Indonesia launched its first carbon emissions trading market to curb the climate impact of its coal-dominated power sector.
During a launch ceremony on September 26, an initial 13 transactions covering 459,914 tons of CO2 equivalent were made on the bourse operated by the Indonesia Stock Exchange.
Carbon credits traded at a price of 69,600 rupiah ($4.51) per unit, which is far below the cost of similar products in established emissions markets like the European Union.
Initial trading is open to coal plants generating at least 100 MW of power and connected to the state utility PerusahaanListrik Negara’s power grid, which accounts for about 86% of the Indonesia’s coal capacity.
The IDXCarbon exchange aims to incentivize utilities to reduce pollution by setting emissions caps for power plants and allowing them to trade any unused credits. President Joko Widodo said at the launch event that Indonesia sees a potential economic gain of up to 3,000 trillion rupiah from the sale of carbon credits.
Indonesia aims to achieve net-zero emissions by 2060 by shifting away from coal power and increasing investments in cleaner energy. Coordinating Minister for Investment and Maritime Affairs, Luhut Binsar Panjaitan, said in June that the nation could hit that target five years ahead with adequate funding.
Paul Butarbutar, CEO at think tank Indonesia Center for Renewable Energy Studies, said, “This is just the beginning, so we’re not expecting immediate big interest from the domestic market. But it is hoped that as time goes by, and with better dissemination, the domestic carbon exchange will further grow.”
Governments across Asia are implementing emission pricing policies, but the carbon markets in the region have yet to make any meaningful impact. Carbon price in South Korea and China are still considered to be below the level needed to compel large emitters to reduce pollution.