Indonesia’s carbon exchange outperforms Malaysia, Japan


Indonesia Carbon Exchange (IDX Carbon) has outpaced the performance of similar exchanges in Malaysia and Japan since its initiation on September 26.

The Indonesia Stock Exchange (IDX) has reported significant progress in the early stages of its carbon exchange.  Approximately 460,000 tons of tCO2 equivalent, valued at Rp 29.2 billion (US$ 1.84 million), have already been traded in the carbon market.

The Indonesia Carbon Exchange has surpassed the performance of similar exchanges in Malaysia and Japan. (Photo: iStock)

IDX Carbon currently has 16 active participants, consisting of one seller, PT Pertamina Geothermal Energy Tbk, and 15 purchasing companies. Another 10 participants are in the pipeline, preparing to join the exchange.

In contrast, Malaysia's carbon exchange, which was launched in December 2022, has recorded significantly fewer carbon credit transactions.

"Bursa Malaysia has only seen around 150,000-160,000 tons traded year to date. This means we have traded nearly three times as much in a shorter time frame," said Ignatius Denny Wicaksono, Head of the Business Development Division at IDX, during a session at the BNI Investor Daily Summit 2023 held in Jakarta on Oct. 24.

In addition, he pointed out that Japan's carbon exchange, launched on October 11, has traded fewer than 10,000 tons, making Indonesia's performance over 50 times greater.

Ignatius also mentioned that one of the key initiatives to stimulate carbon exchange trading is the introduction of a brokerage concept. Under this concept, brokers will be responsible for acquiring carbon units.

"We are currently working with the Financial Services Authority (OJK) to conduct a comprehensive study and put forth proposals for establishing brokerage services in the securities market. This collaboration supported by exchange members, aims to enhance the carbon exchange," he said.

He said the IDX is awaiting the formulation of international policies governing carbon trading. The moment IDX Carbon receive international recognition, it is expected that demand will experience a significant upsurge, fully realizing its potential.

Furthermore, the drive for carbon trading is further bolstered by state-owned enterprises (SOEs) committed to emissions reduction through the purchase of carbon units. Ignatius said that the government mandates all SOEs to develop a net-zero roadmap in alignment with government-prescribed objectives. In practice, SOEs must actively pursue internal emissions reduction efforts before engaging in the procurement of carbon units.

He explained that carbon exchange trading operates under two schemes: government-imposed mandatory emissions limits and voluntary emissions reduction initiatives by private entities.

Firms participating in these schemes could either trade carbon credits or buy them. This approach not only facilitates the attraction of investors but also opens avenues for securing funding from financial institutions.

In relation to the Technical Emission Cap Agreement for companies (PTBAE-PU), he said about 90 power plants have been registered. He emphasized that greater involvement of power plants would be more beneficial, especially considering the possible introduction of carbon tax, which could result in an escalation in the price of carbon credits.

Related Topics
Indonesia’s OJK optimistic about carbon exchange growth in 2024
Green economy to be among Indonesian government’s policy directions

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