ASIATODAY.ID, JAKARTA – Indonesia, through Enhanced Nationally Determined Contributions (ENDC) has increased its ambition in its commitment to reduce greenhouse gas emissions.
Initially, Indonesia’s greenhouse gas emissions reduction target with its own capabilities was 29%, to 31.89% in ENDC, while the target with international support was 41% to 43.20% in ENDC.
The increased target is based on the latest national policies related to climate change, such as related sectoral policies, including FOLU Net-sink 2030, accelerated use of electric vehicles, B40 policy, increased action in the waste sector such as utilization of IPAL sludge, as well as increased targets in the sector agriculture and industry.
Economic Value of Carbon, regulation in Indonesia
Presidential Regulation number 98/2021 regulates the implementation of mitigation actions and climate change adaptation actions carried out through the implementation of carbon economic value (NEK) to achieve NDC targets and control emissions for national development. The implementation of NEK is carried out in sectors and sub-sectors with implementation by ministries/agencies, regional governments, business actors and the community, through 4 (four) mechanisms, namely: Carbon Trading; Performance Based Payments, Carbon Charges; and/or other mechanisms in accordance with developments in science and technology.
Thus, the existence of NEK can be an incentive for achieving NDC by supporting efforts that have been carried out such as controlling forest fires, preventing deforestation and forest degradation, or technological transition to realize new, renewable energy.
The presidential regulation on NEK is aimed at domestic and international markets. If carbon trading occurs between two domestic entities, then the calculation of the reduction in greenhouse gas emissions achieved will still be counted as Indonesia’s contribution. The existence of carbon market regulations opens up opportunities for Indonesia to receive broader funding to control climate change.
NEK is a measure of world performance in managing climate change which reflects the level of success of countries in controlling climate change. For Indonesia, NEK is part of Indonesia’s natural wealth which must be used for the greatest prosperity of the people and controlled by the state, in accordance with philosophical principles as regulated in Article 33 of the 1945 Constitution.
Before the Paris Agreement, or what is often called the Kyoto Protocol regime, carbon trading was regulated and took place using the Clean Development Mechanism (CDM), Joint Credit Mechanism (JCM) mechanism, which is a bilateral collaboration between Indonesia and Japan. On the other hand, the Kyoto Protocol triggers trade which is also not specifically regulated in the Kyoto Protocol, namely the Voluntary Carbon Mechanism (VCM) which is carried out directly by independent parties (without any registration by the state).
At that time, various voluntary carbon trading schemes emerged, such as the widely known crediting scheme Plan Vivo, Verra, Gold Standard, and others (international independent appraisers and some of them became market places). In each large country such as America, various crediting schemes have emerged which are still running today. Several of these crediting schemes have also entered Indonesia and carry out transactions and cooperation on crediting schemes and operate in Indonesia.
Taking note of the results of the trial at COP28 in Dubai, UAE (Paris Agreement regime), it is certain that there is no regulation and recognition of voluntary carbon trading or VCM. Indonesia has firmly committed to and ratified the Paris Agreement through Law Number 16 of 2016, so that the applicable regulations in Presidential Regulation 98 of 2021 and Minister of Environment and Forestry Regulation number 21 of 2022 do not regulate and recognize VCM in Indonesia.
In the Kyoto Protocol era, there has been carbon trading without authorization and registration (because of its voluntary nature, so the market determines itself, how credits are calculated, carbon business rules are determined by themselves, market size and capitalization are determined by themselves and various rules of the game are determined by themselves. by the market with their respective agreements, so this crediting scheme is better known as a private crediting scheme).
Director of Sectoral and Regional Resource Mobilization, Ministry of Environment and Forestry, Dr. Wahyu Marjaka explained, to achieve NDC and carbon incentives, there are regulations in Presidential Regulation number 98/2021 and Minister of Environment and Forestry Regulation number 21/2022.
“There are several forestry concession owners who have executed carbon trading contracts with private crediting scheme parties which are not in accordance with Indonesian regulations and the government has taken action against them,” said Wahyu Marjaka in Jakarta, Friday, March 1 2024.
The Best and Become a Reference
Meanwhile, the Indonesian Financial Services Authority (OJK) assesses that, to date, Indonesia’s carbon exchange is much better compared to other countries and has become an international reference.
