Indonesia projects to initiate its carbon exchange in September, with power generation companies the first to trade on it.
The exchange will be operated by Indonesia Stock Exchange (BEI) which overseeing by the Financial Services Authority, and the Ministry of Environment and Forestry.
Power producers that operate coal power plants and have a level of emissions lower than the level set by the government can sell emission allowances to their less efficient peers, according to Dr Ignatius Wahyu Marjaka, the director of the ministry’s department for the mobilization of sectoral and regional resources.
In February, Indonesia - Southeast Asia’s largest economy and the world’s eighth-largest greenhouse emitter - started the first phase of mandatory carbon trading for 99 coal power plants owned by 42 companies and supplying electricity to state utility firm PLN.
More than half of the power generation in Indonesia is sourced from coal.
Wahyu said that Indonesia is also looking into companies in the forestry industry that are quite capable and can meet the requirements to participate in the exchange in September.
Forestry and similar sectors linked to land use, together with energy and transportation, make up 97% of Indonesia’s pledge to lower emissions and adapt to climate change.
Late last year, the government lifted its target to cut emissions by 2030 by 31.89%, or by 43.2% with international financial support.
Wahyu said that Indonesian government is also identifying entities that contributed to removing 577 million tonnes of carbon dioxide equivalent (CO2e) verified under the United Nations Framework Convention on Climate Change between 2018 and 2020.