Seven Causes Behind the Gap Between Regulation and Reality
Indonesia has a massive ambition to turn its forestry and other land use sector into a net carbon sink, rather than an emission contributor, by 2030. This target is known as FOLU Net Sink (Forestry and Other Land Use Net Sink). The figure is specific: carbon sequestration must reach minus 140 million tons of CO₂ equivalent per year. Its contribution? Around 60 percent of Indonesia's total emission reduction commitment in its NDC (Nationally Determined Contribution) to the world.
To fulfill this commitment, Indonesia has prepared several regulatory frameworks, although they are not yet comprehensive in the context of climate change and remain limited to focusing on emission reductions across various sectors through market mechanisms. The challenge is that regulation does not automatically provide a legal guarantee that the target will be achieved. Data shows that Indonesia has not yet succeeded in reaching the zero-emission point in the FOLU sector, which should have occurred since 2021.[1]
What is actually hindering it? Madani Berkelanjutan conducted a rapid review using the ROCCIPI analysis framework, an internationally recognized tool used to dissect why a regulation fails to change behavior.[2] ROCCIPI stands for seven factors: Rules, Opportunity, Capacity, Communication, Interest, Process, and Ideology.
“The primary problem lies in rules that are not yet strong enough to change the behavior of the actors.”
Strong Regulations on Paper, Weak in the Field
The primary instrument for the FOLU Net Sink target is a Ministerial Decree (Kepmen). Hierarchically, its position is below Government Regulations (PP) and Presidential Regulations (Perpres). This means that other ministries are not obligated to submit to this target. Yet, the achievement of the -140 million tons CO₂ target is influenced by various related sectors, thus requiring cross-sectoral coordination among the Ministry of Forestry, the Ministry of Environment, the Ministry of Agriculture, ATR/BPN (National Land Agency), and regional governments.
Another issue is that the national target has not been translated into legally binding targets per province or regency. Without that obligation, regional governments have no legal responsibility to contribute. Furthermore, Government Regulation (PP) No. 23/2021 concerning Forestry Management precisely opens the door for commodity expansion inside forest zones through the Multi-Business Forestry (MUK) scheme, lacking a clause that mandates the maintenance of minimum carbon cover. This is a normative conflict that directly collides with climate targets.
Presidential Regulation (Perpres) No. 110/2025 concerning the Implementation of Carbon Economic Value Instruments presents a positive development. In terms of format, there is an escalation to the Presidential Regulation level, operationalizing carbon trading mechanisms, result-based payments, and the voluntary carbon market. This step fills an important gap that had long been empty. However, there is an asymmetry that needs to be closely examined: the economic incentive instrument stands at the Perpres level, while the target instrument and the obligation to achieve it namely the -140 million tons CO₂ target still rests on Ministerial Decree (Kepmen) No. 168/2022, which holds a lower position. This means that Indonesia has already built a reward system for those who protect forests, but lacks an equivalent obligation system for those who are supposed to meet the target.
Additionally, Perpres No. 110/2025 itself replaces Perpres No. 98/2021, which was previously in force. This replacement of instruments within a four-year period creates regulatory uncertainty for investors and long-term carbon project managers, who naturally require legal certainty as a prerequisite for investment.
Forests Are More Profitable If Logged
This is the most visible core problem: the current price of carbon in the voluntary market ranges from 3 to 15 US dollars per ton of CO₂.[3] Meanwhile, the economic value of converting one hectare of forest into an oil palm plantation can be dozens of times higher, factoring in timber value, land value, and long-term palm oil revenues. As long as this economic value gap is not addressed, any rational-thinking actor will choose land conversion over forest conservation.
Spatial data from the FOLU Net Sink 2030 Operational Plan (Renops) shows that around 10.48 million hectares of forest areas are at a high risk of deforestation and degradation. Ironically, 40 percent of the high-risk peatland areas are actually located within or bordering already permitted concession areas. Thus, the threat comes not only from no man's land zones, but from areas that already have managers but have not yet implemented sustainable practices.
Building Compliance Without Adequate Capacity
Carbon trading regulations mandate a strict MRV (Measurement, Reporting, Verification) system. The problem is that most of the Regional Technical Implementation Units (UPT) of the Ministry of Forestry lack the experts required to run MRV. Measuring carbon stocks, calculating baseline emissions, and compiling international-standard reports are not tasks that can be performed without specialized training.
The most concerning condition lies within forest communities. Village Forest Management Institutions (LPHD) and indigenous communities actually have access to social forestry permits and hold massive potential to become carbon managers. Unfortunately, their tenurial rights are frequently contested by the state. Furthermore, they lack the capital to register carbon projects, the technical expertise to measure stocks, and the legal assistance to protect their rights when signing carbon contracts. Out of 1,090 Forest Management Units (KPH) across Indonesia, only 37 units possess full capacity.[4] A total of 166 KPHs fall into the weakest category, and they are precisely concentrated in regions with the largest carbon potential, such as Papua, Kalimantan, and Nusa Tenggara.[5]
Information Does Not Arrive, Interests Are Misaligned
Various developments regarding carbon trading have been highly dynamic, both in terms of regulation and markets. However, information on this matter does not filter down to the village level. Village heads and LPHD chairpersons, who face forest areas directly every day, are often unaware that their forests already possess tradable carbon value.
