Indonesia's Carbon Pricing

Understanding the Basic Regulatory Framework

Carbon Pricing as an instrument to achieve

On 26 September 2023, the Indonesian Stock Exchange launched the Indonesia Carbon Exchange (IDX Carbon), marking another milestone for Indonesia in its commitment to net zero emissions by 2060. The IDX Carbon came in towards the end of two years since President Joko Widodo issued Presidential Regulation Number 98 Year 2021 on the Carbon Pricing Mechanism to achieve the Nationally Determined Contribution (NDC) and Greenhouse Gas (GHG) Emission Control in the National Development, commonly referred to as the Presidential Regulation on Carbon Pricing. Carbon Pricing (Nilai Ekonomi Karbon) is defined as a value for each GHG unit emitted from human and economic activities.

Carbon Pricing Regulation is sector-based

Climate mitigation action is the underlaying activity in the Carbon Pricing mechanism. This activity is regulated by sector or sub-sector, including energy, waste, Industrial Processes and Product Uses (IPPU), agriculture, forestry and/other sectors as science and technology advances. Some of the sub-sectors are transportation, waste, power plant, plantation, forestry, agriculture and industry. The mentioned sectors and sub-sectors correspond to Indonesia’s sectoral ministries. However, the President Regulation delegates explicitly which ministerial sector has the coordination authority over several sectors or sub-sectors.

Carbon Trading: Emission Trading and Emission Offset

The commercialisation of Carbon Pricing is currently implemented through carbon trading, result-based payment (RBP) and carbon tax. Carbon trading includes emission trading and emission offset, domestically and internationally.