GreenLedger Team
February 15, 2026
The Indonesia made a landmark move in climate governance with the issuance of Federal Decree-Law No. 11 of 2024 on Climate Change, establishing the first comprehensive legal framework for greenhouse gas regulation in the country. This legislation represents a fundamental shift from voluntary commitments to mandatory compliance, and businesses operating in Indonesia must understand its implications to avoid penalties and maintain their competitive standing.
The law introduces several critical requirements for businesses. First, it mandates greenhouse gas emissions reporting for companies exceeding specified thresholds, which vary by sector. Industrial facilities, oil and gas operations, and large commercial enterprises are among the first wave of entities required to submit annual emissions inventories to the Ministry of Environment and Forestry (KLHK) and Environment. The law also establishes a national carbon budget framework, allocating emissions allowances across sectors in alignment with the Indonesia Net Zero 2060 Strategic Initiative. Companies that exceed their allocated budget will face financial penalties and may be required to purchase carbon offsets from approved registries.
The compliance timeline is structured in phases. Phase one, which began in early 2025, requires large emitters defined as those producing more than 25,000 tonnes of CO2 equivalent annually to register with the national emissions registry and begin baseline reporting. Phase two extends reporting requirements to medium-sized enterprises and introduces third-party verification mandates. By 2027, all registered entities must have their emissions data independently verified by accredited auditors. Companies should begin preparing now by establishing internal carbon accounting systems, training staff on GHG Protocol methodologies, and engaging with certified verification bodies.
The law has differentiated impacts across sectors. The oil and gas sector faces the most stringent requirements, including mandatory methane leak detection and repair programs, flaring reduction targets, and upstream emissions intensity benchmarks. The construction and real estate sector must comply with new building energy performance standards and embodied carbon reporting for new developments. Manufacturing companies are subject to best available technology requirements for emissions-intensive processes. The transportation sector will see phased fuel efficiency standards and mandatory fleet emissions reporting for logistics companies operating more than 50 vehicles.
Enforcement mechanisms under the law are substantial. Non-compliance with reporting deadlines carries fines ranging from USD 100,000 to USD 1,000,000 depending on the severity and duration of the violation. Falsification of emissions data is treated as a criminal offense with potential imprisonment. The Ministry has the authority to suspend operating licenses for persistent non-compliance. However, the law also provides incentives including tax benefits for early adopters of clean technology, preferential access to government contracts for companies demonstrating emissions reductions, and streamlined permitting for renewable energy projects.
Businesses should take immediate steps to ensure compliance. Conducting a comprehensive emissions inventory across Scope 1, 2, and 3 categories is the essential first step. Investing in automated carbon accounting software can significantly reduce the administrative burden and improve data accuracy. Engaging with legal counsel familiar with the new regulatory framework is advisable, particularly for companies operating across multiple emirates where local regulations may impose additional requirements. The law represents both a compliance challenge and a strategic opportunity, as companies that move quickly to reduce emissions will benefit from lower compliance costs and enhanced reputation in an increasingly climate-conscious market.
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