Indonesia expected to introduce new law to stimulate carbon trading market


(Image: Wikimedia Commons)

To fully unleash the potential of the carbon credit market, Indonesian government plans to speed up the review of relevant regulations and introduce new laws in June. Moeldoko, the director of the Indonesian Presidential Office, vows to facilitate a smoother carbon trading before President Joko Widodo steps down in this October.

Indonesia’s carbon trading is regulated by Presidential Regulation No. 98 of 2021 and Minister of Environment and Forestry Regulation No.21 of 2022. The country officially inaugurated its carbon trading platform in September 2023. However, subsequent trading volume has been limited.

During a meeting with officials from the Ministry of Environment and Forestry, Moeldoko stated that carbon trading is a project initiated by President Jokowi with the aim of establishing a credible, inclusive, transparent, and fair carbon economy ecosystem. Therefore, carbon trading should be more active during this tenure.

He noted that Indonesia has a great potential for carbon trading due to its rich and vast natural resources as well as significant market. However, the carbon trading and exchanges have not progressed as expected due to “some obstacles in drafting and harmonizing regulations processes, such as carbon taxes and setting emissions thresholds in several sectors. This needs to be addressed promptly,” he explained.

Laksmi Dewanti, the Director-General of Climate Change Control (PPI) of the Ministry for Environment and Forestry (KLHK), revealed that the government plans to issue a Ministerial Regulation related to foreign carbon trading by this June. “In formulating the regulations, they must ensure that the metrics used in carbon trading contribute to emission reductions are in line with the NDC targets under the Paris Agreement,” she added.

Moeldoko reiterated the importance of coordinating existing regulations and drafting new laws, especially to enhance projects related to the country’s Nationally Determined Contributions (NDCs) in area such as energy, waste, industrial, and the use of agricultural products, forestry, and other sectors in line with the advancements in science and technology, such as blue carbon.

The Ministry of Environment and Forestry plans to include solutions for marine carbon reduction in the second NDC document, expected to be submitted in August, to accelerate the achievement of emission reduction targets.

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