greenhouse gas emissions profile, emissions reduction targets, carbon allocation, and the scope of applicable mitigation activities.
The roadmap will serve as a basis for the implementation of carbon trading in the waste sector and is to be established through a Ministerial/Head Decision.
3. Who May Participate in Waste-Sector Carbon Trading?
Carbon trading in the waste sector may be conducted by parties responsible for climate mitigation actions. These parties are defined to include regional governments, private entities, and management units.
Regional governments may participate where they have a legal basis for implementing climate mitigation actions and have entered into a cooperation agreement with a legally established business entity and/or management unit.
Private entities must have an obligation to undertake climate mitigation actions, appropriate legal status, and the capacity to manage mitigation assets, technology, or facilities. Where a business does not possess the required capacity, cooperation with another legally established business possessing the relevant capacity is permitted.
Management units may consist of individuals or groups carrying out climate mitigation actions and having an institutional status recognised under applicable laws. They may also cooperate with individuals or groups acting as aggregators.
This structure potentially allows mitigation activities of different sizes and organisational forms to participate in the carbon market, subject to the applicable requirements.
4. Domestic Carbon Trading: Emissions Trading and Offsets
Permen 11/2026 divides waste-sector carbon trading into domestic and international carbon trading.
Domestic carbon trading consists of two mechanisms: greenhouse gas emissions trading and greenhouse gas emissions offsets.
The emissions trading mechanism establishes a framework under which regulated installations operate within an emissions ceiling and corresponding emissions quotas. The offset mechanism provides a separate route for mitigation activities to generate carbon units that may subsequently be used or traded in accordance with the applicable framework.
This distinction is important because participation in the domestic carbon market is not limited to entities subject to an emissions cap. Mitigation activities may also participate through the offset mechanism where the applicable requirements are satisfied.
5. Cap-and-Trade for Regulated Installations
For emissions trading, Permen 11/2026 establishes a cap-and-trade structure.
The process begins with the identification and designation of Regulated Installations (Instalasi yang Diatur). The government then determines the greenhouse gas emissions ceiling based on carbon allocation, establishes emissions quotas, determines the portion of the emissions ceiling that may be compensated through offsets, and facilitates trading of emissions quotas.
The identification of regulated installations takes into account the type of business or activity, the volume of greenhouse gas emissions, and the contribution of the relevant activity to the mitigation target of the applicable subsector.
The subsequent assessment considers, among other matters, the characteristics of the business or activity, the scope of emissions sources, the availability of emissions data, and the readiness of the relevant party to implement measurement, reporting and verification (“MRV”).
The emissions ceiling is then used as the basis for determining emissions quotas for regulated installations. The aggregate emissions quotas allocated to all regulated installations may not exceed the established emissions ceiling.
6. Trading of Emissions Quotas and Use of Offsets
Under the emissions trading mechanism, a regulated installation may acquire emissions quotas from another regulated installation.
In addition to purchasing quotas, the responsible party may undertake its own climate mitigation actions and/or purchase greenhouse gas emissions offsets.
The portion of the emissions ceiling that may be compensated through offsets is subject to a quantitative limitation during the relevant compliance period. This limitation forms the basis for determining how much offset may be used by a regulated installation.
Carbon quota transactions, mitigation activities and the use of offsets must be reported through SRUK. The registration requirement provides a common record for carbon-unit utilisation and transactions within the framework.
7. Offset Activities and Carbon Unit Registration
The offset mechanism provides a separate pathway for mitigation activities in the waste sector to generate carbon units.
For existing offset activities that had already been registered to obtain greenhouse gas emission reduction certificates or non-certificate carbon units before Permen 11/2026 came into force, the regulation provides transitional treatment. Such activities do not have to obtain a new notification of acceptance and recognition of the registration of their mitigation action plan or project planning document solely as a result of the new regulation.
Where interoperability with international data standards is not yet available, certain data relating to existing offset activities must be recorded through SRUK within the prescribed period following the relevant verification report, issuance of carbon units, or carbon-unit transaction.
The issuance of carbon units under these transitional arrangements remains subject to the relevant recommendation or approval from the Minister/Head.
8. International Carbon Trading and Corresponding Adjustment
Permen 11/2026 also establishes a framework for international carbon trading in the waste sector.
The regulation distinguishes international carbon trading that requires government authorisation and corresponding adjustment from transactions that do not require those mechanisms.
Where carbon units are transferred for purposes connected with the NDC of another country, the applicable authorisation and corresponding-adjustment framework becomes relevant. This is particularly important for cross-border transactions involving international climate commitments, where the treatment of the corresponding emissions reduction must be properly recorded to address the risk of double counting.
Permen 11/2026 also provides a standard form of recommendation for the utilisation of carbon units in international carbon trading, supporting a more structured approval and documentation process.
9. Interaction with the National Carbon Market Framework
Permen 11/2026 operates as a sector-specific implementing regulation within Indonesia’s broader national carbon-market framework.
At the national level, the legal framework recognises carbon trading as an instrument for reducing greenhouse gas emissions through the trading of carbon units. Permen 11/2026 then translates that framework into specific procedures for the waste sector, including the establishment of regulated installations, emissions ceilings, emissions quotas, offset mechanisms and registration requirements.
The regulation also links waste-sector carbon trading with the carbon exchange and SRUK. This creates an interaction between the sectoral authority responsible for emissions and mitigation activities and the infrastructure used to record and trade carbon units.
This sector-specific approach is consistent with the government’s broader development of a national carbon-trading infrastructure. KLH/BPLH had previously identified waste as one of the sectors being prepared for implementation of economic instruments for carbon, including industrial solid waste, domestic and industrial wastewater, and domestic solid waste.
10. Practical Implications for Waste-Sector Businesses
For businesses operating in the waste sector, Permen 11/2026 introduces a regulatory framework in which emissions data, mitigation activities, MRV readiness and carbon-unit registration become increasingly relevant to participation in carbon trading.
Businesses that may fall within the scope of regulated installations should consider their emissions profile, availability and reliability of emissions data, and readiness to comply with MRV requirements. These factors may become relevant in the government’s assessment and designation of regulated installations.
Businesses developing mitigation projects may also need to assess whether their activities are more appropriately structured under the emissions-trading or offset mechanism, including the applicable requirements for documentation, verification, carbon-unit issuance and SRUK registration.
For transactions involving international buyers or cross-border use of carbon units, additional consideration should be given to whether the transaction requires government authorisation and corresponding adjustment.
Conclusion
Permen 11/2026 establishes a dedicated framework for carbon trading in Indonesia’s waste sector, covering both regulated emissions trading and offset-based activities.
The framework connects the identification of regulated installations and emissions quotas with carbon trading, while placing mitigation activities and carbon-unit transactions within an integrated registration framework through SRUK. It also provides a regulatory pathway for international carbon trading and transitional treatment for certain offset activities that were already underway when the regulation entered into force.
For waste-sector businesses, the regulation therefore makes emissions data, MRV readiness, mitigation-project documentation and carbon-unit registration increasingly important considerations when assessing participation in Indonesia’s carbon market.
This alert is part of a series examining recent developments in Indonesia’s environmental, climate change, and carbon market regulatory framework. Please feel free to contact us should you wish to discuss these developments further.
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