ABSTRACT
This paper analyzes Indonesia’s climate mitigation strategy with a focus on private sector innovation in promoting a circular economy in the palm oil industry. Facing major emissions from energy, land use, and waste, Indonesia has adopted key national policies, including its NDC, carbon pricing regulations, and carbon market mechanisms, to meet its Net-Zero Emissions target by 2060, strengthened by research and innovation initiatives. A case study of PT Dharma Satya Nusantara Tbk (DSN Group) illustrates how palm oil mill effluent (POME) is converted into Bio-Compressed Natural Gas (Bio-CNG), reducing both diesel use and methane emissions. The initiative showcases the environmental and economic potential of utilizing industrial waste. This study highlights the need for stronger collaboration across sectors to scale up similar low-carbon innovations nationwide.
Keywords: climate change, Net-Zero Emissions, Bio‑CNG, POME, mitigation policy, private sector, renewable energy
INTRODUCTION
Climate change is no longer just an environmental issue—it has become an existential challenge that affects all aspects of human life. This phenomenon is characterized by rising global temperatures, melting polar ice caps, sea-level rise, and an increasing frequency and intensity of natural disasters, such as floods, droughts, and heatwaves. The Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC, 2023) unequivocally states that greenhouse gas emissions from human activities, especially in the energy, industrial, and land-use sectors—are the primary drivers of the current climate crisis. According to Thomas and Mukherji (2025), climate change is expected to lower GDP, increase the number of food-insecure households, increase poverty, and slow growth of agricultural productivity, adversely impacting rural households.
Indonesia, as a tropical archipelagic nation rich in natural resources, is in a highly vulnerable position regarding the impacts of climate change. At the same time, Indonesia also makes a significant contribution to global greenhouse gas emissions, primarily through deforestation, forest fires, and the consumption of fossil fuel–based energy. According to data from the Ministry of Environment and Forestry (MoEF) in 2023, land‑use change and the energy sector remain the country’s most significant sources of greenhouse gas emissions. Specifically, land‑use change—including deforestation and peatland fires—accounts for roughly 48 % of Indonesia’s total emissions, while the energy sector contributes about 35 %.
As part of its commitment to the Paris Agreement, Indonesia has set a target to achieve Net-Zero Emissions (NZE) by 2060—or even sooner. The country has articulated various strategies and policies to support this goal, including its Nationally Determined Contribution (NDC), a comprehensive energy transition roadmap, and Presidential Regulation No. 98 of 2021 on the Implementation of Carbon Economic Value (NEK). Under its Enhanced NDC, Indonesia commits to reducing greenhouse gas emissions by 31.89% unconditionally and up to 43.20% with international support by 2030 relative to business-as-usual scenarios. In fact, active participation from the private sector and civil society is recognized as a critical driver of the transition process and its success (MoEF, 2025; Husain dan Nurfadhilah, 2024).
One noteworthy example of climate mitigation innovation from the private sector is the initiative by PT Dharma Satya Nusantara Tbk (DSN Group) to convert Palm Oil Mill Effluent (POME) into Bio-Compressed Natural Gas (Bio-CNG) (DSNGROUP, 2024). This renewable energy is then used as a substitute for diesel fuel in operational vehicles, particularly trucks transporting palm fruit. This approach not only reduces dependence on fossil fuels but also minimizes methane emissions, which significantly contribute to the greenhouse effect.
This paper aims to provide a brief examination of the dynamics of climate change in Indonesia, the transition strategies toward net-zero emissions, and highlight the importance of multi-sectoral collaboration through an innovative case study from the private sector. Accordingly, this paper is expected to provide a more comprehensive understanding of the challenges and opportunities Indonesia faces in addressing the climate crisis while accelerating the transformation toward a low-carbon future.
GREENHOUSE GAS EMISSIONS IN INDONESIA
Indonesia is one of the countries with a significant level of greenhouse gas (GHG) emissions globally (Annur, 2023). According to the Ministry of Environment and Forestry, Indonesia’s GHG emissions in 2023 reached approximately 1.36 billion tons of CO₂ equivalent, with five main contributing sectors: energy, forestry, waste, agriculture, and industry (KLHK, 2025).
The energy sector—particularly coal and oil-based power generation, along with fuel consumption for transportation, is the primary contributor to carbon dioxide (CO₂) emissions. Industrial development and the growth of motor vehicles further increase the carbon footprint of this sector. On the other hand, the LULUCF sector (Land Use, Land Use Change, and Forestry) contributes emissions in the form of carbon from deforestation, peatland fires, and the conversion of natural forests into agricultural land, especially for palm oil and industrial timber plantations. Emissions from this sector are highly variable and influenced mainly by the intensity of forest fires and the success of land rehabilitation programs (MoEF, 2022).
