Methane abatement is gaining traction as a fast, effective way to curb climate change and Indonesia is uniquely poised to play a significant role. Methane is 80 times more potent than CO2 over 20 years and accounts for about 30% of current global warming (IEA, 2021), but its short atmospheric lifetime means reductions will deliver near-immediate climate benefits.
Indonesia is the world’s sixth largest methane emitter, with major sources including fossil fuel operations such as oil and gas production, refining and coal mining, as well as agriculture and waste (Climate Trace, 2025) (Figure 2). The country is therefore well-positioned to spearhead efforts and seize the opportunity to lead on methane abatement.
“Indonesia stands at the cusp of a taxonomy design upgrade that could unlock the resources to cap landfills, deploy biodigesters, and transform rice paddies, turning methane from a problem into an opportunity.”
Indonesia has already made important commitments to tackle methane, including targets in its Enhanced Nationally Determined Contribution (NDC), national climate regulations and participation in the Global Methane Pledge. But commitments are only half the story. Scaling methane abatement requires investment and today, that investment remains far below of what is needed. For instance, climate change mitigation measures related to methane reduction in the Agriculture and Waste sectors alone are expected to cost USD 2.5 trillion, yet only USD 1.5 billion in financial support have been received so far (CPI, 2025).
Indeed, Indonesia is already developing one of the most important tools it has to translate those commitments into capital flows to shift this trend: the national sustainable finance taxonomy, the Taksonomi untuk Keuangan Berkelanjutan Indonesia (TKBI).
By embedding clear technical screening criteria (TSC) for methane-abatement activities in Version 3 of TKBI, Indonesia has the power to drive capital flows toward the highest-impact and most cost-effective mitigation opportunities.
Turning classifications into capital
Taxonomies are much more than the classification tools they are often described as. When designed well, they become lighthouses for investment, guiding capital toward green and transitioning activities and helping markets align with climate goals.
The difference between a promising idea and an investable project is often specificity. Investors need to know:
- Which activities are eligible?
- What thresholds or safeguards apply?
- How can risks be measured and managed?
Without clear definitions of what counts as “Green”, “Transition”, or “Does Not Meet the Classification”, financial institutions cannot easily assess which methane abatement projects qualify for sustainable finance. For methane in particular, the lack of taxonomy coverage often means that abatement opportunities remain invisible to investors even when technologies are cost-competitive or already in use in pilot projects.
Figure 1: From policy to projects: how taxonomies unlock finance
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Where Indonesia stands today
Indonesia’s TKBI Version 2, launched in February 2025, marked an important step forward. It expanded TSC for sectors such as transport, construction, and parts of AFOLU (forestry and palm oil plantation) in addition to Version 1’s TSC on energy. It also includes a traffic-light system to reflect both green and transitioning activities.
However, in Version 2, the TSCs of the taxonomy did not yet cover key sectors with the highest potential of reducing methane emissions, such as Agriculture, Waste and Wastewater. While fossil –fuel related activities are covered under the Energy sector, targeted criteria for methane-specific interventions, such as leak detection and repair (LDAR) have not yet been explicitly defined. These sectors together account for some of the largest contributions to Indonesia’s methane emissions (Climate Trace, 2023).
With TKBI Version 3 now under development and expected to be released in Q1 2026, it is set to introduce TSC for the remaining priority sectors including Waste, Industry Processes and Product Use (IPPU), and the remaining AFOLU activities. It is a timely opportunity to embed methane-abatement pathways directly into the taxonomy, and would not only help close the methane-finance gap but also position Indonesia alongside other global leaders which include methane abatement in its taxonomies.
Lessons from global and regional peers
- The EU Taxonomy has set a benchmark by establishing detailed TSC for sectors that are major sources of methane such as Agriculture, Waste, and Energy. It clearly defined activities such as anaerobic digestion, landfill gas capture and improved manure management, including thresholds and performance metrics that facilitate investment. For example, the TSC for biofuel manufacturing requires that feedstocks exclude food and feed crops, comply with sustainable biomass sourcing rules, and incorporate methane control safeguards where applicable. This clarity sends strong signals to the market and helps align capital with climate objectives.
