Designing Institutions Amid the Carbon Market Euphoria

On 9 July 2026, the government officially launched the Carbon Unit Registry System (SRUK), the new foundation for the national carbon trading ecosystem, replacing the National Climate Change Control Registry System.

Based on blockchain technology and directly connected to the Indonesia Carbon Exchange, SRUK is designed to ensure every carbon unit traded passes strict verification and avoids the risk of double counting.

The government aims for Indonesia to become one of the main players in the global carbon market, with projected values cited in the thousands of trillions of rupiah over the coming years.

As of mid-year, transaction volume on the Indonesia Carbon Exchange had only reached around 1.98 million tonnes of CO2 equivalent worth Rp93.81 billion — a relatively small figure compared with the much-trumpeted potential worth thousands of trillions. The number of exchange users has only reached 155, with the government targeting just around 45 new users by year-end.

This gap between potential on paper and realisation in the field points to one thing: the regulatory infrastructure and systems are relatively mature, but the supply of genuinely trade-ready carbon projects remains the weak point.

Interestingly, a closer look shows the initial supply of carbon units on the exchange is still dominated by projects from the renewable energy and forestry sectors. The marine and fisheries sector, which holds one of the world’s largest blue carbon reserves through mangrove ecosystems, seagrass meadows and coastal peat swamps, has yet to contribute much to that supply — despite considerable potential.

By way of illustration, a study mapping blue carbon potential in mangroves along the north coast of Java identified eight zones with a total potential land area of 106,324 hectares, stretching from Serang to Madura.

Across that area, projected carbon absorption over fifty years is estimated at 43.45 million tonnes of CO2 equivalent, with sufficiently convincing financial viability — even under the most conservative carbon price scenario, the return on investment remains in the double digits, with a payback period of less than eight years. These figures confirm that the north coast of Java has ample capacity to become one of the main suppliers of national blue carbon units going forward.

The same study shows nearly half the land in one priority block still has ‘under identification’ status — it is unclear whether it falls under state land, community land, or areas requiring further legal resolution.

Moreover, benefit-sharing schemes involving developers, communities and government ultimately demand something far more complicated than mere investment calculations: how to design this multi-stakeholder institution so that it genuinely runs effectively and fairly.

At this point, lessons from outside the marine and fisheries sector become relevant. A doctoral dissertation by Didit Eko Prasetiyo, entitled ‘Institutional Model for Marine Economic Development in Labuan Bajo, Indonesia’, defended late last year in the Tropical Marine Economics Doctoral Programme at the Bogor Agricultural Institute’s Graduate School, offers an analytical framework worth examining.

Combining the Institutional Analysis and Development approach with multi-actor prospective analysis, the study maps how various stakeholders — central government, local government, businesses, local communities, academics and media — relate to one another in managing a complex marine economic zone.

Its main finding is fairly illuminating: no single actor is truly dominant in the governance of Labuan Bajo’s marine economy. Most stakeholders, including government and businesses, actually occupy positions of high mutual interdependence.

The factors most decisive for successful development are not capital or technology alone, but community participation, regulatory clarity, infrastructure availability and the quality of human resources.

Of the institutional scenarios tested, the collaborative pentahelix-based strategy — placing government, business, academics, communities and media on an equal footing within one governance framework — proved to be the most robust choice, consistently outperforming schemes that centralise authority in a single party.

This collaborative approach, according to the study, also proved effective in reducing institutional transaction costs, which have often been the hidden obstacle behind the slow realisation of marine economic projects. This logic deserves consideration for blue carbon project development, including on Java’s north coast.

Rather than viewing benefit-sharing schemes merely as financial transactions between developers, communities and government, it would be more appropriate to frame benefit distribution as part of a broader collaborative institutional design that explicitly accommodates the role of academics in providing databases and scientific verification, the role of media in public information transparency, and the role of coastal communities not merely as beneficiaries but as active partners in managing the area.

The current moment is actually quite ideal to start designing such an approach. The spirit of SRUK, which emphasises integrity, transparency and equitable distribution of benefits down to the site level, aligns with the collaborative principles proven effective in the marine economics institutional study.

If the readiness of the national carbon market’s systems and regulations can be combined with an institutionally tested, academically grounded design, the marine and fisheries sector has a real opportunity not merely to watch from the sidelines, but to become one of the main suppliers filling the gap in national carbon unit supply — while ensuring its economic benefits are genuinely felt by the coastal communities that have long stewarded these ecosystems.