The waste sector contributes methane (CH₄) and nitrous oxide (N₂O) emissions from domestic and industrial waste, primarily through inadequately managed wastewater disposal systems. Meanwhile, the agriculture sector generates emissions from livestock enteric fermentation, the use of nitrogen-based fertilizers, and the burning of crop residues in fields.
Historically, Indonesia’s greenhouse gas (GHG) emissions have shown an increasing trend since the reform era, in line with economic growth and land expansion. However, in recent years, mitigation efforts such as peatland restoration, a moratorium on new permits in primary forests and peatlands, and the expansion of new and renewable energy (NRE) sources have begun to show an effect in slowing the growth rate of emissions (World Bank Group, 2023). Indonesia’s GHG emissions under the Business-As-Usual (BAU) scenario are projected to reach approximately 2.869 GtCO₂e by 2030 (ENDC Republic of Indonesia, 2022). However, with the implementation of mitigation policies aligned with the Nationally Determined Contribution (NDC), Indonesia targets an emission reduction of 31.89% unconditionally and up to 43.2% with international support compared to the BAU scenario.
On the global emissions map, Indonesia ranks between 8th and 10th among the world’s largest emitters, depending on the year of measurement and the calculation method used (Global Carbon Atlas, 2023). Although its per capita contribution remains lower than that of developed countries, international attention toward developing countries like Indonesia is considerable, given its position as a mega-biodiverse nation and a major producer of strategic global commodities such as palm oil, coal, and nickel (Dunne, 2019).
With an emission structure heavily influenced by natural resources and fossil fuel consumption, Indonesia's mitigation strategy necessitates a multisectoral and multi-stakeholder approach (Muhammad et al., 2021). The utilization of waste as a source of renewable energy—exemplified by the Bio-CNG program from POME implemented by PT DSN—serves as evidence that technological innovation can play a significant role in reducing emissions from sectors that have traditionally been seen as part of the problem.
NATIONAL POLICIES FOR CLIMATE MITIGATION
To fulfill its commitment to the Paris Agreement, the Government of Indonesia has developed a series of national policies aimed at significantly reducing greenhouse gas (GHG) emissions. This commitment is reflected in the Nationally Determined Contribution (NDC) document, which sets an emission reduction target of 31.89% unconditionally and up to 43.2% with international support by 2030, compared to the business-as-usual (BAU) scenario.
One of the concrete steps taken was the issuance of Presidential Regulation No. 98 of 2021 on the Implementation of Carbon Economic Value (NEK), which complements all existing regulations related to emission control (as shown in Table 1). This regulation serves as the primary legal framework for operating the domestic carbon market. It encompasses policy instruments such as emissions trading (cap and trade), project-based carbon offset mechanisms (e.g., REDD+ in the forestry sector), and the development of a national registry system. This strategy aims to position carbon as an economic commodity that can be quantified, traded, and regulated through measurable incentive schemes.
Emissions trading, more commonly known as cap and trade, is a market-based mechanism designed to control and reduce greenhouse gas (GHG) emissions, particularly carbon dioxide (CO₂). This is done by providing economic incentives for businesses to lower their emissions. Companies that are unable to reduce their emissions will face penalties or must purchase excess emission reductions from other companies that can reduce more than the required amount (Mutu Internasional, 2022).
Carbon emissions can be controlled through a carbon tax (Environesia Global Saraya, 2024), which is a government policy that imposes an additional cost on businesses or individuals based on the amount of carbon dioxide (CO₂) they produce. The goal is to provide financial incentives for companies to switch to more environmentally friendly energy sources. For example, a power generation company that uses coal will pay more in taxes compared to one that uses renewable energy.
Table 1. National regulations related to greenhouse gas (GHG) emission mitigation in Indonesia
|
No.
