Union and Muslim groups are preparing to challenge the law in court and another wave of protests is expected this week, according to Reuters.

But while the protests have focused on concerns over labor rights, environmentalists say the law loosens environmental protections and could lead to widespread deforestation and habitat loss.

Indonesia's rainforests are the world's third largest after the Amazon and Africa's Congo Basin and are ecologically important for their rich biodiversity, with animals including elephants, clouded leopards, sun bears and the critically endangered orangutan.

Deforestation is already driving many species toward extinction and environmentalists warn that the law could give them a "strong push towards the edge," said Phelim Kine, senior Asia director at environmental campaign group Mighty Earth.

Why environmentalists are worried

Indonesia supplies more than half of the world's palm oil and the industry contributes about 2.4% to the country's GDP. But the industry is a major cause of deforestation in Indonesia and palm oil has had a devastating impact on the environment.

The new law will remove a requirement that Indonesian provinces have a forest cover of 30%, raising concerns that extractive industries and palm oil plantations could drastically step up land clearance and escalate conflicts over land and Indigenous rights.

"That's staggering, that's the equivalent of telling a United States citizen that an American corporation is going to raze Yosemite, or in the UK that they'll pave the Lake District. The environmental impacts are almost incalculable," Kine said.

Adding to concerns is that previously, companies were responsible for environmental damage in their concessions, whether they were at fault or not. But environmentalists say these "strict liability" provisions are now vague and proof of wrongdoing is now required to prosecute the company.

Officials say this is to provide legal certainty in criminal investigations, according to Reuters, but environmentalists are worried it will weaken laws aimed at prosecuting companies that cause forest fires.

"We are afraid the changes of the liability mechanism will blur the lines in trial and hamper law enforcement for the forest fire issue," said Grita Anindarini, a researcher for the Indonesian Center for Environmental Law.

Intense forest fires from land burning rage across Indonesia every year, with toxic haze spreading as far as Malaysia and Singapore. Farmland is burned to prepare for the next year's crop and to clear forests, with the carbon-rich peat burning for weeks and creating a health crisis with disastrous consequences for the climate crisis.

'Major setback in environmental law'

Campaigners say the law makes changes to several other key environmental rules, including removing environmental reviews for many new projects.

It also integrates environmental permits with business permits and compliance monitoring will now be "risk-based."

Companies would previously need to fill out an environmental impact assessment, called an AMDAL, to asses the impact their project would have on the environment and local communities. Now, only companies whose activities pose a "high risk" to the environment will need to secure this license.

"The government said high risk means (companies') activities will have a significant impact on the environment, and if you have high risk activities you must conduct a environmental impact assessment," said Grita, who added that it's not clear what constitutes a high risk activity or how a company will be judged.

According to Grita, companies now only need to consult those people "directly impacted" by the project, raising concerns that local people and environmental advocates will be left out of the consultation process. "It's very unclear who is directly impacted," she said.

The new rules have raised fears that the system of checks and balances on those polluting or exploiting the environment will be diminished.

This is a "major setback in environmental law," Grita said.

But Environment Minister Siti said the law makes it easier for the government to revoke business permits for companies that undermine environmental laws.

She continued that corporations "playing around" in forest areas will be subject to "strict criminal sanctions."

Moving forward

Environmentalists say Indonesia could have used the opportunity to recover its economy in a sustainable way.

"They could have made it a golden region for economic green growth with forest cover and biodiversity treated as priceless assets rather than items to be pillaged," Kine said.

Reuters reported that banks like Citibank and ANZ have said if the jobs law is implemented well, there will be a better investment climate for Indonesia.

But others within the industry say it may backfire. A group of 35 global investors managing $4.1 trillion in assets issued a letter to the Indonesian government warning of the damaging consequences for the environment, according to Reuters.

Grita said that Indonesia's environmental law is "one of the most progressive laws we have" and progress has been made in recent years to step up environmental protection, though implementation and monitoring is still weak. The palm oil industry in particular has come under pressure from buyers, financiers, and civil society groups among others to reduce deforestation and the destruction of peatlands.

Concerns have also been raised that Indonesia's new law will move the country's environmental legislation away from international best practices.

There are calls for the government to repeal the law, and Kine said the focus now will be on ensuring it's implemented in a way that "mitigates the extent of the damage that the law on its face can inflict."