Indonesia’s cattle biodigester system is a highly effective ‘green’ technology, radically improving smallholders’ quality of life both in the household and via the farm enterprise: the main product, biogas, is a smokeless cooking fuel and the by-product, bioslurry, is a high-value fertiliser. The biodigesters also qualify for carbon offsets from the avoided use of fuelwood and non-renewable fuel. ~~Carbon income is currently low, however, and the potential of bioslurry – both to earn carbon offsets, and as a market commodity for the farmer – has yet to be realised. And while there has been a rapid uptake of biogas technology, with 14,500 digesters installed across nine provinces, this trend is slowing down. One-hundred-per-cent subsidies have distorted the market, and poorer farmers who lack capital or cooperative membership are yet to be reached. ~~This report, the second of two biogas partner studies by the Hivos-IIED Learning Trajectory Programme on payments for ecosystem services, looks at the Indonesia Domestic Biogas Programme to understand the potential of carbon-offset funding in relation to smallholder agriculture.