Indonesia’s carbon trading market has taken a significant step forward by allowing foreign participants to trade on its domestic carbon exchange, IDXCarbon. This move aligns with the nation’s ambition to regain its status as a key player in the global carbon offset market and attract increased investment to fund local climate initiatives.
On Monday, nine international buyers participated in trades on IDXCarbon, a platform operated by the Indonesian stock exchange. The exchange began offering domestic carbon credits sourced from five energy projects managed by state-owned utility, PT Perusahaan Listrik Negara. The Indonesian government plans to expand the offerings to include forestry and land use-based carbon credits by March, according to Environment Minister Hanif Faisol Nurofiq. These credits, derived from conservation efforts like peatland restoration and reforestation, are expected to command a premium due to their added environmental benefits such as water conservation, biodiversity protection, and oxygen production.
Minister Nurofiq emphasized the importance of these credits having a premium price, acknowledging the significant ecological benefits they provide. “There should be a premium for the sector,” he said in a recent interview.
President Prabowo Subianto has expressed ambitious goals for Indonesia’s carbon market, aiming to generate billions of dollars in revenue. He has also committed to accelerating the country’s timeline for achieving net-zero emissions by a decade, aiming for 2060 instead of 2070. Achieving this goal would require substantial investment—up to $3.8 trillion—into renewable energy, grid infrastructure, and electric vehicles, according to BloombergNEF.
Indonesia was once a prominent supplier of voluntary carbon credits in Asia, but restrictions imposed in 2022 limited its exports as the government reviewed its domestic carbon offset strategy to align with national climate goals. Major international corporations, including Volkswagen AG and Shell Plc, were significant buyers of Indonesia’s credits prior to these restrictions, as reported by BNEF data.
Since IDXCarbon’s launch in September 2023, demand has been weaker than anticipated, largely due to delays in the rollout of a planned emissions cap-and-trade system. In 2024, the exchange facilitated the trade of just 413,764 tons of carbon credits at an average price of 47,682 rupiah ($2.90) per ton.
At Monday’s launch, IDXCarbon listed over 1.7 million carbon credits, available to both local and international buyers. These credits are generated through initiatives aimed at improving energy efficiency at PLN facilities, including gas-fired power plants and a mini-hydropower project. In the initial round of trading, 41,822 tons of credits were sold, priced at 96,000 rupiah per ton for the gas plant projects and 114,000 rupiah per ton for the hydropower facility.
The exchange aims to increase its carbon trading volume in 2025 to between 500,000 and 750,000 tons, including both domestic and foreign buyers. Indonesia Stock Exchange President Iman Rachman expressed optimism about the market’s future growth following the official launch.
This move to open Indonesia’s carbon exchange to global markets follows the adoption of new rules at COP29 in November, which outlined frameworks for international carbon trading and the use of these credits to meet national climate targets. However, some analysts, including Joy Foo from BNEF, warn that concerns over the quality of Indonesia’s energy generation credits, including questions about their actual impact on emissions reduction, could dampen interest from global investors. Additionally, the introduction of large volumes of new credits may put downward pressure on local carbon prices.
Despite these challenges, Indonesia remains determined to boost its carbon market as a crucial part of its broader strategy to address climate change and attract global investment.
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