[Column] Comparing Indonesia and Malaysia's Forest Carbon Credits – Indonesia driven by rules vs. Malaysia driven by policy

✅ In a nutshell

• 🌳 Indonesia has established ministerial regulations for carbon trading in the forestry sector and for a carbon unit registration system in 2026, stipulating procedures and timelines for international transfers in its articles.
• 🇲🇾 Malaysia announced its National Carbon Market Policy (NCMP) in April 2026, but the National Climate Change Bill, which will provide its legal backing, was reported in October 2026 to be in the preparation stage for submission.
• 🗺️ In Malaysia, forests and land are under the jurisdiction of the states, and Sarawak has established its own regulations for carbon licenses, fees, and connections with equivalent adjustments.
• 🔖 Regarding the relationship with Japan's emissions trading system, a significant difference is that Indonesia is a partner country for the JCM (Joint Crediting Mechanism), whereas Malaysia is not included in the list of partner countries published by the Ministry of the Environment.

Introduction

This time, we will explain the forest carbon credit systems of Indonesia and Malaysia in comparison with those of overseas transfers.
Comparing the Indonesian system with the Japanese system, particularly the bilateral credit system (Joint Crediting Mechanism, JCM), Column on the Borderless Management Law Firm website This is explained below.

Indonesia issued Forestry Minister Regulation No. 6 of 2026 in April 2026, significantly reviewing the procedures for carbon trading in the forestry sector.
Meanwhile, Malaysia will also publish its National Carbon Market Policy in 2026, outlining a framework for participation in international trade under Article 6 of the Paris Agreement.
The systems of the two neighboring countries are both based on Article 6 of the Paris Agreement, but the way they are structured is very different, and the details to check will likely change depending on which country you are involved in.

This paper will read the original Indonesian regulations, Malaysian policy documents, guidelines and Sarawak regulations to clarify the differences between the two countries.
This article organizes the laws and policy documents of both countries from the perspective of Japanese practice, and individual cases require verification by lawyers from each country.

Indonesia has established procedures and durations in its ministerial regulations

Indonesia's system is structured around legislation: presidential decrees and ministerial regulations.
The higher law was promulgated on October 10, 2025 Presidential Decree No. 110 of 2025 Yes.
Regarding the forestry sector, the announcement was made on April 13, 2026 Minister of Forestry Regulations No. 6 of 2026 This outlines the procedures for carbon trading.
Furthermore, it was promulgated on July 6, 2026 Minister of the Environment Regulation No. 10 of 2026 This system establishes the carbon unit registration system (Sistem Registri Unit Karbon, SRUK) and the authorization procedures.

According to the Forestry Minister's Regulations, there are two routes for carbon units: domestic emission reduction certificates (Sertifikat Pengurangan Emisi GRK, SPE GRK) and units issued according to international standards such as Verra (Article 10).
If the project is moved abroad for use in another country's NDC (Nationally Determined Contribution), it will be approved by the Minister of Forestry and then authorized by the Minister of Environment for substantial adjustment (Corresponding Adjustment). The transferred units will be deducted from the calculation of the country's NDC, and accounting adjustments will be recorded to prevent double accounting (Articles 25 to 27 of the Minister of Forestry Regulations, and Articles 17 and 28 of the Minister of Environment Regulations).

A key feature of the Indonesian system is that the duration is stipulated in the text.
The main periods are as follows:

Stage	Basis	period
Validity period of approval by the Minister of Forestry for the route of international standards	Article 24, Paragraph 1 of the Minister of Forestry Regulations	6 months
Recommendation for equivalent adjustments (if making a recommendation)	Article 26, Paragraph 3 of the Regulations of the Minister of Forestry	Within 7 business days of receiving the application
Recommendation for equivalent adjustments (if not recommended)	Article 26, Paragraph 2, Item b of the Regulations of the Minister of Forestry	No specific requirement
Ortholization	Article 17 of the Minister of the Environment Regulations	Within 15 business days of receiving the recommendation

Furthermore, the Minister of Forestry may review the number of units being traded and the need to achieve NDC, and may narrow down the amount to be recommended, or refrain from recommending the unit on the grounds that it is necessary to achieve NDC (Article 26, paragraphs 1 and 2 of the Minister of Forestry Regulations).

Malaysia has outlined its framework in its national carbon market policy

Positioning of national carbon market policies

In Malaysia, the Ministry of Natural Resources and Environmental Sustainability (NRES) National carbon market policy We have made this public.
Report from the state news agency Bernama on October 8, 2026 According to the, the NRES minister said the policy was published in April 2026.

The National Carbon Market Policy lists three ways Malaysia's credits can be used: to achieve NDC, for other international mitigation objectives (Other International Mitigation Purposes, OIMP), and to offset domestic regulations (1.4).
Other examples of international mitigation objectives include the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

The procedures for overseas relocation are handled by NRES

According to the National Carbon Market Policy, the NRES, as the Designated National Authority (DNA) under Article 6 of the Paris Agreement, is responsible for establishing detailed mechanisms for authorization, reporting, and coordination (4.1.1.1).
The procedures for overseas transfers are divided into two channels: the cooperative approach under Article 6, paragraph 2 of the Paris Agreement, and the Paris Agreement Credit Mechanism (PACM) under Article 6, paragraph 4 (2.3, 4.1.1.2).
Annex A7 stipulates that the application, registration, authorization, and equivalent coordination stages shall be carried out by the NRES or an agency designated by the NRES.

