Today is Monday, February 12 2024.
On 26 September 2023, Indonesia officially launched its carbon exchange.
As such, the government started to incentivize carbon trading as one of the instruments to accomplish Indonesia’s GHG emission reduction targets.
Let's get some more details on how the Indonesia Carbon Exchange (IDX Carbon) is operating, a few months after its started.
Carbon units is the trading object in Indonesia and are legally defined as securities. But since they are treated more like intangible assets, they do not represent the conventional type of securities from the capital markets. Interesting.
At IDX Carbon portal there are two products defined as follows:
PTBAE-PU, a "cap-and-trade mechanism that is generally applied to mandatory carbon markets. Companies that have been selected by the Government are given a cap or PTBAE-PU in the form of quota allocation (allowance) for a certain period. Companies that emitted more than the given cap can buy PTBAE-PU from business doers who emitted less than their cap. PTBAE-PU can also be obtained through an auction mechanism organized by the relevant Ministry".
SPE-GRK, "commonly known as Carbon Credit, is a letter of emission reduction certificate owned by an entity that has completed Measuring, Reporting, and Verification phase, and registered in National Registry System for Climate Change Control in the form of a registry number. Companies can buy carbon credit to meet emission reduction targets or fulfil commitments in carbon neutral or net-zero emissions. SPE-GRK can be traded per project through an Auction, Marketplace, or Negotiation mechanism, where buyer/seller can buy and sell certain SPE-GRK through the Carbon Exchange. SPE-GRK can also be traded as a standardized group of project in the Regular Market. Every SPE-GRK in IDX Carbon will be classified into a certain standardized product. The details of purchased project will be given to the buyer after the transaction is made".
Via its Minister of Environment and Forestry, Indonesia enacted mutual recognition of some international Emission Reduction Certificates (ERC) such as from Verified Carbon Standard, Gold Standard and Plan Vivo.
In Indonesia, forestry and energy are the two top sectors with NDC targets, with forestry being the major sector for the country's carbon net sink approach. You may recall that in the past, when NBS carbon credit prices were higher, before international media, specially from UK, started posting about credibility and integrity issues of such credits, Indonesia, Brazil and Congo were considering joining forces for the carbon credits from their forests.
Click at the image below - a diagram from PwC Indonesia, with the Carbon Pricing regulatory framework as of November 2023 - to go to the IDX Carbon portal.
And here for a thorough report by PwC Indonesia, with plenty of good information "Indonesia’s Carbon Pricing. Understanding the Basic Regulatory Framework".
