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Published Jan 5, 2026
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Indonesia Climate Policy Update: Emissions, Energy Rules, and Reporting for Industry
Indonesia is one of the world’s top greenhouse gas emitters and highly vulnerable to climate change impacts, with an estimated 40% of its population at risk from climate hazards.
In response, the country has made significant climate commitments and is developing a framework of laws and regulations to drive a transition toward sustainability.
This article summarises Indonesia’s current and upcoming climate-related laws, with a focus on their operational impact on manufacturers.
National Climate Commitments and Targets
Indonesia ratified the Paris Agreement via Law No. 16/2016, pledging to reduce greenhouse gas emissions by 29% (unconditionally) or 41% (with international support) by 2030. The country also aims for net-zero emissions by 2060.
Renewable Energy Targets
Initially, the country’s National Energy Policy (Government Regulation No. 79/2014) set a target for 23% of primary energy to come from renewables by 2025.
However, as of early 2024, renewables accounted for only 13% of the energy mix, leading the government to revise the 2025 target down to 17–19%, although this has not been formally revised in government legislation.
Energy Conservation Targets
Under the same framework, Indonesia seeks a 17% reduction in national energy intensity by 2025 (baseline 2015). Progress remains slow, but this is a core policy focus.
Carbon Pricing: Emissions Trading and Tax
Indonesia is also rolling out carbon pricing as a central policy tool for meeting its emissions reduction targets under the Paris Agreement.
Legal Foundation
Presidential Regulation No. 98/2021 established the legal framework for carbon pricing through a combination of emissions trading and carbon taxation.
These mechanisms aim to help achieve Indonesia’s Nationally Determined Contribution (NDC) of reducing emissions by 29% (or 41% with international support) by 2030.
Emissions Trading System (ETS)
Phase 1 (2023–2024): Covers PLN-connected coal-fired power plants ≥100 MW – 99 plants, or ~81% of capacity.
Administered by: IDXCarbon, launched October 2023.
Estimated impact: Could cut ~36 Mt CO₂e by 2030.
Phase 2 (2025–2027): Likely to include smaller coal and on-grid gas plants.
Phase 3 (2028–2030): Plans to bring all fossil fuel–based generation into the fold.
Beyond 2030: ETS may expand to forestry, agriculture, and other industrial sectors
Carbon Tax
Indonesia has also legislated a carbon tax as part of Law No. 7/2021, but implementation has been delayed for economic reasons.
Current Status (Jan 2026):
Initial rate: ~US$2 per ton CO₂ (approx. IDR 30,000/ton). CO₂ tax implementation is planned but has seen repeated delays from initial rollout in 2022 to indefinite postponement as of end-2025.
Applies first to: Coal-fired power plants, covering ~86% of coal-sector emissions and that Phase 2 may include forestry/agriculture/industrial processes.
The tax is expected to gradually rise in price and expand to other sectors in future phases.
Large plants, especially those generating power, should now track and report emissions. Investing in cleaner operations and higher efficiency can reduce future levies and even generate revenue through trading surplus carbon allowances. Data integrity is critical, and manual methods may fall short. Carbon Central helps you streamline this.
Energy Efficiency Obligations for Large Energy Users
Improving energy efficiency is a cornerstone of Indonesia’s climate strategy, and new regulations make it a clear responsibility for businesses. In 2023, the government issued Government Regulation (PP) No. 33/2023 on Energy Conservation, updating and strengthening requirements that had existed since 2009.
Under this regulation, major energy users in several sectors must implement energy management and conservation measures. The rule explicitly covers four sectors, energy supply, transportation, industry, and commercial buildings , with sector-specific thresholds for annual energy use:
Industrial facilities consuming over 4,000 TOE (tons of oil equivalent) per year must implement an energy management program. This typically entails appointing an energy manager, conducting regular energy audits, and adopting energy conservation action plans.
Energy suppliers (e.g. power plants, utilities) using above 6,000 TOE per year are obligated as well.
Transportation sector entities with energy use over 4,000 TOE per year fall under the mandate.
Commercial buildings (offices, malls, etc.) with usage above 500 TOE annually are included, a notable expansion beyond industry which shows a push to also improve building efficiency.
By broadening the scope to these sectors, PP 33/2023 ensures that large energy consumers must actively pursue efficiency improvements. The regulation also encourages the growth of Energy Service Companies (ESCOs) and financing for efficiency projects, recognising that external expertise and capital can help companies achieve savings.
Covered operations must appoint energy managers, conduct audits, record progress, and deliver annual reports. Companies can partner with ESCOs or invest in heat-recovery, insulation, and efficient motors to comply while slashing energy bills and emissions.
Renewable Energy Policies and Incentives
Transitioning from coal to renewables is another major policy focus, and there are still multiple regulations and incentives in place to encourage renewable energy development, as shown below.
PR 112/2022: Reshaping the Energy Mix
To accelerate uptake, Presidential Regulation No. 112/2022 introduced several structural reforms:
A revised tariff framework to improve commercial viability for renewable projects.
Simplified procurement procedures for Independent Power Producers (IPPs).
A coal plant moratorium, banning new coal-fired power plants for public supply beyond 2030, with exemptions for captive or strategic projects.
This regulation sends a strong signal: Indonesia’s future grid must prioritise renewables. However, loopholes like the exemption for industrial captive coal plants have drawn criticism from environmental advocates.
