Indonesia Launches Carbon Emissions Credit Trading

Indonesia Launches Carbon Emissions Credit Trading

Indonesian President Joko Widodo has launched the country’s first carbon emission credit trading system, aiming to establish a market that will fund cuts in greenhouse gas emissions and position Indonesia as a major player in the global carbon trade.

As an archipelago with the world’s third-largest rainforest area, Indonesia is also one of the largest emitters of greenhouse gases. The nation has set a target of achieving carbon neutrality by 2060.

Thirteen carbon credits of nearly 460,000 metric tons of carbon dioxide equivalent (CO2e) from PT Pertamina Geothermal Energy’s projects in North Sulawesi were traded at Tuesday’s opening, priced at 69,600 rupiah ($4.51) per ton, according to a trading board at the Indonesia Stock Exchange, which facilitates the trade.

The buyers were some of Indonesia’s largest banks like Bank Central Asia and Bank Mandiri, other units of state energy firm Pertamina, and companies in the mining sector, among others.

President Jokowi expressed confidence in Indonesia’s potential for carbon reduction efforts, particularly through nature-based solutions. He envisioned the country’s carbon market growing to a value of 3,000 trillion rupiah ($194.30 billion).

“I am very optimistic that Indonesia can become the world’s carbon (market) axis as long as concrete steps are taken consistently and jointly by all stakeholders,” Jokowi said during the launch.

Initially, participation in the trading system will be voluntary. However, the government is actively working on a plan to introduce national regulations on pollution, including the implementation of a carbon tax as Luhut Pandjaitan, a senior minister overseeing carbon pricing regulations, confirmed during the launch event.

Since February, some of Indonesia’s largest coal power plants have already begun trading emission allowances.

The government plans to set emission caps for four additional sectors: forestry, industrial processes and product use, agriculture, and waste management.

Indonesia also aims to adopt international standards and expedite efforts to gain recognition from foreign markets, allowing the country to offer its carbon credits to international buyers as Luhut said. However, he noted the need to ensure that cross-border carbon trade does not hinder Jakarta’s own commitments under the Paris Agreement.

Transactions in the emission trading system are recorded using blockchain technology, Luhut said.


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