Indonesia launches carbon exchange to accelerate emission reduction

The Indonesia Stock Exchange (IDX) has launched a carbon trading platform as part of the country’s efforts to incentivise emissions reduction. The IDX was appointed by the Financial Services Authority (OJK) to oversee Indonesia’s carbon trading market, following the passage of an omnibus law on the financial sector that includes mandatory carbon trading for coal power plant operators.

Under the carbon trading mechanism, companies engaged in renewable energy or decarbonisation activities will be able to sell carbon credits, while emitters such as coal power plant operators can buy those credits to compensate for their carbon emissions.

Participants must register with the Ministry of Environment and Forestry to engage in carbon trading at the IDX.

President Joko Widodo attended the launch, mentioning the potential for carbon trading at the exchange to reach more than 3 quadrillion rupiah ($194 billion), though he did not offer a time frame. “This will be a new sustainable economic opportunity as the world is heading toward the green economy,” he said.

The OJK has identified 99 coal power plants eligible to participate in trading and expects projects from various sectors such as forestry, agriculture, waste, oil and gas, processing, and marine industries to engage in the carbon market.

Official trading began following the launch, with the initial transaction involving a registered geothermal project by Pertamina, a state-owned energy company in North Sulawesi province. It had registered approximately 800,000 tonnes of carbon dioxide equivalent, with a traded volume of 459,914 CO2 equivalent, priced at 69,600 rupiah per tonne. The transaction recorded 13 total trades and orders from 16 registered users.

Perusahaan Listrik Negara (PLN), the state-owned electricity company and the largest user of coal energy in Indonesia, operates 130 coal power plants generating over 20 gigawatts as of 2022. PLN has announced plans to retire coal power plants early and cease new construction by 2030.

To achieve its 2030 Nationally Determined Contributions (NDC), the Ministry of Finance estimates a minimum investment of $310 billion will be required. President Widodo has also signed the Just Energy Transition Partnership (JETP) with developed nations, securing $20 billion in financial support to accelerate the phasedown of coal power plants.

The government is actively exploring alternative energy sources, with a total identified capacity of 3,686 GW from solar, micro-hydro, bioenergy, wind turbines, geothermal, and sea currents. However, as of last year, the total utilised capacity had only reached 12.56 GW.

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