Indonesia's Financial Services Authority (OJK) has released a series of rules for the establishment of a carbon exchange, with the goal of launching an onshore carbon trading market by the year-end.
The establishment of the exchange aligns with Indonesia’s initiatives as one of the world’s major carbon emitters to reduce emissions by more than 30% by 2030 and to achieve net-zero emissions by 2060.
The carbon exchange will be allowed to facilitate cross-border trade, according to the rule made public on Aug. 24.
The trading process will adopt a cap-and-trade system, imposing constrains on pollution levels are enabling trade of allowances among business entities.
According to the new rule, it specifies that the trading will use a certificate that will show the amount of greenhouse gas emission reduction, quantified in one ton of CO2.
The exchange operator should be an entity based in Indonesian, but 20% of its voting shares could be held either directly or indirectly by an overseas company, the rule said.
OJK said last week that several companies have shown interest in becoming the operator, but no decision has been made yet.
The financial regulatory authority had previously indicated its expectation to launch carbon trading market in September.
Indonesia had initially planned to impose a carbon tax on emissions that had not been offset by carbon credits. However, authorities postponed the implementation, citing the need for a right "economic situation".