Holding a “megadiverse” status shared by only 16 other countries and home to almost 17% of the world’s known species, Indonesia is one of most biodiverse nations in the world. Yet, the country faces a significant gap in biodiversity conservation financing.
Funding needs are estimated at approximately US$6.6–9.2 billion per year, while available financing capacity is only around US$1.2 billion. This represents a gap of approximately 82–87 per cent. Closing this gap is critical to ensure that Indonesia can adequately protect and restore its ecosystems and biodiversity, which underpin the country’s economy and support the livelihoods of millions across these islands. However, closing this gap requires more than simply increasing government spending. Indonesia needs to find new financing sources that can connect conservation needs with private capital.
One instrument currently getting attention is the biodiversity credit, a mechanism designed to quantify and finance measurable actions that conserve, protect, or restore biodiversity, creating an opportunity to channel private capital towards biodiversity conservation. Indonesia has begun laying the foundations to utilise this mechanism, including the development of a policy framework and pilot project initiatives. However, Indonesia needs to be careful not to view the issuance of biodiversity creditsas the only means to this end. The real challenge for biodiversity credits and other conservation-financing initiatives is building a market with sufficient project supply, buyer demand, and trust in the integrity and measurability of biodiversity outcomes to make biodiversity conservation economically viable, and thus sustainable over the long term.
In this regard, Australia’s experience provides a relevant comparator.
Australia was one of the first countries to establish a national legal framework for a voluntary biodiversity marketthrough the Nature Repair Act 2023 which establishes a legal framework for projects that protect, manage, or restore biodiversity and creates a system for recognising and financing measurable improvements in biodiversity conservation. These certificates can be owned and traded by project proponents and other eligible participants, allowing conservation outcomes to be recognised as an asset that can attract funding from organisations seeking to support biodiversity conservation. This provides a potential mechanism for directing private finance towards conservation projects and creating longer-term financial incentives for maintaining biodiversity outcomes.
However, this market is still in its infancy. The first methodology, Replanting Native Forest and Woodland Ecosystems, was only available in March 2025. As of the end of May 2026, there are listed only two registered projects, and no certificates have been issued.
These figures aren’t enough to conclude whether Australia’s approach is a success or failure. However, these do provide an important reminder that establishing a legal framework and methodology doesn’t automatically create a functioning market with sufficient supply of biodiversity projects, buyer demand, and transactions to generate meaningful private investment in conservation.
Australia’s Three Lessons for Indonesia
There are at least three main lessons to be learned from Australia’s experience so far.
First, the market requires a sufficiently diverse supply of projects.
Australia’s first methodology was relatively narrow in scope, focusing only on the restoration of native forest and woodland ecosystems on previously cleared land. Other types of projects that could contribute to biodiversity conservation include wetland and coastal ecosystem restoration, protection and restoration of threatened-species habitat, grassland restoration, and invasive-species management. By initially limiting eligibility to native forest and woodland restoration, the methodology restricts the range of conservation activities that can access the market and may therefore direct investment towards a narrower set of ecosystems and conservation outcomes. This can make it more difficult to channel finance to projects in ecosystems or locations where biodiversity needs are particularly urgent, potentially reducing the market’s overall contribution to biodiversity conservation
For Indonesia, this process demonstrates the importance of providing diverse pathways from the outset, without compromising ecological integrity. Moreover, Indonesia’s biodiversity is highly diverse, so methodologies should not rely too heavily on a single ecosystem or activity. Peatland restoration, tropical rainforest protection, and endemic species conservation may require different measurement approaches.
However, expanding the methodology doesn’t mean every conservation activity can be easily converted into credit. Indonesia still needs robust standards for additionality, baselines, permanence, and ecological impact measurement.
Second, credit supply would be meaningless without demand.