|
Regulation & Year
|
Main Focus / Key Mitigation Measures
|
|
1
|
Presidential Regulation No. 98 of 2021 – Implementation of Carbon Economic Value (NEK)
|
NDC, carbon trading, offset mechanisms, cap and trade, carbon levy
|
|
2
|
MoEF Regulation No. 12 of 2024
|
MRV (Measurement, Reporting, Verification), DRAM, GHG emission reporting, SRN-PPI (National Registry System for Climate Change Control)
|
|
3
|
MoEF Regulation No. 21 of 2022 – Implementation Procedures for Carbon Economic Value
|
Registration of mitigation actions (DRAM), MRV, data management in SRN-PPI
|
|
4
|
OJK Regulation No. 14 of 2023 – Carbon Trading via the Indonesia Carbon Exchange
|
Carbon trading mechanisms, governance of mandatory carbon market
|
|
5
|
MoEF Regulation No. 7 of 2023
|
GHG Emission Statement Letter (SPE-GRK), forest sector carbon offsets, forest carbon trading
|
|
6
|
MoEF Regulation No. P.13 of 2022
|
Strengthening the technical capacity of local governments in forest fire (Karhutla) mitigation
|
|
7
|
Law No. 32 of 2009 – Environmental Protection and Management
|
Pollution control, GHG emission reduction, environmental impact assessments (AMDAL)
|
|
8
|
Law No. 16 of 2016 – Ratification of the Paris Agreement
|
Global GHG commitments, formalization of NDC targets
|
|
9
|
Law No. 17 of 2004 – Ratification of the Kyoto Protocol
|
Clean Development Mechanism (CDM), emission baselines, international offsets
|
|
10
|
Law No. 7 of 2021 – Harmonization of Tax Regulations
|
Carbon tax provisions for businesses exceeding emission caps (carbon levy)
|
Notes: NEK = Carbon Economic Value; NDC = Nationally Determined Contribution; MRV = Measurement, Reporting, and Verification; DRAM = Mitigation Action Plan Document; SRN-PPI = National Registry System for Climate Change Control; SPE-GRK = GHG Emission Statement Letter; CDM = Clean Development Mechanism
The government launched the Indonesia Carbon Exchange (IDX Carbon) in September 2023, managed by the Indonesia Stock Exchange (IDX) under the supervision of the Financial Services Authority (OJK). This market enables the official allocation of emission quotas and carbon trading. The initial focus of the cap-and-trade program is directed toward carbon-intensive sectors, including the cement, fertilizer, steel, and paper industries. Carbon taxation is regulated under Law No. 7 of 2021 (HPP Law) and Government Regulation No. 50 of 2022, which allow for the implementation of a carbon tax starting in April 2022. This tax combines an emissions cap with a tax rate applied when the limit is exceeded (Fitria and Kurniawan, 2025).
As a technical elaboration of Presidential Regulation No. 98/2021, Minister of Environment and Forestry Regulation No. 12 of 2024 establishes the procedures for reporting, verification, and registration of mitigation actions, including the implementation of the SRN-PPI (National Registry System for Climate Change Control), as well as the DRAM (Mitigation Action Plan Document), which serves as the basis for submitting and reporting mitigation projects.
In the forestry sector, mitigation strategies are strengthened through the FOLU (Forest and Other Land Use) Net Sink 2030 program, which aims to make the sector a net carbon sink by 2030. Through this program, the government promotes reduced deforestation, peatland and mangrove restoration, as well as the widespread adoption of sustainable forest management practices. This program is closely aligned with Minister of Environment and Forestry Regulation No. 7 of 2023, which regulates carbon trading mechanisms in the forestry and peatland sectors, including the issuance of Greenhouse Gas Emission Reduction Certificates (SPE-GRK).
Long-term efforts are outlined in the Long-Term Strategy for Low Carbon and Climate Resilience 2050 (LTS-LCCR), which emphasizes energy transition, energy efficiency, gradual coal reduction, and an increased share of renewable energy in the national energy mix. This document serves as the foundation for achieving the Net Zero Emission (NZE) target by 2060 or earlier.
On the area of research and innovation, Indonesia has initiated the application of climate-related technologies, which include: (a) introduction of crop varieties adapted to dry weather and water lodging; (b) application of climate-smart farming practices such as intermittent irrigation, and an appropriate planting calendar. CGIAR (2025) reported that scaling up of these technologies requires broad policy support, such as easy access to seed and technology information.
Mitigation policies also encourage active participation from the private sector and the public. Initiatives to utilize industrial waste as a source of renewable energy—such as PT Dharma Satya Nusantara (DSN)’s effort to convert POME (Palm Oil Mill Effluent) into Bio-CNG—serve as a concrete example of how the business sector can make meaningful contributions to the national climate agenda.
INNOVATION BY PT DHARMA SATYA NUSANTARA TBK (DSN GROUP)
The following account of PT Dharma Satya Nusantara Tbk (DSN Group)’s methane utilization initiative from palm oil mill waste is derived from the company’s 2024 Annual Report. Founded in 1980, the company aspires to become a leading sustainable palm oil producer distinguished by operational excellence and strong environmental stewardship. As of 2024, DSN manages more than 100,000 hectares of oil palm plantations located in Kalimantan and Sumatra islands, and operates multiple palm oil mills (POMs) and integrated processing facilities. Its dedication to sustainability is demonstrated through a range of environmental initiatives, notably the conversion of Palm Oil Mill Effluent (POME) into renewable energy.
One of DSN Group’s most significant breakthroughs is the conversion of POME waste into biogas, which is then purified into Bio-Compressed Natural Gas (Bio-CNG). Through anaerobic digestion, biogas is produced from liquid waste. The raw biogas is then upgraded through a purification process to remove carbon dioxide (CO₂), water vapor, and hydrogen sulfide (H₂S), resulting in high-purity methane (CH₄) that can be compressed into Bio-CNG. According to the company’s internal publication (DSNGROUP, 2024), a single installation unit is capable of producing up to 800–1,000 Nm³ of Bio-CNG per day—enough to replace the diesel fuel consumption of palm fruit transport trucks.