On the other hand, review periods like those stipulated in Indonesia's regulations are not included in the national carbon market policy.
The National Carbon Market Policy is a policy document, and the duration and requirements of individual procedures will likely be determined by future legislation or bylaws.

Legally backed climate change bill yet to be passed

The National Carbon Market Policy cites the National Climate Change Act (Climate Change Act) as the legal backing for the carbon market, prioritizing its finalization, submission to Congress, and enactment (5.1).
The National Climate Change Act also outlines a plan to establish subordinate legislation concerning carbon markets (5.1).
In the aforementioned Bernama report from October 8, 2026, the NRES minister described the National Climate Change Bill as an "upcoming (upcoming)" bill, suggesting that it has not yet been passed.

In other words, while Indonesia's procedures for overseas relocation are already underway based on ministerial regulations, Malaysia has outlined its policy framework and is likely to be in the process of developing legislation.

The partner countries cooperating under Article 6 of the Paris Agreement are Singapore and South Korea

At the time of writing, the National Carbon Market Policy lists Singapore and South Korea as the countries with which Malaysia has signed a memorandum of understanding regarding cooperation under Article 6, Paragraph 2 of the Paris Agreement (4.1.1.3).
Japan is not listed.

The National Carbon Market Policy also presents a marginal cost reduction curve (Marginal Abatement Cost Curve) comparing the costs of domestic measures, positioning the more expensive measures, around 17 MtCO2e (around 30%), out of a potential reduction of around 56 MtCO2e in 2030 as suitable for international cooperation (2.4, 4.1.2).
By limiting international cooperation to these costly measures, it is argued that mitigation outcomes transferred abroad will not undermine the achievement of domestic NDCs (4.1.2).
The difference lies in the fact that Indonesia's system narrows the amount of NDCs required at the individual recommendation stage, while Malaysia's approach narrows the scope of international cooperation at the policy stage.

Malaysia's forest credits are heavily under state jurisdiction

National credit system is forest carbon offset

According to the National Carbon Market Policy, Malaysia's government credit scheme is currently limited to forests, with forest carbon offsets (FCOs) being the operational mechanism (2.5).
The FCO is developed by the Malaysian Forest Fund (MFF), an agency under NRES (4.2 P2-AP4).

MFF has announced FCO Guidelines This is the opinion-seeking version with "Version 1.4 – Public Comment" written on the cover.
Here are some points from this edition that will be useful when comparing it with the Indonesian system.

• Applications for registration require the submission of a record of free, prior, and informed consent (Free, Prior and Informed Consent, FPIC) (Section 8.3(d)).
• When using credits for international purposes under Article 6 of the Paris Agreement, it is necessary to adhere to the national framework (National Arrangement) (paragraph 8.4).
• The registration decision is to be made within 60 business days of receiving the application (paragraph 12.1).
• The credit period is set to be 30 years or more (paragraph 13).
• If registration or certification is sought under other criteria during the same period, this will be grounds for cancellation of the registration (Section 18.1(c)).

The last point is considered distinctive in that it explicitly excludes double registration with other standards compared to Indonesia's Forestry Minister Regulations, which set out domestic routes side by side with routes of international standards.
However, since this is the version currently being submitted for feedback, the final content needs to be confirmed.

Forests and land are under the jurisdiction of the state

National carbon market policies assume that states have jurisdiction over forests and land (4.2 P2-AP4).
Therefore, the National Carbon Market Policy stipulates that federal and state coordination will take place in federal-state climate coordination meetings established under the National Decarbonization Commission (Jawatankuasa Dekarbonisasi Kebangsaan, JDK) (5.2).
A major difference is that in Indonesia, carbon trading in the forestry sector is centrally managed by the Minister of Forestry, while in Malaysia, it is necessary to review the state system.

Sarawak has its own rules

As an example of a state system, Sarawak Forest (Forest Carbon Activities) Regulations 2022 It has been established and has been in effect since January 1, 2023 (Article 1).
The main contents are as follows:

• Those engaged in forest carbon activities apply for a carbon license from the Director of the Forest Service, which is issued with the approval of the State Minister (Articles 13 and 14).
• The license is subject to activation in accordance with carbon standards, and the term of the license shall not exceed the period covered by the credit (Article 14, paragraph 3, Article 16, paragraph 1).
• The license is non-transferable (Article 20).
• The amount of credit that can be traded is determined by the Director after deducting any buffers and is stated in the terms of the license (Article 33).
• Regarding internationally traded credits, the Director-General is expected to ensure that the Malaysian government makes substantial adjustments through the state ministry (Article 40, Paragraph 2).

