On 9 October 2023, Indonesia launched the Indonesian Carbon Exchange (also known as IDXCarbon) in a serious effort to reduce greenhouse gas (GHG) emissions by 31.89 percent independently and 43.2 percent with international support by 2030. This initiative aligns with Law No. 4 of 2023 concerning the Development and Strengthening of the Financial Sector (P2SK), which gives authority to the Financial Services Authority (OJK) to regulate and supervise carbon trading in this country.
The official launch of the IDXCarbon, held by the Indonesian Stock Exchange (BEI), was announced by President Joko Widodo. BEI has received a business licence as a Carbon Exchange Organizer from OJK through Decree No. KEP-77/D.04/2023 dated 18 September 2023. This inauguration occurred at the BEI Building, Jakarta, with several high-ranking state officials and related stakeholders. In the initial carbon trading, IDXCarbon recorded carbon trading of 459,953 tons of Carbon Units, with 27 transactions. The provider of Carbon Units in this inaugural trade is Pertamina New and Renewable Energy (PNRE), which provides Carbon Units from the Lahendong Unit 5 and Unit 6 Projects of PT Pertamina Geothermal Energy Tbk. The companies that acted as buyers of Carbon Units in the initial IDXCarbon trade included PT Bank Central Asia Tbk, PT Bank CIMB Niaga Tbk, PT Bank DBS Indonesia, PT Bank Mandiri (Persero) Tbk, PT BNI Sekuritas, PT BRI Danareksa Sekuritas (part of PT Bank Rakyat Indonesia (Persero) Tbk), PT CarbonX Bumi Harmoni, PT MMS Group Indonesia, PT Multi Optimal Research and Education, PT Pamapersada Nusantara, PT Pelita Air Service, PT Pertamina Hulu Energi, PT Pertamina Patra Niaga, PT Truclimate Decarbonization Indonesia, and PT Air For All (Fairatmos).[1]
What is a carbon exchange?
Carbon Exchange, as explained in OJK Regulation no. 14 of 2023, is a system that regulates carbon trading and/or carbon unit ownership records. This carbon trading mechanism is designed as a market instrument to reduce GHG emissions through carbon unit buying and selling transactions. Traded carbon units represent credits for releasing carbon dioxide or other greenhouse gases.
Concerning Presidential Decree No. 98 of 2021, carbon trading also aims to control climate change, as well as a form of Indonesia’s contribution to global efforts to limit the increase in world average temperature to below 2 oC, ideally not more than 1.5 oC.
According to Ministry of Energy and Mineral Resources and PT PLN (Persero) data, the initial phase of carbon trading will involve 99 coal-based Steam Power Plants (PLTU). However, in the future, carbon trading activities will become increasingly busy with participation from other priority sectors related to fulfilling the NDC, such as Forestry, Agriculture, Waste, Oil and Gas, General Industry, and the Marine sector, which will follow. This trading will be implemented in stages, focusing on quality carbon units, starting from the electricity and forestry sectors.
Tri Hita Consulting is delighted to support from the buyer’s side to create a carbon offset strategy to achieve your company’s net-zero commitment and from the supplier’s side to develop carbon projects up to the registration stage. Contact info@trihita-consulting.com to talk further.
[1] https://www.idx.co.id/id/berita/siaran-pers/2016