Opening Up Opportunities for Village Community Participation in Carbon Trading

By: Suryani Amin, she holds an M.Si in Sociology and is currently pursuing her Ph.D. in Health and Social Science International Program at Mahidol University in Thailand, and Ari Mochamad, Program Director of Climate Change and Circular Economy, Save the Children, Indonesia.

Indonesia continues to demonstrate its commitment to the global fight against climate change. The country enhanced its Nationally Determined Contribution (NDC) in 2021 to fulfill its commitment to reduce greenhouse gas emissions, from 29% in the first and updated NDCs to 31.89% unconditionally, using the country’s own resources. Meanwhile, the emissions reduction target, done conditionally with international support, rises from the previous 41% to the enhanced figure of 43.20%.

These revised targets pave the way for more ambitious climate change mitigation goals. Indonesia's updated NDC reflects the country's commitment to strengthening efforts to mitigate climate change by significantly reducing greenhouse gas emissions, particularly in the forestry and land use   sector as a priority. One of the approaches through which Indonesia intends to achieve these goals is through carbon trading. The government is actively preparing regulatory instruments, such as the recently issued Minister of Environment and Forestry (MoEF) Regulation Number 7 of 2023 concerning Carbon Trading Procedures in the Forestry Sector. This ministry regulation provides detailed guidelines and operational procedures for implementing carbon trading in the forestry sector, following the issuance of Presidential Decree Number 98 of 2021 regarding the Organization of Carbon Economic Value for the Achievement of Nationally Determined Contribution Targets and Greenhouse Gas Emission Control in National Development and MoEF Regulation Number 21 of 2022 on Procedure for Implementing Carbon Economy Value. The Presidential Decree and the MoEF regulation plays an instrumental role in Indonesia's climate strategy, emphasizing the economic potential of carbon trading in environmental conservation. This decree provides strategic direction for carbon trading efforts. Both regulations aim to effectively harness the economic value of carbon while aligning with Indonesia's national and international climate goals.

Participation of village communities in carbon trading

MoEF Regulation Number 7 of 2023 offers Indonesian village communities a new   opportunity to  participate in carbon trading from forest management particularly those hold social forest management rights as required by the  regulation,  including  community forest,  village forest and customary forest  . By conserving natural resources, engaging in afforestation, or reforestation peatland, and mangrove restoration, and adhering to international standards, these communities can create economic opportunities while making significant contributions to ecosystem conservation.  According to Statistics Indonesia (BPS), there are 81,616 villages in Indonesia. The MoEF reports that 25,863 villages, or 31.68%, are surrounded by forests, but 36.7% of these villages are classified as impoverished. The revenue generated from the trading could be used to best support the community, improve the quality of their lives, and adapt to changes in the climate.

Indonesia recognizes that its large and diverse ecosystem is important in achieving these goals. The MoEF reports that Indonesia's total forest cover area was 125.76 million hectares in 2022. Indonesia also ranks among the top countries in terms of mangrove forest cover, accounting for 20-25% of the global mangrove ecosystem. The area of mangrove forests is 3.36 million hectares.

The issuance of this legislation reflects Indonesia’s commitment to environmental preservation and emission reduction while also providing new options for Indonesian village communities. The communities can now participate in carbon trading, which involves purchasing and selling carbon credits corresponding to a specific quantity of greenhouse gas reduction.

Opportunities for Village Communities

Through a variety of techniques, Indonesian village communities could play an important role in carbon trading. Conservation and reforestation activities, such as protecting local forests from deforestation and land degradation, as well as actively participating in replanting to promote carbon sequestration, are critical. Coastal community can focus on effective mangrove restoration to capture carbon and generate revenue through carbon trading. To effectively engage in this process, a reliable data collection and monitoring system are required to quantify and track carbon sequestration, thus enhancing the value of carbon credits obtained by communities. Consequently, it is crucial to seek certification from accredited organizations to ensure their credibility and compliance with global standards. These opportunities exist, but gaps must be filled to assist villages.

The ministry regulation sets requirements that allow only those who hold the right for social forestry management in the silver category to be involved in carbon trading. According to KLHK (2022), the realization of social forestry has reached 5,087,754 ha out of the target of 12,700,000 ha. In the silver category, the achievement has been significant. However, there is a suggestion for reforming the regulation to enable those in the blue category to also participate in carbon trading, opening more opportunities. This way, they can advance to the silver category through carbon trading.

The Way Forward for Village Communities

Several crucial elements are required to ensure that community involvement in carbon trading is successful. First, the necessity to enhance community education and awareness regarding the potential advantages, prerequisites, and significance of carbon trading. This objective can be accomplished through educational and engagement process aimed at establishing a solid foundation for effective participation. Moreover, investments in training and capacity-building programs are indispensable to equip community members with the knowledge and expertise necessary for the sustainable management of forests and accurate monitoring of carbon levels. Adhering to local and national laws is ultimate to guarantee the legitimacy of carbon trading activities within communities. To  access carbon markets, communities can explore opportunities through intermediaries who facilitate connections with potential purchasers of carbon offsets, including governmental bodies, non-governmental organizations, and financial institutions.

As this represents a novel opportunity, the village community must initially acquaint itself with the system, processes, and associated costs. Preparing for this journey will require a significant investment of time. Consequently, it is imperative to engage trustworthy experts to provide essential guidance and support. 

In addition, there is a need to establish an internal mechanism, at social forest management right holder in the village   This will enables greater community involvement and a better understanding of the unique challenges and opportunities that each forests presents. The arrangements tailored to the specific needs of each community will ensure that benefits are distributed more equitably and in accordance with local needs and goals. It is also essential to have clear dispute-resolution systems in place. Maintaining community harmony in carbon trading involves developing pre-agreed approach for resolving disagreements, mediating conflicts, and reaching equitable solutions.

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