Australia’s Nature Repair Market is essentially voluntary. Project proponents can sell certificates to private buyers, but there is no general obligation for companies to purchase them. As such, demand for biodiversity certificates depends largely on whether businesses and other private buyers see sufficient value in purchasing them—for example, to support their nature-related commitments or respond to reporting and disclosure requirements. As a result, building projects and issuing certificates does not, in itself, guarantee sufficient or sustained demand to create a substantial and sustainable market.
Indonesia needs to consider the demand side from the outset. Buyers could include companies with nature-related targets, investors, philanthropists, or public-private financing mechanisms. The government also needs to carefully consider whether and how regulatory instruments can create more structured demand.
Australia itself, in November 2025, opened the possibility that certain methods could be used in the future to determine whether biodiversity certificatescould be used as environmental offsets. This development suggests that the link between biodiversity credits and regulatory mechanisms not only help generate demand but also introduce new risks. Allowing certificates as offsets could raise concerns over the additionality of projects, if adequate compensation is given, and whether markets prioritise regulatory compliance over conservation outcomes.
Indonesia needs to clearly distinguish between biodiversity creditsand biodiversity offsets. Credits should not be a shortcut for companies to compensate for biodiversity loss that could have been avoided or minimized. If offset mechanisms are developed, the principles of avoidanceand mitigationmust remain a priority.
Third, markets need trust.
In carbon markets, units such as tonnes of CO₂ equivalent provide relatively uniform units. Biodiversity is much more complex. Its value can depend on species, ecosystem conditions, habitat quality, and landscape connectivity changes over time. Therefore, Measurement Reporting Verification (MRV) systems – an approach used to monitor, report and verify any changes in ecosystems, wildlife and nature over time – and registration systems are the foundation of the credit value itself.
Australia has developed the Biodiversity Market Register and the Biodiversity Assessment Instrument to support measurement, transparency, and tracking of projects and certificates.
Indonesia needs to establish a similar system from the outset, including consistent measurement standards, independent verification, public registration, and mechanisms to track biodiversity credits from issuance to transfer of ownership. Such a system must also prevent double countingand ensure that ecological claims are verifiable.
The Fourth Lesson? The Local and Indigenous Communities Managing and Supporting Conservation
However, market integrity is not only about establishing MRV systems or generating demand from private entreprises. Indonesia must also address a more fundamental question regarding who owns and receives the economic benefits from conserving biodiversity?
Many areas with high biodiversity value are located in areas involving indigenous and local communities. Australia’s experience highlights the importance of incorporating Indigenous knowledge, values, participation, and decision-making into biodiversity market design. Under the Nature Repair Market, First Nations people and organisations can participate as project proponents, while the framework requires Indigenous knowledge to be used with the guidance of its owners and encourages culturally informed project design and implementation.
This suggests a potential fourth lesson for Indonesia: biodiversity-credit markets should define ownership, consent, participation, and benefit-sharing arrangements from the outset, particularly where projects involve Indigenous and local communities.
Final Remarks
Indonesia now has an opportunity to learn before the market develops further. Bappenas (the Indonesian Ministry of National Development Planning) and other relevant ministries/agencies, with support from UNDP BIOFIN, are developing pilot projects and a white paper on biodiversity credits. The Indonesian government also emphasises environmental integrity, transparency, and equitable benefits.
Australia’s experience shows that the biggest challenge in building an efficient biodiversity conservation market isn’t simply creating credit but rather creating the conditions that make it credible and desirable. Indonesia therefore needs to simultaneously develop three elements: a methodology broad enough to generate project supply, a credible source of demand to create economic value, and an integrity system that allows buyers to trust ecological claims. Importantly, this should also include a framework ensuring Indigenous and local communities are meaningfully involved, with clear arrangements for consent, participation, ownership, and benefit-sharing where projects affect their lands, knowledge, or livelihoods.
Yunus is a researcher from Riau Province, Indonesia. He holds a master’s degree in biological sciences from Khon Kaen University, Thailand. His expertise includes ecology, environmental economics, conservation, and sustainability.
This article is published under a Creative Commons License and may be republished with attribution.