- Beyond the taxonomy, the EU is also advancing regulations that aim to curb methane emissions from fossil fuels, including those imported into the bloc with its new EU Methane Regulation, adopted in 2024. This means that countries exporting fossil fuels to the EU, including Indonesia, may soon need to meet stricter methane control requirements (Directorate-General for Energy, 2024). By strengthening its own taxonomy and methane management frameworks, Indonesia can pre-emptively align with international expectations and enhance its credibility with global investors.
- The Singapore-Asia Taxonomy takes a technical approach to methane abatement in the Waste sector. It sets specific requirements for managing methane in solid waste and landfill operations, including source-segregated waste, contingency plans to minimize methane leakage, and productive use of biogas (e.g., for energy or grid injection). Operational thresholds—such as minimum efficiency levels and safeguards— are embedded in the screening criteria, aligning with best practices for methane mitigation.
By drawing from these examples, TKBI Version 3 can deliver bankable, high-impact methane abatement guidance that remains aligned with Indonesia’s national priorities and market readiness.
Why activity-level clarity in TSCs matter
In Indonesia, many national policies and its NDC already recognize methane abatement solutions. But without inclusion in the TKBI, these activities will remain outside the scope of sustainable finance and miss the opportunity to attract sufficient capital. Developing clear, activity-level TSC will help direct capital toward these high-impact interventions.
There are several market-ready measures for methane abatement that could be incorporated, including:
- Waste and Wastewater (Climate and Clean Air Coalition, 2022; RMI, 2024):
- Waste prevention and waste diversion
- Anaerobic digestion of sewage and sludge
- Methane capture systems in treatment stages
- Agriculture (Hedge et al., 2025):
- Alternate wetting and drying (AWD) in rice paddies
- Improved livestock feed (e.g., feed efficiency, methane inhibitors)
- Manure storage and handling interventions (e.g., frequent manure removals, biofilter ventilation, solid-liquid separation)
- Fossil Fuel Operations (IEA, 2025):
- Methane leak detection and repair (LDAR)
- Restrict routine flaring and venting
- Pre-mining methane drainage in coal operations
- Plugging and monitoring non-operational wells and sealing abandoned coal mines
Incorporating these into TKBI Version 3 as eligible green or transition activities would send policy signals to the wider market of the inclusion of such activities thus greatly improving their bankability to help unlock private finance.
Table 1: Key methane abatement activities by sector—coverage in TKBI, policy alignment and importance for abatement
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These activities are already cited in Indonesia’s NDCs, regulation, and policies. However, without taxonomy-based criteria, their bankability remains limited. Figure 2 highlights the breakdown of Indonesia’s methane emissions and its importance of embedding abatement pathways into the taxonomy sectors with the largest emissions footprint.
Figure 2: Sectoral methane emissions breakdown (2023)
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Recommendations: a roadmap for TKBI Version 3
To maximize the potential of TKBI Version 3 and mobilize finance for methane-abatement, Indonesia can:
- Fast-track TSC development for methane-intensive sectors, prioritizing activities already identified in national policies and regulations.
- Apply the existing traffic-light system to methane abatement, clearly marking transitional activities that complement the effort of Indonesia’s national decarbonization progress.
- Incorporate activity-level granularity to classify and guide investment in specific abatement interventions.
- Draw from global practices such as the EU Taxonomy to develop science-based thresholds and do-no-significant harm (DNSH) safeguards.
- Ensure enabling conditions are in place. These could include monitoring, verification, and reporting (MRV) frameworks, better methane emissions data, and capacity building to support implementation.
- Position TKBI as a finance mobilization tool rather than a classification guidance document, and link it to broader efforts such as the national vision of Golden Indonesia 2045 “Indonesia’s Asta Cita,”, Just Energy Transition Partnership (JETP), blended finance platforms, and other methane-focused initiatives.
Conclusion
Methane abatement is one of the most cost-effective, high-impact and underfinanced climate actions available today. Indonesia stands at the cusp of a taxonomy design upgrade that could unlock the resources to cap landfills, deploy biodigesters, and transform rice paddies, turning methane from a problem into an opportunity.
By embedding robust and granular criteria for methane significant sectors, Indonesia can unlock capital and finance the “fast wins” on methane and chart a course for others to follow.
