Search

What is CBAM?   CBAM is a carbon border tax. It is designed to ensure that the EU’s climate policies do not cause "carbon leakage", where companies move production to countries with weaker environmental rules to save money, shifting rather than reducing global emissions. By placing a price on the carbon emitted during the production of certain goods imported into the EU, the mechanism ensures that foreign products face the same costs as those made within the bloc under the EU Emissions Trading System (ETS), which requires companies to pay for the right to emit carbon dioxide.  Which Sectors are Affected? To understand CBAM's impact, it is important to see which industries are subject to its requirements.   CBAM initially targets the most carbon-intensive industrial sectors:  Iron and Steel  Aluminium  Cement  Fertilisers  Electricity  Hydrogen  The EU plans to expand this list in the coming years to include processed products and possibly more sectors like chemicals and plastics. This potential expansion highlights the need to monitor regulatory developments.  Timeline of Implementation   Phase 1: The Definitive Period (2026 – 2034)   This is is the most important window for Non EU exporters. The system is now a live tax mechanism, not a pilot.  1 January 2026: Financial obligations commence. Importers must be registered as "Authorised CBAM Declarants" to bring covered goods into the EU.  31 August 2026: Deadline for the final "Transitional" quarterly report (covering Q4 2025).  1 February 2027: The first window opens for purchasing CBAM certificates to cover emissions from goods imported during 2026.  31 August 2027: The first Annual CBAM Declaration is due. Importers must surrender certificates equivalent to the total verified embedded emissions—the carbon released during manufacture—of their 2026 imports.  2026–2034: During this period, the EU will reduce free allowances to domestic industries each year. As these allowances drop, CBAM costs for importers will rise until all embedded carbon is taxed.  Phase 2: Scope Expansion (2026 – 2030)   By End of 2026: The Commission will complete a review to decide whether to include organic chemicals and polymers (plastics) in the scope.  By 2030: The goal is to include all sectors currently covered by the EU Emissions Trading System, which could bring paper, pulp, and glass into the mechanism.  A Global Domino Effect?   The EU is the first to implement such a scheme, but likely not the last. The UK government has already announced plans to introduce its own UK CBAM by 2027 to protect British industry from being undercut by high-emission imports.  Conclusion   CBAM represents a fundamental shift in international trade. 'Greenness' is now a financial liability, not just a social responsibility metric. Businesses must ensure data transparency and invest in low-carbon technology to access the market.

Sumatra is not only blessed with abundant natural resources but is also one of the regions most vulnerable to natural disasters. This presents a significant challenge for both local communities and businesses, given that the island is one of the world’s largest hubs for palm oil production. While the industry offers immense potential as an economic driver, environmental concerns persist, with industrial operations often blamed for land-use changes. Palm oil companies must take preventive and adaptive measures to mitigate the risks associated with their operations. Obtaining operational certifications is essential—not just to meet regulations, but to help mitigate disasters and secure long-term business sustainability. Certification as a Mitigation Solution The implementation of certification standards sets strict criteria to prevent environmental impacts from industrial operations. These standards include the mandatory ISPO (Indonesian Sustainable Palm Oil) and the voluntary RSPO (Roundtable on Sustainable Palm Oil). The following reasons why implementing certification standards is essential : Protect High Conservation Value (HCV) Areas: Companies must preserve natural water catchments and river buffers to protect these areas. Certification prohibits the clearing of new peatlands. It also mandates water table management. This helps prevent land subsidence, which can trigger permanent flooding. Operations must ensure that drainage systems do not discharge extreme water volumes. This prevents flooding in downstream residential areas. Flooding not only harms local communities: it also paralyses company operations. Certification helps businesses build resilience. Conclusion The recent floods in Sumatra serve as a reminder that nature has its limits. Palm oil certification acts as a bridge. It helps ensure that corporate operations stay in harmony with the environment’s carrying capacity. By adhering to sustainability standards, the palm oil industry protects both the ecosystem and its own economic future. In the face of these environmental adversities, Peterson Solutions Indonesia extends solidarity to the people of Sumatra and another areas that faced similar disasters. We firmly hope that integrated mitigation efforts will soon yield a more stable, resilient landscape for generations to come.

