Indonesia Tests Biodiversity Credits Amid Warnings of Market-Driven Conservation Risks

A New Market for Nature

Indonesia is moving forward with biodiversity credits, a financing mechanism designed to channel private capital into conservation and ecosystem restoration. The government has established a technical team and prepared a policy framework for pilot projects, backed by the UK government and the International Advisory Panel on Biodiversity Credits. In January, Indonesia and the United Kingdom announced a strategic partnership with climate, energy and nature as core pillars.

The credits aim to address what policymakers describe as a conservation funding gap. Under the proposed system, biodiversity protection efforts would generate tradable units that companies can purchase, similar to carbon offsets. Indonesia, home to some of the world's most biodiverse ecosystems, is positioned as a key testing ground for what proponents call high-integrity biodiversity credits.

Yet the rollout has drawn sharp scrutiny from conservation practitioners and indigenous advocates who see parallels with carbon markets, where credit schemes have faced persistent criticism over effectiveness, land conflicts and community displacement.

Fundamental Questions Beyond Funding

Cindy Julianty, executive coordinator of Working Group ICCAs Indonesia, argues that the real debate extends beyond finding new revenue streams. The critical issue, she notes, is why Indonesia has chosen to build a market for biodiversity when underlying governance problems remain unresolved.

Indonesia's biodiversity loss stems from deforestation, expansion of extractive industries, conversion of forest and coastal areas, development that exceeds environmental limits, land tenure conflicts and weak law enforcement. Recognition of indigenous peoples' rights remains incomplete.

Existing funding mechanisms have not been fully utilized, according to Julianty. The Access and Benefit Sharing framework under the Nagoya Protocol has seen suboptimal implementation. Subsidies that drive biodiversity destruction have not been reformed. The Polluter Pays Principle, which would require corporations profiting from natural resource exploitation to bear the costs of damage, has seen weak enforcement. Issues surrounding indigenous land rights, tenure conflicts and free, prior and informed consent remain unresolved.

The Commodification Problem

The central concern is not governance alone but the act of assigning economic value to nature. Biodiversity credits require translating ecosystems into metrics that can be priced and traded. This reduction of complexity into numbers raises questions about what is lost in the process.

Julianty points out that indigenous communities across Indonesia do not ask how much a forest costs. Instead, forests are understood as living spaces, rivers as sources of life, seas as intergenerational heritage and mountains as cultural identity. The shift from this worldview to one where nature becomes a financial asset represents what she describes as biocultural violence, a gradual change in perspective that redefines ecosystems as commodities.

The methodologies for measuring biodiversity credits remain contested among scientists. No universal unit exists to capture the full complexity of tropical rainforests, and scoring systems that equate ecosystems in different regions overlook distinct ecological and cultural contexts. A rainforest in Papua cannot be treated as equivalent to one in Sumatra or Kalimantan simply because they score similarly on an index.

Lessons from Carbon Markets

Biodiversity credits share structural similarities with carbon offsets, which have faced criticism for allowing polluters to continue damaging activities elsewhere by purchasing credits. Biodiversity offsets operate on a similar logic, permitting habitat destruction in one location if compensated through protection or restoration in another.

Critics argue that this approach does not address root causes of biodiversity loss but instead creates new financial instruments that enable continued exploitation. The underlying logic treats nature as an economic object that can be measured, priced and traded, a framework that some see as a continuation of colonial-era resource extraction under a more technocratic guise.

What Communities Actually Need

Indigenous communities, local farmers and traditional fishers have maintained biodiversity for centuries without market mechanisms. Their management systems predate the term biodiversity credit by millennia. What these groups require, according to advocates, is recognition of customary territories, certainty of tenure rights, protection from criminalization and direct access to funding that strengthens existing management systems.

The People's Conservation Summit, scheduled for September 1 to 3 in Yogyakarta, will bring these debates into sharper focus as Indonesia advances its pilot projects. The event will test whether biodiversity financing can be designed in ways that avoid the pitfalls of carbon markets and respect the knowledge systems of communities who have long served as de facto custodians of Indonesia's ecosystems.

The Path Forward

Indonesia faces a choice between two conservation models. One path involves building market-based instruments that translate biodiversity into tradable units. The other prioritizes strengthening existing governance frameworks, enforcing environmental laws, reforming harmful subsidies and recognizing indigenous land rights.

The biodiversity crisis did not emerge because nature lacked economic value but because ecosystems have been treated as resources for extraction. Whether biodiversity credits can reverse this pattern or simply reinforce it under a different name remains an open question as Indonesia's pilot projects move forward.