DSN has implemented the use of Bio-CNG as fuel for its fleet of fresh fruit bunch (FFB) transport trucks and as an energy source for the company's internal power generation. As such, Bio-CNG not only reduces dependence on fossil fuels but also creates a circular model within the palm oil production system. Trucks that previously relied on diesel now operate with lower emissions thanks to the use of waste-based renewable energy. This has a direct impact on reducing fuel costs while also extending the lifespan of vehicles due to the cleaner combustion of methane.
The utilization of Bio-CNG has had a significant impact on reducing diesel consumption in plantation operations. DSN estimates savings of hundreds of kiloliters of diesel per year, depending on the scale of implementation. For example, a single Bio-CNG production unit with a capacity of approximately 1,000 Nm³/day can replace up to 800 liters of diesel per day, equivalent to around 290,000 liters per year. Assuming the current industrial diesel price is around IDR 14,000 (US$ 0.84) per liter, the potential financial savings could exceed IDR 4 billion (US$ 238.73 million) per year per installation unit.
In addition, converting POME into Bio-CNG also prevents the release of methane (CH₄)—a greenhouse gas with a Global Warming Potential (GWP) 25 times higher than CO₂—which is typically emitted into the atmosphere through open wastewater lagoons. Each cubic meter of POME can produce approximately 20–28 Nm³ of biogas containing 60–65% methane. By capturing and utilizing this methane, each Bio-CNG unit can prevent the release of up to 4,000 tons of CO₂e per year. This amount is equivalent to offsetting the annual emissions of more than 1,000 motor vehicles.
CONCLUSION
Climate change is a systemic challenge that necessitates an integrated response across sectors and stakeholders. Indonesia, as a country with significant emissions and high biodiversity, bears a primary responsibility in the global mitigation agenda. National policies have been directed toward low-carbon development through various instruments, including the NDC, Presidential Regulation No. 98 of 2021 on Carbon Economic Value, as well as emissions trading systems and carbon taxation. However, achieving the Net-Zero Emissions target will not be possible without the active participation of the private sector.
The case study of PT Dharma Satya Nusantara Tbk demonstrates that industrial waste—specifically POME from palm oil mills—can be converted into renewable energy in the form of Bio-CNG, which can replace diesel while significantly reducing methane emissions. This innovation not only showcases technical and economic effectiveness but also serves as a concrete example of how the private sector can make meaningful contributions to the energy transition and sustainable development.
By expanding the replication of similar initiatives and strengthening supporting policies, the utilization of waste as an energy source can become a key strategy in building an inclusive, decentralized, and low-emission energy system. Strong collaboration between the government, businesses, and communities will be the fundamental foundation for the success of Indonesia’s future climate mitigation agenda.
REFERENCES
Annur, M. N. (2023). Indonesia masuk daftar negara penghasil emisi gas rumah kaca terbesar dunia 2022. Databoks. https://databoks.katadata.co.id/lingkungan/statistik/5924082ebd9dd50/ indonesia-masuk-daftar-negara-penghasil-emisi-gas-rumah-kaca-terbesar-dunia-2022
CGIAR System Organization. 2025. CGIAR Impacts in Agrifood Systems: Evidence and Learnings from 2022–2024. Montpellier, France: CGIAR System Organization. https://hdl.handle.net/10568/175083
Dunne, D. (2019). Profil Carbon Brief: Indonesia. Carbon Brief. https://www.carbonbrief.org/profil-carbon-brief-indonesia/
ENDC Republic of Indonesia. (2022). Enhanced Nationally Determined Contribution (ENDC) – Indonesia. UNFCCC. https://unfccc.int/sites/default/files/NDC/2022-09/ENDC%20Indonesia.pdf
Environesia Global Saraya. (2024). Perbedaan carbon tax dan carbon trading. https://environesia.co.id/blog/Perbedaan-Carbon-Tax-dan-Carbon-Trading
Fitria, & Kurniawan, H. (2025). Pajak karbon di Indonesia: Tarif carbon tax untuk perusahaan. Klikpajak. https://klikpajak.id/blog/pajak-karbon-dan-tarif-pajak-karbon-indonesia/
Global Carbon Atlas. (2023). Fossil CO₂ and GHG emissions by country: 2023 ranking. https://carbon-atlas-emissions.wedodata.dev/568f660c-cb91-4252-8c94-d5597dfc6b12
Husain, M. F. & Nurfadhilah, N. L. (2024). Kebijakan dan program/kegiatan sektor energi di daerah dalam rangka mendukung pencapaian Net Zero Emission. Universitas Indonesia Publishing. https://ccsf.ui.ac.id/wp-content/uploads/158/2025/01/B5-Update_Buku-Panduan-I-CCSF-UI-compressed.pdf
Intergovernmental Panel on Climate Change (IPCC). (2023). Sixth Assessment Report: Synthesis report. https://www.ipcc.ch/assessment-report/ar6/