Background: Standardising Sustainability for the Downstream Industry As a follow-up to Presidential Regulation No. 16 of 2025 on the Indonesian Sustainable Palm Oil (ISPO) Certification System, the Ministry of Industry issued Minister of Industry Regulation No. 38 of 2025 to provide technical provisions for ISPO certification for the downstream palm oil industry. This regulation ensures that palm oil derivative products comply with national standards on legality, traceability, and sustainability across the downstream value chain. This regulation fills in the technical details not elaborated in the Presidential Regulation, including procedures for certification audits, documentation requirements, monitoring mechanisms, and the system of sanctions for industrial companies that fail to comply with ISPO requirements. Key Provisions on ISPO Certification for the Downstream Palm Oil Industry under Minister of Industry Regulation No. 38 of 2025 1. Certification Obligations for the Downstream Industry All companies engaged in the processing and manufacturing of palm oil derivatives  are required to hold a valid ISPO Certificate. This obligation applies to downstream activities producing refined palm oil products, oleochemicals, food and non-food palm-based products, including cooking oil, margarine, specialty fats, palm-based animal feed, and other derivative outputs. The scope of regulated business activities is determined based on the Indonesian Standard Industrial Classification (KBLI)  listed in the annexe to Minister of Industry Regulation No. 38 of 2025, which specifically covers downstream palm oil processing and manufacturing activities . 2. Certification Principles and Criteria The regulation applies the core ISPO principles to downstream industrial activities, covering: Legal compliance , including business licences, tax identification numbers (NPWP), and trademark legality. Supply chain traceability , through supplier verification, supply chain models, and traceability of raw material origins. Sustainable business improvement , relating to product quality, operational efficiency, and environmental management. Each principle is supported by indicators and parameters that are verified through audits. 3. ISPO Certification Process The certification process includes: verification of document completeness; Stage 1 and Stage 2 audits; assessment by the certification body; issuance of the certificate, including provisions on the use of the ISPO logo on products. Audit duration is determined based on the company’s production capacity. 4. Surveillance and Recertification Companies are required to undergo annual surveillance audits and recertification every five years. 5. Certificate Transfer Companies may transfer their certification from one ISPO Certification Body to another through an established transfer mechanism. 6. Administrative Sanctions Companies that fail to comply with the provisions may be subject to: written warnings; administrative fines; temporary suspension of business activities. 7. Guidance and Supervision The Ministry of Industry carries out guidance, facilitation, and supervision to ensure that certification implementation is conducted in accordance with regulatory requirements. Why This Regulation Matters 1. Alignment of Sustainability Standards For the first time, the downstream palm oil industry is explicitly subject to mandatory sustainability standards under the ISPO system. 2. Strengthening Product Traceability Supply chain requirements ensure that palm oil products can be traced back to the origin of their raw materials. 3. Supporting Global Market Competitiveness Global demand for sustainably produced palm oil continues to grow; ISPO certification serves as a tool to maintain credibility and market access. 4. More Systematic Oversight Annual surveillance and standardised audit requirements ensure consistent implementation of sustainability practices. Effective Date and Transition Period Minister of Industry Regulation No. 38 of 2025 sets out two key timelines: 1. Six-Month Transition Period Article 49 stipulates that the regulation enters into force six months after its promulgation. If promulgated on 3 November 2025, the regulation will become effective in May 2026. 2. Mandatory Certification from 19 March 2027 Article 48 stipulates that the downstream industry must hold an ISPO Certificate starting 19 March 2027. This provides companies with time to prepare traceability systems, documentation, and audit processes. Relationship with Presidential Regulation No. 16 of 2025 Minister of Industry Regulation No. 38 of 2025 serves as the technical implementing regulation of Presidential Regulation No. 16 of 2025, which constitutes the national legal framework for the ISPO system. The Presidential Regulation establishes: ISPO obligations for all actors across the palm oil value chain; ISPO principles and institutional structure; the audit and assessment framework; reporting and oversight obligations. Minister of Industry Regulation No. 38 of 2025 then details the technical implementation specifically for the downstream industry, ensuring that the mandate of the Presidential Regulation is operationalised through structured audit mechanisms, surveillance, and sanctions. Conclusion Minister of Industry Regulation No. 38 of 2025 is a key regulatory instrument in strengthening the governance of Indonesia’s downstream palm oil industry. With a six-month transition period and full certification obligations taking effect on 19 March 2027, industry players are given time to adjust internal systems, enhance traceability, and fulfil legal requirements. As a technical implementing regulation of Presidential Regulation No. 16 of 2025, this regulation provides a structured framework to ensure that ISPO sustainability standards can be applied consistently across the downstream value chain, reinforcing the credibility of Indonesian palm oil products in global markets.

Peterson Indonesia's Environmental Consultants provide direct solutions to your environmental challenges while guaranteeing your trust is well-placed. Peterson Solutio ns Indon esia Sustainability Consulting Find Services Sustainability Reporting Peterson offers a number of services to support you creating a sustainability report, also referred to as a corporate social responsibility (CSR) report. Read more Our Unique Approach At Peterson, we are responsive and flexible. We build corporate teams from different regions and fields of expertise to best suit your requirements. Risk Analysis Peterson can assist our customers in mapping the risks of adverse social and environmental impacts in your supply chain, by commodities and geographies. Read more Read more 70 4000 SOME OF OUR HAPPY CLIENTS Find A Local Office You will be redirected to our international website Find an office News & Events EUDR Delay and Its Global Impact How Europe’s deforestation law postponement affects sustainability and global supply chains The European Union Deforestation Regulation... Oct 7 FSC Approves AP RFSS: A New Opportunity for Smallholders in Asia-Pacific Expanding Inclusive and Efficient Forest Certification for Small-Scale Producers On 18 July 2025 , the Forest Stewardship Council (FSC)... Jul 23 Strengthening Environmental Planning: A Comparison of Government Regulation No. 22 of 2021 and No. 26 of 2025 Background: Building an Integrated Environmental Planning Framework As part of efforts to strengthen environmental protection and... Jun 26 View More Subscribe Form Join Thanks for subscribing!

Our advice and support are based on almost 100 years of experience and expertise in providing solutions to a broad range of customers including multinational companies, small and medium-sized enterprises, farmers’ cooperatives, associations, non-governmental organisations and governments. Carbon Fisheries Food Safety Forestry Organic ISCC Rainforest Alliance Textile, Apparel and Recycled Products Social Accountability Sustainability Reporting Sustainable Finance Verified Carbon Standard SMETA - Training (Bahasa Indonesia) Regenerative Agriculture Cosmetics ISO Services

Check our past projects and find the most suitable one for your business. PROJECTS Due to some heavy amount of data, some certifications may take more time to load. Tailor-made solutions GHG ESG/SR