The signing of the Indonesia–European Union Comprehensive Economic Partnership Agreement (IEU-CEPA) on September 23, 2025, marks a strategic milestone for Indonesia’s non-oil and gas exports to access the European market starting in 2027. However, beyond its economic prospects, this agreement also signifies the beginning of a new phase of regulatory and governance reform. Under the agreement, Indonesia must align its domestic policies with two major EU frameworks: the EU Deforestation Regulation (EUDR) and the Carbon Border Adjustment Mechanism (CBAM) — both setting strict standards on deforestation-free supply chains and carbon emission reduction in industrial production.
Recent research by CELIOS and PUSHAM UII reveals that Indonesia’s current legal and policy frameworks remain insufficiently equipped to meet these new regulatory regimes. On one hand, the EUDR requires the harmonization of domestic sustainability standards such as ISPO, SVLK, spatial planning, and forestry licensing systems to ensure compliance with traceability and deforestation-free principles. On the other hand, CBAM demands a fundamental transformation of Indonesia’s industrial base—particularly steel and aluminum—through the adoption of cleaner energy sources and carbon reduction technologies.
At the same time, regulatory gaps and weak institutional coordination continue to undermine implementation. The National Strategy on Business and Human Rights (Presidential Regulation No. 60 of 2023), for instance, expired in September 2025, leaving a legal vacuum in the state’s agenda to integrate human rights standards into business practices. This underscores the urgent need for a renewed, legally binding National Action Plan on Business and Human Rights, particularly for sectors linked to deforestation and carbon-intensive production.
CELIOS emphasizes that the implementation of IEU-CEPA cannot be separated from a broader reform of Indonesia’s legal and governance architecture — including the revision of the Government Regulation on Forestry Management and the Government Regulation on Risk-Based Business Licensing, the strengthening of sustainability certification systems (ISPO and PROPER), and the establishment of a National Traceability Dashboard integrating permits, concession maps, and geolocation data. Without such reforms, Indonesia risks facing trade barriers, losing access to the European market, and missing the opportunity to position itself as a leader in the transition toward a low-carbon, socially just, and environmentally sustainable economy.