Ministry of Environment and Forestry (MoEF). (2025). Memperkuat sistem pengamanan tata kelola nilai ekonomi karbon, jaga kedaulatan negara. https://www.kemenlh.go.id/news/detail/ memperkuat-sistem-pengamanan-tata-kelola-nilai-ekonomi-karbon-jaga-kedaulatan-negara
Ministry of Environment and Forestry (MoEF). (2025). Emisi dari sektor energi, IPPU, pertanian, kehutanan, dan limbah. https://signsmart.menlhk.go.id/v2.1/app/chart/emisi_m
Ministry of Environment and Forestry (MoEF). (2022). The state of Indonesia’s forest 2022 towards FOLU Net Sink 2030. Https://phl.menlhk.go.id/static/file/publikasi/1664941652-Digital_SoIFO%202022_9.25.22.pdf? utm_source= chatgpt.com
Muhammad, A., Rizky, L., Sahide, A., Candra, I. A., & Prasetya, S. I. (2021). Multilevel governance and Indonesia’s strategy for climate change mitigation and adaptation. Jurnal Hubungan Internasional, 13(2), 115–132. https://doi.org/10.18196/jhi.v13i2.20999
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PT Dharma Satya Nusantara Tbk (DSNGROUP). (2024). Exploring innovation, leveraging sustainability: Annual report 2024. https://dsn.co.id/wp-content/uploads/2025/04/AR-DSNG-2024-Final.pdf
Thomas, T and A. Mukherji. 2025. What Do We Know About the Future of Food System Transformation in Relation to Climate Change? In Wiebe, K., and E. Gotor, eds. 2025. What Do We Know About the Future of Food Systems? Washington, DC: International Food Policy Research Institute.
World Bank Group. (2023). Indonesia country climate and development report: Executive summary – East Asia and Pacific. https://documents1.worldbank.org/curated/en/ 099063023033517696/ pdf/
National Strategy for Climate Mitigation: Private Sector Circular Use of Palm Oil Mill Waste
ABSTRACT
This paper analyzes Indonesia’s climate mitigation strategy with a focus on private sector innovation in promoting a circular economy in the palm oil industry. Facing major emissions from energy, land use, and waste, Indonesia has adopted key national policies, including its NDC, carbon pricing regulations, and carbon market mechanisms, to meet its Net-Zero Emissions target by 2060, strengthened by research and innovation initiatives. A case study of PT Dharma Satya Nusantara Tbk (DSN Group) illustrates how palm oil mill effluent (POME) is converted into Bio-Compressed Natural Gas (Bio-CNG), reducing both diesel use and methane emissions. The initiative showcases the environmental and economic potential of utilizing industrial waste. This study highlights the need for stronger collaboration across sectors to scale up similar low-carbon innovations nationwide.
Keywords: climate change, Net-Zero Emissions, Bio‑CNG, POME, mitigation policy, private sector, renewable energy
INTRODUCTION
Climate change is no longer just an environmental issue—it has become an existential challenge that affects all aspects of human life. This phenomenon is characterized by rising global temperatures, melting polar ice caps, sea-level rise, and an increasing frequency and intensity of natural disasters, such as floods, droughts, and heatwaves. The Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC, 2023) unequivocally states that greenhouse gas emissions from human activities, especially in the energy, industrial, and land-use sectors—are the primary drivers of the current climate crisis. According to Thomas and Mukherji (2025), climate change is expected to lower GDP, increase the number of food-insecure households, increase poverty, and slow growth of agricultural productivity, adversely impacting rural households.
Indonesia, as a tropical archipelagic nation rich in natural resources, is in a highly vulnerable position regarding the impacts of climate change. At the same time, Indonesia also makes a significant contribution to global greenhouse gas emissions, primarily through deforestation, forest fires, and the consumption of fossil fuel–based energy. According to data from the Ministry of Environment and Forestry (MoEF) in 2023, land‑use change and the energy sector remain the country’s most significant sources of greenhouse gas emissions. Specifically, land‑use change—including deforestation and peatland fires—accounts for roughly 48 % of Indonesia’s total emissions, while the energy sector contributes about 35 %.
As part of its commitment to the Paris Agreement, Indonesia has set a target to achieve Net-Zero Emissions (NZE) by 2060—or even sooner. The country has articulated various strategies and policies to support this goal, including its Nationally Determined Contribution (NDC), a comprehensive energy transition roadmap, and Presidential Regulation No. 98 of 2021 on the Implementation of Carbon Economic Value (NEK). Under its Enhanced NDC, Indonesia commits to reducing greenhouse gas emissions by 31.89% unconditionally and up to 43.20% with international support by 2030 relative to business-as-usual scenarios. In fact, active participation from the private sector and civil society is recognized as a critical driver of the transition process and its success (MoEF, 2025; Husain dan Nurfadhilah, 2024).
