Minister of Forestry Regulation Number 7 of 2026 Simplifies Licensing and Deregulates Carbon Trading in Conservation Areas

Introduction

On 20 April 2026, the Ministry of Forestry issued Minister of Forestry Regulation Number 7 of 2026 on Amendments to Minister of Forestry Regulation Number 27 of 2025 on the Utilization of Environmental Services in Nature Reserve Areas, Nature Conservation Areas, and Game Hunting Parks (“MoFor Regulation 7/2026”), which took effect on 21 April 2026. This regulation aims to promote carbon environmental service utilization activities while simplifying bureaucratic procedures in Nature Conservation Areas (“KPA”) and Game Hunting Parks (“TB”) based on the principles of sustainable and environmentally sound development.

Previously, challenges arose in accommodating the pace of carbon trading due to restrictive administrative provisions. Through MoFor Regulation 7/2026, the Government seeks to address these constraints by refining licensing requirements and clarifying the rights and prohibitions applicable to businesses.

 

Comparison

MoFor Regulation 7/2026 amends several provisions in Minister of Forestry Regulation Number 27 of 2025 on the Utilization of Environmental Services in Nature Reserve Areas, Nature Conservation Areas, and Game Hunting Parks (“MoFor Regulation 27/2025”). The table below presents a detailed comparison of these amendments:

 

Key Provisions

Amendment to Definitions

MoFor Regulation 7/2026 amends Article 1 of MoFor Regulation 27/2025 by removing two definitions, namely item 94 (ESG Certification) and item 97 (Carbon Unit Registry System/SRUK). In addition, MoFor Regulation 7/2026 introduces two new definitions after item 98, namely items 98a and 98b. Item 98a defines the Carbon PB-PJL Fee as a levy imposed on Business Licensing granted for commercial activities in Carbon Environmental Services within National Parks (TN), Grand Forest Parks (Tahura), and Nature Tourism Parks (TWA) to business entities. Item 98b defines the Carbon PB-PJL Charge as a levy imposed on each transaction of Carbon Trading conducted by Carbon PB-PJL holders within their business activity areas.

Regulation of Foreign Business Entities

MoFor Regulation 7/2026 introduces a new paragraph (5) in Article 493. Article 493 previously stipulated that Carbon Environmental Services Business Licensing (“PB-PJL Carbon”) may be granted to seven categories of businesses, including foreign business entities (paragraph (4) letter g). With the addition of paragraph (5), MoFor Regulation 7/2026 affirms that foreign business entities conducting Carbon Environmental Services activities must comply with all applicable laws and regulations in Indonesia.

Simplification of Carbon Trading Requirements

MoFor Regulation 7/2026 amends Article 510 by removing several provisions that previously imposed burdens on businesses, namely:

1. The prohibition on trading carbon stock (previously letter b); 
2. The prohibition on the transfer of ownership of carbon credits (previously letter i); and 
3. The obligation to demonstrate ESG Certification (previously paragraph (2)) and to employ certified personnel in natural resource and ecosystem conservation, NEK, and carbon trading (paragraph (3)). 

Following these amendments, the remaining applicable carbon trading requirements include:

1. Alignment with the forestry sector Carbon Trading roadmap; 
2. Fulfillment of feasibility aspects (additionality, permanency, leakage); 
3. Compliance with annual activity plan obligations; 
4. Mechanisms for GHG Emission Offsetting; 
5. Assessment of biodiversity and social impacts; 
6. Implementation of social and cultural safeguards, including the principle of free, prior, and informed consent; 
7. Development of safeguard mechanisms; 
8. Benefit-sharing mechanisms between PB-PJL Carbon holders, conservation units (UPT/UPTD), and local communities; 
9. Competence in implementing ESG principles; and 
10. Qualifications for the implementation of NEK instruments. 

Simplification of Prohibitions on Carbon Trading through GHG Emission Offsetting

MoFor Regulation 7/2026 amends Article 511 by simplifying prohibitions on carbon trading through GHG Emission Offsetting into only four conditions, under which such trading cannot be conducted by Business License holders in the execution of:

1. Fulfillment of obligations; 
2. Watershed (DAS) rehabilitation; 
3. Corporate Social Responsibility (CSR); and/or 
4. Cooperation agreements for strengthening functions and unavoidable strategic development in KSA, KPA, and TB. 

Three previously existing prohibitions have been removed, namely those relating to performance-based payment periods, the existence of cooperation agreements concerning performance-based GHG emission reduction payments, and activities aimed at obtaining corporate performance rating programs (PROPER)/certification.

Removal of Ministerial Approval Requirement in Carbon Trading

MoFor Regulation 7/2026 amends Article 512 on the mechanism of Carbon Trading by removing the provision that previously required PB-PJL Carbon holders to obtain prior approval or recommendation from the Minister before conducting Carbon Trading, whether domestically or internationally. Under MoFor Regulation 7/2026, Article 512 stipulates that Carbon Trading shall be conducted in accordance with prevailing laws and regulations without requiring prior ministerial approval or recommendation.

Removal of the Prohibition on Transfer of Carbon Credits

MoFor Regulation 7/2026 amends Article 515 on prohibitions applicable to PB-PJL Carbon holders by removing letter g, which previously prohibited the transfer of ownership of carbon credits to other parties. This removal is directly correlated with the elimination of similar requirements in Article 510. Meanwhile, six other prohibitions remain in force, namely:

1. Treating the business area and its resources as ownership or control rights; 
2. Transferring PB-PJL Carbon to other parties; 
3. Using PB-PJL Carbon as collateral or security; 
4. Constructing facilities and infrastructure outside the designated business area; 
5. Conducting Climate Change Mitigation Actions that are inconsistent with the Carbon PJL Plan (RP-PJL Carbon); and 
6. Trading pre-existing carbon stock that does not result from the permit holder’s Climate Change Mitigation Actions. 

It should be noted that although the prohibition on transferring carbon credit ownership (former letter g) has been removed from Article 515, the prohibition on trading carbon stock not derived from Climate Change Mitigation Actions (letter f) remains in effect. This means that permit holders may only trade carbon credits directly generated from their own activities under their PB-PJL Carbon license.

 

Closing

MoFor Regulation 7/2026 simplifies licensing and deregulates carbon trading in conservation areas to encourage the utilization of carbon environmental services. The regulation reduces bureaucratic barriers by removing ESG certification requirements, eliminating the need for ministerial approval in Carbon Trading, and lifting the prohibition on transferring carbon credit ownership. Furthermore, MoFor Regulation 7/2026 streamlines the prohibitions on GHG emission offsetting into four conditions while maintaining environmental integrity and legal certainty.