Fiscal Incentives and Climate Finance
To make clean energy more investable, the government offers:
Tax holidays and reductions for qualifying renewable investments.
Import duty exemptions for renewable energy equipment.
Preferential loans via state-owned lenders like PT SMI and Bank Mandiri.
Access to funding through the Climate Funding Mechanism, established under PR 98/2021, which supports emissions reduction projects, including renewable energy infrastructure.
These measures aim to de-risk project development, particularly in solar, hydro, biomass, and geothermal.
The Draft NRE Bill: Still in Flux
The long-awaited New and Renewable Energy (NRE) Bill is designed to codify Indonesia’s renewable transition into law. The current draft includes:
Creation of a Renewable Energy Fund to finance projects.
New pricing mechanisms to ensure bankability of clean power.
Legal pathways for wheeling (direct use of the transmission grid by private buyers), a key enabler of corporate power purchase agreements (PPAs).
However, the bill also controversially expands “renewable” definitions to include nuclear and coal with carbon capture (CCS). Political disagreements, especially around grid access and power wheeling, have delayed passage, with the bill now expected to be reintroduced under the next administration (2025–2026 legislative cycle).
JETP: Accelerating with International Support
In 2022, Indonesia signed a US$20 billion Just Energy Transition Partnership (JETP) with major international partners to:
Retire coal power plants early.
Scale up renewable deployment, including solar, wind, and energy storage.
Build local capacity, such as domestic solar panel and battery manufacturing.
If delivered effectively, JETP could reshape procurement rules, improve investor confidence, and create new opportunities for manufacturers within renewable supply chains.
If wheeling is legislated, manufacturers could explore green power purchase agreements, invest in on-site solar, and align with standards like RE100. These steps would help reduce exposure to carbon pricing and improve positioning with ESG-focused markets.
Mandatory Sustainability Reporting and ESG Disclosure
Indonesia now requires companies to publicly report how their operations affect the environment and society. This move is part of a broader shift from voluntary sustainability efforts to formal, enforceable obligations.
Who Must Report and What Law Applies
Under OJK Regulation No. 51/POJK.03/2017, the Financial Services Authority (OJK) mandates sustainability reporting for financial institutions such as banks, insurers, and pension funds (reporting required since 2019), and publicly listed companies, which were required to start reporting in 2021. Reports must be submitted each year by 30 April and must cover the previous calendar year.
What the Report Must Contain
Reports must include clear, measurable information about a company’s energy consumption, emissions, waste and water use, labour and community initiatives, risk management, and governance practices. They must also describe how sustainability principles are integrated into business strategy and financial planning.
OJK’s Circular Letter No. 16/SEOJK.04/2021 outlines the structure and required content of these reports. While companies are encouraged to reference international frameworks such as GRI or SASB, this is not mandatory.
What Happens If You Don’t Comply
Companies that fail to submit accurate reports can receive formal warnings or administrative sanctions from OJK. While enforcement has so far been relatively light, expectations for timely and high-quality submissions are rising.
What This Means for Manufacturers
If your company is listed on the Indonesia Stock Exchange or supplies listed firms, you will need to collect and report accurate environmental and social data. This includes tracking energy use and emissions, monitoring waste management and safety records, and ensuring ESG risks are assessed and addressed by leadership. Companies relying on basic tools such as spreadsheets or unverified data may face challenges when reports are reviewed or audited.
The Climate Change Bill: A Unified Legal Framework in Progress
A draft Climate Change Management Bill (RUU Keadilan Iklim) is currently in Indonesia’s legislating schedule (Prolegnas). Drafted by the Regional Representative Council (DPD), inspired by models like Canada’s climate laws, it aims to unify fragmented regulations and define binding emissions and adaptation mandates.
Passing this bill would bring long-term policy clarity, but also new obligations, such as formal climate risk assessments and action plans. Companies investing now in emissions systems or adaptation measures will be ahead of the curve.
Key Takeaways
For manufacturers and industrial players, four areas demand immediate attention:
Compliance Now Depends on Data
Companies must monitor emissions, conduct energy audits, and submit detailed sustainability reports. This calls for reliable data systems and manual tracking will not be enough.
Non-compliance risks administrative penalties and weakened credibility with clients and investors.
Efficiency as a Competitive Advantage
Meeting energy conservation rules under PP 33/2023 is not just about staying within the law, it is a path to cutting costs. Optimising production lines, switching to high-efficiency equipment, and improving load management can significantly reduce energy bills and improve margins.
Planning for Energy Transition
Indonesia is tightening limits on coal and expanding support for renewables. Companies can prepare by investing in on-site solar, tapping into green finance, or preparing for upcoming reforms such as power wheeling. Sectors like automotive, chemicals, or consumer electronics should also watch for climate-driven changes in product standards and supply chain expectations.
Verifiable Climate Data Facilitates Market Access
Indonesia’s climate and sustainability rules are converging around one principle: decisions must be backed by reliable data. Manufacturers that can track emissions, energy use, and sustainability performance at an operational level will find it easier to comply, secure financing, and maintain market access. Those relying on fragmented or manual data will face growing friction as requirements tighten.
If you need clarity on what data you should be tracking and how to structure it for compliance and future readiness, a focused discussion can help define the right next steps.