One noteworthy example of climate mitigation innovation from the private sector is the initiative by PT Dharma Satya Nusantara Tbk (DSN Group) to convert Palm Oil Mill Effluent (POME) into Bio-Compressed Natural Gas (Bio-CNG) (DSNGROUP, 2024). This renewable energy is then used as a substitute for diesel fuel in operational vehicles, particularly trucks transporting palm fruit. This approach not only reduces dependence on fossil fuels but also minimizes methane emissions, which significantly contribute to the greenhouse effect.
This paper aims to provide a brief examination of the dynamics of climate change in Indonesia, the transition strategies toward net-zero emissions, and highlight the importance of multi-sectoral collaboration through an innovative case study from the private sector. Accordingly, this paper is expected to provide a more comprehensive understanding of the challenges and opportunities Indonesia faces in addressing the climate crisis while accelerating the transformation toward a low-carbon future.
GREENHOUSE GAS EMISSIONS IN INDONESIA
Indonesia is one of the countries with a significant level of greenhouse gas (GHG) emissions globally (Annur, 2023). According to the Ministry of Environment and Forestry, Indonesia’s GHG emissions in 2023 reached approximately 1.36 billion tons of CO₂ equivalent, with five main contributing sectors: energy, forestry, waste, agriculture, and industry (KLHK, 2025).
The energy sector—particularly coal and oil-based power generation, along with fuel consumption for transportation, is the primary contributor to carbon dioxide (CO₂) emissions. Industrial development and the growth of motor vehicles further increase the carbon footprint of this sector. On the other hand, the LULUCF sector (Land Use, Land Use Change, and Forestry) contributes emissions in the form of carbon from deforestation, peatland fires, and the conversion of natural forests into agricultural land, especially for palm oil and industrial timber plantations. Emissions from this sector are highly variable and influenced mainly by the intensity of forest fires and the success of land rehabilitation programs (MoEF, 2022).
The waste sector contributes methane (CH₄) and nitrous oxide (N₂O) emissions from domestic and industrial waste, primarily through inadequately managed wastewater disposal systems. Meanwhile, the agriculture sector generates emissions from livestock enteric fermentation, the use of nitrogen-based fertilizers, and the burning of crop residues in fields.
Historically, Indonesia’s greenhouse gas (GHG) emissions have shown an increasing trend since the reform era, in line with economic growth and land expansion. However, in recent years, mitigation efforts such as peatland restoration, a moratorium on new permits in primary forests and peatlands, and the expansion of new and renewable energy (NRE) sources have begun to show an effect in slowing the growth rate of emissions (World Bank Group, 2023). Indonesia’s GHG emissions under the Business-As-Usual (BAU) scenario are projected to reach approximately 2.869 GtCO₂e by 2030 (ENDC Republic of Indonesia, 2022). However, with the implementation of mitigation policies aligned with the Nationally Determined Contribution (NDC), Indonesia targets an emission reduction of 31.89% unconditionally and up to 43.2% with international support compared to the BAU scenario.
On the global emissions map, Indonesia ranks between 8th and 10th among the world’s largest emitters, depending on the year of measurement and the calculation method used (Global Carbon Atlas, 2023). Although its per capita contribution remains lower than that of developed countries, international attention toward developing countries like Indonesia is considerable, given its position as a mega-biodiverse nation and a major producer of strategic global commodities such as palm oil, coal, and nickel (Dunne, 2019).
With an emission structure heavily influenced by natural resources and fossil fuel consumption, Indonesia's mitigation strategy necessitates a multisectoral and multi-stakeholder approach (Muhammad et al., 2021). The utilization of waste as a source of renewable energy—exemplified by the Bio-CNG program from POME implemented by PT DSN—serves as evidence that technological innovation can play a significant role in reducing emissions from sectors that have traditionally been seen as part of the problem.
NATIONAL POLICIES FOR CLIMATE MITIGATION
To fulfill its commitment to the Paris Agreement, the Government of Indonesia has developed a series of national policies aimed at significantly reducing greenhouse gas (GHG) emissions. This commitment is reflected in the Nationally Determined Contribution (NDC) document, which sets an emission reduction target of 31.89% unconditionally and up to 43.2% with international support by 2030, compared to the business-as-usual (BAU) scenario.
One of the concrete steps taken was the issuance of Presidential Regulation No. 98 of 2021 on the Implementation of Carbon Economic Value (NEK), which complements all existing regulations related to emission control (as shown in Table 1). This regulation serves as the primary legal framework for operating the domestic carbon market. It encompasses policy instruments such as emissions trading (cap and trade), project-based carbon offset mechanisms (e.g., REDD+ in the forestry sector), and the development of a national registry system. This strategy aims to position carbon as an economic commodity that can be quantified, traded, and regulated through measurable incentive schemes.
