Monday, January 19, 2026
Indonesia, a country long struggling with deforestation, is facing a significant risk of increased forest loss in 2025. After years of steady but uneven progress, the Southeast Asian nation is on the brink of a deforestation crisis. Rising logging activity, expanding plantations, and resource extraction projects like mining are contributing to a concerning spike in deforestation. This trend threatens to undo the environmental strides Indonesia has made in the battle against climate change.
In December 2025, Indonesia’s Forestry Minister Raja Juli Antoni reported that the country had lost more forest in the first nine months of the year than in the entirety of any of the first three years of the decade. If the current rate continues, Indonesia’s gross deforestation could reach or surpass the levels seen in 2024, which marked the highest losses since 2019.
The government has made substantial progress in recent years, notably with a moratorium on clearing forests for oil palm plantations, but these gains are now at risk. The total gross deforestation recorded during the first nine months of 2025 reached 166,500 hectares, a worrying trend when compared to earlier years. The sharp increase contrasts with the previous four years, when the annual deforestation rate stayed below 146,000 hectares.
A key factor contributing to the worsening situation is the Merauke Food Estate project in South Papua. This ambitious initiative involves clearing a staggering 2 million hectares of forest to create a massive agricultural zone. Critics argue that the project could undermine Indonesia’s recent successes in reducing deforestation, with the country’s global environmental reputation at risk.
Environmental groups, including Mighty Earth, have expressed concern over the project’s long-term impact. Amanda Hurowitz, forest commodities lead at Mighty Earth, commented that the project is detrimental to Indonesia’s battle to curb global deforestation. Despite these warnings, the Indonesian government continues to push forward with the project, highlighting its significance for domestic food security and biofuel production.
The intensification of deforestation in Indonesia could also harm its lucrative palm oil export industry. Under the EU’s 2023 Deforestation Regulation (EUDR), food-processing companies importing Indonesian products must verify that their shipments do not come from deforested areas. The EU is likely to scrutinise products like palm oil, soy, cocoa, and timber more closely if deforestation rates continue to rise.
The EU regulation mandates that at least 3% of Indonesian exports be checked to ensure they do not contribute to deforestation. This is expected to increase to 9% if the deforestation rate exceeds certain benchmarks. Such a surge in audits would undoubtedly increase operational costs for importers, making Indonesian commodities less attractive. Indonesia’s palm oil industry, which relies heavily on European markets, could suffer significant financial losses due to these stricter regulations.
The recent Comprehensive Economic Partnership Agreement (IEU-CEPA) signed between Indonesia and the EU could prove to be a double-edged sword. While the agreement ensures tariff-free access for Indonesian palm oil, the growing concern over deforestation might overshadow this trade advantage. The increase in deforestation is likely to provoke more scrutiny, which could lead to more significant trade barriers.
Indonesia’s struggle to balance economic growth with environmental protection is evident in its performance in the global carbon credit market. At the COP30 Summit in Brazil, Indonesia sold less than 3 million carbon credits out of the 90 million it had on offer. This lack of demand reflects concerns over Indonesia’s commitment to reducing emissions and protecting its forests.
Bhima Yudhistira Adhinegara, executive director of the Center for Economic and Law Studies (CELIOS), remarked that the poor response to Indonesia’s carbon credit auction indicates a lack of genuine effort to preserve its rainforests. He argued that the country’s dual focus on deforestation-heavy projects like the Merauke Food Estate and carbon market initiatives demonstrates the inherent contradiction in its climate policies.
Indonesia’s push to develop a domestic biofuel industry has further intensified the debate over its deforestation practices. In October 2025, the government awarded a massive contract to construct an 80-kilometre highway connecting South Papua to the Merauke Food Estate, a crucial part of the country’s bioethanol production strategy. The project, which includes a bioethanol factory and a power station, is expected to cost over $8 billion and significantly impact local forests.
Despite the environmental concerns, the Indonesian government remains focused on biofuel production, which it views as essential for reducing reliance on imported energy. However, this strategy has raised alarms among environmental groups, who argue that it may worsen deforestation rates and increase Indonesia’s carbon emissions.
If deforestation in Indonesia accelerates, the consequences will not only be felt domestically but globally. Indonesia is the world’s sixth-largest emitter of greenhouse gases, primarily due to land-use change and deforestation. As a result, any increase in deforestation would have a direct impact on global efforts to mitigate climate change.
The accelerated loss of forests also threatens Indonesia’s rich biodiversity. The country’s rainforests are home to some of the world’s most endangered species, including the orangutan, and the continued destruction of these forests could drive many of these species closer to extinction.
Indonesia now faces a critical crossroads in its development trajectory. The government’s push for large-scale agricultural and biofuel projects, such as the Merauke Food Estate, presents significant challenges to the country’s environmental goals. While these initiatives may offer short-term economic benefits, they also threaten to undo years of progress in reducing deforestation and combating climate change. As the global community increases scrutiny of Indonesia’s deforestation rates, the country must reassess its development strategies to ensure a balance between economic growth and environmental protection.
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Tags: carbon credits, deforestation, deforestation in Indonesia, Deforestation Regulation, EU Deforestation Regulation, Indonesia deforestation crisis, Merauke Food Estate, woodworking and processing, woodworking industry, woodworking UK
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