“Even at the ASEAN level, we are the largest. At launch the largest transaction volume was quite large. “What’s interesting is the timeline, because the central government and the relevant ministries agree that the launch must be hastened, because the issue of climate change is very prominent and it is urgent to find an effective solution,” said the Director of Supervision of the OJK Carbon Exchange, Aldy Erfanda, answering questions regarding the development of trading on the Indonesian carbon exchange, Friday, March 1, 2024.
As is known, Indonesia has started trading its first carbon credits on September 26 2023. This is a historical record for Indonesia because it has a quite important mission, namely creating a market to fund the reduction of greenhouse gas emissions and becoming a major participant in global carbon trading.
The launch of carbon exchange trading was inaugurated directly by the President of the Republic of Indonesia Joko Widodo. Based on the determination of the Financial Services Authority, the organizer of this trading is the Indonesian Stock Exchange (BEI). The Carbon Exchange Operator business license has been granted to the IDX by the Financial Services Authority (OJK) through Decree number KEP-77/D.04/2023 on September 18 2023.
Aldy said that carbon trading through the carbon exchange is a national strategic project.
“Besides volume, we need to be proud of what we do, because the carbon trading concept, we adopt the most complex carbon trading system in the world. Why is it the most complex? Because we choose the Cap-Trade-Tax process. “This means that a cap or allowance is determined – then trade is carried out, meaning carbon trading and -tax, meaning a carbon tax is applied,” he explained.
In other countries it is simpler, in some neighboring countries, direct tax, there is no upper limit setting, there are no trading facilities, these countries don’t want the hassle. There are also other countries that apply upper limits and trade limits, no taxes.
“Well, that’s what we need to be proud of with the system we chose, even though it is very complex,” said Aldy.
Globally, said Aldy, Indonesia is a country that is highly regarded internationally regarding carbon trading through the carbon exchange, although achieving progress like this is not easy.
“Moreover, we are very specific about achieving the NDC target. “So each sector must work, such as the FOLU, Energy and waste sectors,” he explained.
Aldy explained, technically, all of this is related to a clear frame work and the authority is in the Ministry of Environment and Forestry.
“Currently, we have a lot to do to ensure the sustainability of carbon trading through the best carbon exchange,” he said.
Aldy said, Indonesia is trying to adopt the most complex ones in order to get credible trade. To maintain national and international credibility, the rules are not easy and require comprehensive study.
“Well, what is called regulation, there are definitely parties who like it and don’t like it. “But in general, we have one voice and one mission, namely that we want Indonesia to have carbon trading, which has good integrity, transparency and prevents double-counting-carbon,” he explained.
Pioneering International Carbon Trading
In the future, Aldy continued, there is still a lot of homework to do. “In the near future we are planning a pilot project regarding international carbon trading on the Indonesian carbon exchange and getting there, we have held regulatory coordination meetings. “There has been rapid progress there, there has been an agreement regarding international trade,” he explained.
“So far, many skeptics have called us slow, but we are still in the process. Our target is that in 2024 international carbon trading can be opened on the Indonesian carbon exchange. “This is not easy, because we have to prepare various regulations that support these targets for which there are already basic regulations,” he said.
So far, many countries through their embassies in Jakarta have met with the OJK to ask about this question, starting from Australia, the US, Japan, Taiwan, and so on.
“They are very interested. In the future, we will coordinate with the Ministry of Foreign Affairs. “The technical team has done that, and we will also involve the relevant ministries,” he added.
International enthusiasm is attracted by Indonesia’s carbon potential, because Indonesia is one of the countries that has large forests.
“Our nature base is indeed very large. “We are working hard on carbon trading because we want to make a very big contribution not only to national interests, but internationally, considering that reducing global emissions is very important,” he explained.
“We hope that the progress of these regulations will develop rapidly. “Why is the frame regulatory, because our NDC target requires 5 sectors to work, but so far the only ones working are the Ministry of Environment and Forestry, and the Ministry of Energy and Mineral Resources, while others must follow, including the Ministries of Agriculture and Industry,” he stressed. (AT Network)
Check out other news and articles at Google News and WA Channel
Discussion about this post