From Ombo to Carbon Credits: An Indigenous-Led ESG Governance Model for Direct Participation in Indonesia's Carbon Exchange

Abstract

Indonesia's carbon market has expanded since the Indonesia Carbon Exchange (IDXCarbon) began operating in September 2023, with accumulated transaction value reaching IDR 93.75 billion by April 2026. However, indigenous communities that have safeguarded forests for generations lack equal standing as market actors. This study designs and tests an institutional model enabling the Kaili indigenous community in Pakuli Induk Village, Sigi Regency, to participate directly in the carbon exchange, grounded in Ombo local wisdom. A mixed-method approach was employed with quantitative components including Multi-Criteria Decision Analysis with 12 criteria and 3 institutional alternatives, an Environmental, Social, and Governance Readiness Index with 12 measurable indicators, descriptive statistical analysis of IDXCarbon prices (September 2023–July 2026), financial scenario analysis with 4 price scenarios, and comparative institutional analysis between Indonesia and Kenya. Findings reveal: (1) Ombo shows high alignment with permanence and safeguards but weak in MRV and additionality requiring threat-based arguments; (2) direct participation (score 0.78) outperforms corporate partnership (0.52) and broker (0.56) in MCDA; (3) observed carbon prices (IDR 52,295–69,600/tCO₂e) are far below the IDR 200,000 assumption, yet the project remains viable with a break-even point of 9,180 tCO₂e; (4) Kenya's 40% minimum benefit sharing threshold offers relevant policy lessons. The proposed Lembaga Ombo Lestari model with 70:30 benefit-sharing and four-phase implementation roadmap contributes to inclusive ESG governance at the site level.