Emissions trading, more commonly known as cap and trade, is a market-based mechanism designed to control and reduce greenhouse gas (GHG) emissions, particularly carbon dioxide (CO₂). This is done by providing economic incentives for businesses to lower their emissions. Companies that are unable to reduce their emissions will face penalties or must purchase excess emission reductions from other companies that can reduce more than the required amount (Mutu Internasional, 2022).
Carbon emissions can be controlled through a carbon tax (Environesia Global Saraya, 2024), which is a government policy that imposes an additional cost on businesses or individuals based on the amount of carbon dioxide (CO₂) they produce. The goal is to provide financial incentives for companies to switch to more environmentally friendly energy sources. For example, a power generation company that uses coal will pay more in taxes compared to one that uses renewable energy.
Table 1. National regulations related to greenhouse gas (GHG) emission mitigation in Indonesia
No.
Regulation & Year
Main Focus / Key Mitigation Measures
1
Presidential Regulation No. 98 of 2021 – Implementation of Carbon Economic Value (NEK)
NDC, carbon trading, offset mechanisms, cap and trade, carbon levy
2
MoEF Regulation No. 12 of 2024
MRV (Measurement, Reporting, Verification), DRAM, GHG emission reporting, SRN-PPI (National Registry System for Climate Change Control)
3
MoEF Regulation No. 21 of 2022 – Implementation Procedures for Carbon Economic Value
Registration of mitigation actions (DRAM), MRV, data management in SRN-PPI
4
OJK Regulation No. 14 of 2023 – Carbon Trading via the Indonesia Carbon Exchange
Carbon trading mechanisms, governance of mandatory carbon market
5
MoEF Regulation No. 7 of 2023
GHG Emission Statement Letter (SPE-GRK), forest sector carbon offsets, forest carbon trading
6
MoEF Regulation No. P.13 of 2022
Strengthening the technical capacity of local governments in forest fire (Karhutla) mitigation
7
Law No. 32 of 2009 – Environmental Protection and Management
Pollution control, GHG emission reduction, environmental impact assessments (AMDAL)
8
Law No. 16 of 2016 – Ratification of the Paris Agreement
Global GHG commitments, formalization of NDC targets
9
Law No. 17 of 2004 – Ratification of the Kyoto Protocol
Clean Development Mechanism (CDM), emission baselines, international offsets
10
Law No. 7 of 2021 – Harmonization of Tax Regulations
Carbon tax provisions for businesses exceeding emission caps (carbon levy)
Notes: NEK = Carbon Economic Value; NDC = Nationally Determined Contribution; MRV = Measurement, Reporting, and Verification; DRAM = Mitigation Action Plan Document; SRN-PPI = National Registry System for Climate Change Control; SPE-GRK = GHG Emission Statement Letter; CDM = Clean Development Mechanism
The government launched the Indonesia Carbon Exchange (IDX Carbon) in September 2023, managed by the Indonesia Stock Exchange (IDX) under the supervision of the Financial Services Authority (OJK). This market enables the official allocation of emission quotas and carbon trading. The initial focus of the cap-and-trade program is directed toward carbon-intensive sectors, including the cement, fertilizer, steel, and paper industries. Carbon taxation is regulated under Law No. 7 of 2021 (HPP Law) and Government Regulation No. 50 of 2022, which allow for the implementation of a carbon tax starting in April 2022. This tax combines an emissions cap with a tax rate applied when the limit is exceeded (Fitria and Kurniawan, 2025).
As a technical elaboration of Presidential Regulation No. 98/2021, Minister of Environment and Forestry Regulation No. 12 of 2024 establishes the procedures for reporting, verification, and registration of mitigation actions, including the implementation of the SRN-PPI (National Registry System for Climate Change Control), as well as the DRAM (Mitigation Action Plan Document), which serves as the basis for submitting and reporting mitigation projects.
In the forestry sector, mitigation strategies are strengthened through the FOLU (Forest and Other Land Use) Net Sink 2030 program, which aims to make the sector a net carbon sink by 2030. Through this program, the government promotes reduced deforestation, peatland and mangrove restoration, as well as the widespread adoption of sustainable forest management practices. This program is closely aligned with Minister of Environment and Forestry Regulation No. 7 of 2023, which regulates carbon trading mechanisms in the forestry and peatland sectors, including the issuance of Greenhouse Gas Emission Reduction Certificates (SPE-GRK).
Long-term efforts are outlined in the Long-Term Strategy for Low Carbon and Climate Resilience 2050 (LTS-LCCR), which emphasizes energy transition, energy efficiency, gradual coal reduction, and an increased share of renewable energy in the national energy mix. This document serves as the foundation for achieving the Net Zero Emission (NZE) target by 2060 or earlier.