2025 revised regulations Therefore, from March 1, 2025, the forest ecosystem fee on the annual income of traded credits will be 7% for permanent forests and state lands, and 5% for transferred lands and lands of customary rights.
The difference is that in Indonesia, the rate of non-tax revenue is left to other laws, whereas in Sarawak, the rate is clearly stated in the state regulations.

Comparison of the two countries

The contents so far will be summarized by item related to overseas relocation.
It's important to note that the Malaysian section contains a mix of national policy documents and state regulations.

Item	Indonesia	Malaysia
System format	Presidential Decrees and Ministerial Regulations	National carbon market policy. National Climate Change Bill not completed
Forest jurisdiction	Central Minister of Forestry	State (Sarawak has its own rules)
Jurisdiction of the organization	Minister of the Environment (assuming recommendation from the Minister of Forestry)	NRES (Designated National Agency)
Domestic credit system	Emission Reduction Certificate (SPE GRK)	Forest carbon offset (FCO). The guidelines are for the opinion solicitation stage)
International standards for credit	Approval from the Minister of Forestry (valid for 6 months) is required	In FCO, double registration with other criteria is grounds for cancellation
Review period	The article stipulates that recommendations must be made within 7 business days, and authorizations must be made within 15 business days	National carbon market policy has no provisions
Adjusting the amount	The Minister of Forestry can narrow down the amount of recommendations for NDCs as needed	We plan to focus international cooperation on costly measures. Sarawak state director sets tradable quantity
Relations with Japan	JCM's partner countries. Signed a mutual recognition arrangement in 2024	It is not included in the list of JCM partner countries. The countries to which the Memorandum of Understanding under Article 6 is addressed are Singapore and South Korea

Differences for Japanese companies

When Japanese companies purchase forest credits from these countries, their relationship with the Japanese system also becomes important.

Ministry of Economy, Trade and Industry briefing materials for fiscal year 2026 In Japan's emissions trading system, J-Credit and JCM Credit are listed as credits that can be reflected in actual emissions figures.
Indonesia signed the JCM bilateral document on August 26, 2013, and on October 28, 2024, Mutual Recognition Arrangement between JCM and Indonesia's Certification System The signature has also been completed.

On the other hand, Ministry of the Environment's explanation of JCM According to the, Japan has signed the JCM bilateral document with 32 countries, but Malaysia is not included in the list of signatory countries on the same page.
Therefore, it is currently unlikely that Malaysia's forest credits will be used in Japan's emissions trading scheme.
For Japanese companies involved in Malaysian forest credits, this will likely be considered based on the premise of voluntary use, use for other international purposes such as CORSIA, or use under Malaysian domestic systems.

The Malaysian trading venue is operated by a wholly owned subsidiary of Bursa Malaysia Bursa Carbon Exchange There are three ways of dealing with carbon credits and renewable energy certificates: auction, continuing trading and off-market trading.

Things I want to treat under contract

Given the differences in the systems of the two countries, the matters that need to be addressed in the sales contract will also change.

In the Indonesian case, it is believed that the main focus will be on obtaining approval, recommendation, and authorization as prerequisites for delivery, based on the procedures and periods stipulated in the law, price adjustments if the amount of recommendations decreases, and contractual compensation for the deadline if recommendations are not made.

In the Malaysian case, given that the system itself is still in the process of being developed, we believe it is important to address the following points through contracts:

• Responding to changes in laws and regulations. To establish the conditions for burden and release when additional procedures, costs, or quantity restrictions arise in the event that the National Climate Change Act and its subordinate legislation are enacted
• Confirmation of state license. To confirm the acquisition of carbon licenses in Sarawak and other states, their terms, and the structure of transactions based on the premise that the licenses are non-transferable
• Confirmation of duplicate registrations. To have the seller state that they are not registered with both the FCO and international standards
• Identifying the intended use. Identify whether to use it for voluntary use, CORSIA, or NDC in other countries, and if authorization is required, make its acquisition a prerequisite

Summary

Indonesia has established procedures and periods for the transfer of forest carbon credits abroad through presidential decrees and ministerial regulations.
There are gaps, such as the lack of a deadline for non-recommendations, but the text allows us to read who needs to make the decision at each stage.

Malaysia published its National Carbon Market Policy in 2026, outlining a framework for international transfers with NRES as the designated national agency, but has yet to enact a national climate change law to provide legal backing for it.
Forests are also the responsibility of the state, and some states, such as Sarawak, have their own rules governing carbon licenses, tradable quantities, and fees.

For Japanese companies, a significant difference is that Indonesia is a partner country of JCM, while Malaysia is not.
When dealing with cases in both countries, we believe it is necessary to formulate a contract after reviewing not only the national system but also the relationship between the state system and the Japanese system.

This article is a general compilation based on laws, policy documents, and materials published in Indonesia, Malaysia, and Japan as of October 20, 2026. Malaysia's National Climate Change Bill and Forest Carbon Offset Guidelines are still in the works, and the interpretation and implementation of national legislation will need to be reviewed by local lawyers and relevant authorities.