On the other hand, the economic interests of regional governments are often misaligned with the FOLU target. Many forest-producing regions heavily rely on Regional Original Revenue (PAD) from mining permits and palm oil plantations. Protecting forests does not provide immediate or tangible revenue to regional treasuries. Without fiscal incentive mechanisms that favor conservation, such as ecology-based budget transfers, it is difficult to expect regional governments to prioritize the FOLU Net Sink.
An additional complication emerged since October 2024, when the Ministry of Environment and Forestry (KLHK) was officially separated into two distinct ministries. The forestry emission target is now under the Ministry of Forestry, while the carbon registry system and national GHG inventory reside within the Ministry of Environment. Without a binding coordination mechanism, this separation has the potential to exacerbate all seven analyzed factors.
Long Processes Exclude Small Actors
To register a single forestry carbon project, an entity must navigate at least two technical regulations, undergo verification by an accredited institution, list carbon units in the national registry system, and obtain an emission reduction certificate. This process can take months and incur high costs. Consequently, forest cooperatives and LPHDs are automatically shut out of the carbon market even before they begin.
Unresolved tenurial conflicts also act as process barriers. When the boundaries between state forest zones and lands claimed by indigenous peoples remain unclear, who holds the rights to the carbon emissions? The social forestry program, which is supposed to be a bridge for community inclusion, is also hindered by protracted land disputes.
Obstructive Old Paradigms
In many regions, forests are still viewed as resources that must be exploited to drive economic growth. Conservation is seen as an obstacle rather than an opportunity. This paradigm is embedded in the mindsets of regional officials, business circles, and even parts of the public. As long as this view remains unchanged, FOLU Net Sink regulations will continue to be interpreted as a barrier to development.
On the community side, there is a well-founded skepticism toward carbon trading mechanisms. Is this merely a way for corporations to purchase a 'license to keep polluting' elsewhere, while the communities guarding the forests do not receive fair compensation? This skepticism needs to be addressed seriously, not ignored.
“FOLU Net Sink 2030 will only be achieved if three improvements occur simultaneously: fiscal incentives favoring conservation, binding legal enforcement down to the regional level, and tangible technical capacity building in the field.”
What Must Change?
This ROCCIPI diagnosis yields six intervention priorities.
First, elevate the legal basis of the FOLU Net Sink from a Ministerial Decree to the level of a Government Regulation or Presidential Regulation, and establish legally binding emission targets per province.
Second, restructure incentives related to fiscal transfer mechanisms to provide regions with larger budgets when they protect their forests, and set a minimum carbon price that is competitive with land conversion values.
Third, systematically build capacity, such as MRV training centers across seven major islands, technical assistance funds for LPHDs, and a nationwide certification program for forestry carbon experts.
Fourth, build an inclusive and transparent carbon project registration system that features a clear and sufficient timeframe for verification.
Fifth, mandate tiered dissemination down to the village level using materials in local languages, and create a public portal displaying target achievement progress transparently and in real-time.
Sixth, shift the development paradigm through education and empirical evidence: demonstrate that protected forests yield tangible and sustainable economic benefits.
Fixing just one factor will not be enough. Strong incentives without capacity will go unutilized. Capacity built without binding regulations will not yield compliance. Strong regulations without effective communication will not be followed. These components must move together, simultaneously, and with measurable targets.
Footnotes
[1] Ministry of Environment and Forestry of the Republic of Indonesia. Indonesia’s FOLU Net Sink 2030: Operational Plan. Decree of the Minister of LHK Number SK.168/MENLHK/SETJEN/PLA.0/2/2022, Ministry of LHK, 2022. Actual emission data shows that Indonesia has not achieved zero-emission conditions from the FOLU sector in 2021 as targeted in the Renops baseline scenario.
[2] Seidman, Ann, Robert B. Seidman, and Nalin Abeyesekere. Legislative Drafting for Democratic Social Change: A Manual for Drafters. Kluwer Law International, 2001, pp. 85-123. The ROCCIPI framework was developed as a diagnostic tool to identify behavioral factors that determine the success or failure of regulatory implementation.
[3] Global voluntary carbon market prices vary depending on verification standards and project types. The range of US$3-15/ton CO₂ is a common range for nature-based solutions carbon projects in the 2022-2024 period. See: Forest Watch Indonesia. Implementation of Carbon Economic Value (NEK) in the FOLU Sector: Notes on Justice, Climate Integrity, and Its Effectiveness in Reducing the Deforestation Rate. Forest Watch Indonesia, 2023.
[4] Ministry of Environment and Forestry. Indonesia’s FOLU Net Sink 2030 Operational Plan (Renops), 2022. Institutional Typology (TPH) divides 1,090 KPHs into 16 types based on the dimensions of community social capital and KPH institutional capacity. Type A1 represents full capacity KPHs; only 37 units (3.4 percent) fall into this category.
[5] Ibid. A total of 166 KPHs (15.2 percent) fall into the A4 category, which are the institutionally weakest KPHs. Type A4 KPHs are concentrated in Papua, upper Kalimantan, and Nusa Tenggara regions that possess the largest carbon potential yet have the most limited institutional capacity.