On the area of research and innovation, Indonesia has initiated the application of climate-related technologies, which include: (a) introduction of crop varieties adapted to dry weather and water lodging; (b) application of climate-smart farming practices such as intermittent irrigation, and an appropriate planting calendar. CGIAR (2025) reported that scaling up of these technologies requires broad policy support, such as easy access to seed and technology information.
Mitigation policies also encourage active participation from the private sector and the public. Initiatives to utilize industrial waste as a source of renewable energy—such as PT Dharma Satya Nusantara (DSN)’s effort to convert POME (Palm Oil Mill Effluent) into Bio-CNG—serve as a concrete example of how the business sector can make meaningful contributions to the national climate agenda.
INNOVATION BY PT DHARMA SATYA NUSANTARA TBK (DSN GROUP)
The following account of PT Dharma Satya Nusantara Tbk (DSN Group)’s methane utilization initiative from palm oil mill waste is derived from the company’s 2024 Annual Report. Founded in 1980, the company aspires to become a leading sustainable palm oil producer distinguished by operational excellence and strong environmental stewardship. As of 2024, DSN manages more than 100,000 hectares of oil palm plantations located in Kalimantan and Sumatra islands, and operates multiple palm oil mills (POMs) and integrated processing facilities. Its dedication to sustainability is demonstrated through a range of environmental initiatives, notably the conversion of Palm Oil Mill Effluent (POME) into renewable energy.
One of DSN Group’s most significant breakthroughs is the conversion of POME waste into biogas, which is then purified into Bio-Compressed Natural Gas (Bio-CNG). Through anaerobic digestion, biogas is produced from liquid waste. The raw biogas is then upgraded through a purification process to remove carbon dioxide (CO₂), water vapor, and hydrogen sulfide (H₂S), resulting in high-purity methane (CH₄) that can be compressed into Bio-CNG. According to the company’s internal publication (DSNGROUP, 2024), a single installation unit is capable of producing up to 800–1,000 Nm³ of Bio-CNG per day—enough to replace the diesel fuel consumption of palm fruit transport trucks.
DSN has implemented the use of Bio-CNG as fuel for its fleet of fresh fruit bunch (FFB) transport trucks and as an energy source for the company's internal power generation. As such, Bio-CNG not only reduces dependence on fossil fuels but also creates a circular model within the palm oil production system. Trucks that previously relied on diesel now operate with lower emissions thanks to the use of waste-based renewable energy. This has a direct impact on reducing fuel costs while also extending the lifespan of vehicles due to the cleaner combustion of methane.
The utilization of Bio-CNG has had a significant impact on reducing diesel consumption in plantation operations. DSN estimates savings of hundreds of kiloliters of diesel per year, depending on the scale of implementation. For example, a single Bio-CNG production unit with a capacity of approximately 1,000 Nm³/day can replace up to 800 liters of diesel per day, equivalent to around 290,000 liters per year. Assuming the current industrial diesel price is around IDR 14,000 (US$ 0.84) per liter, the potential financial savings could exceed IDR 4 billion (US$ 238.73 million) per year per installation unit.
In addition, converting POME into Bio-CNG also prevents the release of methane (CH₄)—a greenhouse gas with a Global Warming Potential (GWP) 25 times higher than CO₂—which is typically emitted into the atmosphere through open wastewater lagoons. Each cubic meter of POME can produce approximately 20–28 Nm³ of biogas containing 60–65% methane. By capturing and utilizing this methane, each Bio-CNG unit can prevent the release of up to 4,000 tons of CO₂e per year. This amount is equivalent to offsetting the annual emissions of more than 1,000 motor vehicles.
CONCLUSION
Climate change is a systemic challenge that necessitates an integrated response across sectors and stakeholders. Indonesia, as a country with significant emissions and high biodiversity, bears a primary responsibility in the global mitigation agenda. National policies have been directed toward low-carbon development through various instruments, including the NDC, Presidential Regulation No. 98 of 2021 on Carbon Economic Value, as well as emissions trading systems and carbon taxation. However, achieving the Net-Zero Emissions target will not be possible without the active participation of the private sector.
The case study of PT Dharma Satya Nusantara Tbk demonstrates that industrial waste—specifically POME from palm oil mills—can be converted into renewable energy in the form of Bio-CNG, which can replace diesel while significantly reducing methane emissions. This innovation not only showcases technical and economic effectiveness but also serves as a concrete example of how the private sector can make meaningful contributions to the energy transition and sustainable development.
By expanding the replication of similar initiatives and strengthening supporting policies, the utilization of waste as an energy source can become a key strategy in building an inclusive, decentralized, and low-emission energy system. Strong collaboration between the government, businesses, and communities will be the fundamental foundation for the success of Indonesia’s future climate mitigation agenda.
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