Indonesia, as Southeast Asia’s single largest economy and one that is projected to be the world’s fourth-largest by 2050, has a considerable stake in transforming into a green growth economy.
Not only is this transformation environmentally imperative for the vast archipelago, but it is also a substantial business opportunity.
In the report, AC Ventures (ACV), an Indonesian early-stage technology venture capital firm, and Boston Consulting Group (BCG) jointly released their research on the decarbonisation sector and its implications for the nation’s “green growth” potential, which outlines a pivotal role for the country on the global stage as it seeks to transform its economy.
The report titled “Catalysing Indonesia’s Green Growth Potential” estimates the value of Indonesia’s green growth opportunity at US$400 billion, combining industry revenue and carbon offset potential.
According to the report, green growth in Indonesia involves three key focus areas – strategy and professional services (a US$46 billion potential market by 2030), solutions that optimise GHG intensity (a US$350 billion potential market by 2030), and emission offsetting (a US$3.5 billion potential market by 2030).
To leverage these opportunities fully, the report lays out how Indonesia can boost green financing, develop supportive regulatory frameworks, and nurture green talent. These measures will be crucial in meeting Indonesia’s ambitious emission-reduction targets for 2030 and supporting the country’s continued economic growth.
The report also spotlights the potential for smaller-scale ventures like startups and MSMEs, as well as investors and financiers, to drive Indonesia’s transition.
Enormous Decarbonisation Potential
For instance, Unravel Carbon, a notable startup providing a SaaS decarbonization platform, and MAKA Motors, accelerating EV two-wheeler adoption in Indonesia, exemplify the country’s emerging green growth sector. Meanwhile, ventures like Fairatmos aid carbon mitigation project developers, establishing a developing domestic carbon credit ecosystem.
Marc Schmidt of BCG said, “Building a low-carbon economy and the associated decarbonisation will provide opportunities for stakeholders across all sectors, including Indonesia’s large and important MSME sector. Broad participation by innovators will be essential to implement and sustain the necessary changes in Indonesia’s economy.”
Lauren Blasco of ACV added, “Our report underlines the tremendous decarbonisation potential Indonesia holds. For example, the international demand for voluntary carbon credits is set to skyrocket, increasing by about 27% annually until 2030. Currently, around 30% of the world’s total carbon reserves are in Indonesia’s peatlands alone.”
“When we commoditise their preservation, Indonesia is poised to be a frontrunner in this burgeoning market. We foresee our carbon credit market expanding to 140 million tons by 2030, a huge leap from the 40 million issued in the past decade. At a projected rate of US$25 per ton, this market alone could bring in US$3.5 billion annually, signaling a significant opportunity.”
To address the nation’s significant talent shortage, especially in the green startup space, Indonesia has established the National Talent Management body to develop and retain talent. Simultaneously, the Indonesian Financial Services Authority (OJK) is fostering sustainable finance practices, and the country’s central bank has joined the Network for Greening the Financial System (NGFS).