Ahead of the annual United Nations’ Climate Change Summit, the government is preparing to open a domestic carbon market as part of efforts to fulfill its international commitment to reducing greenhouse gas emissions.

Dida Gardera, environment assistant deputy at the Office of the Coordinating Economic Minister, said the government was close to opening the first domestic carbon market in the country as stipulated in Government Regulation No. 46/2017 on environmental economic instruments.

Article 27 of the regulation stipulates that environment funds can be sourced from carbon trading revenue, among other sources.

“While many issues are still under deliberation right now, it is most likely that we will use the emissions-trading system, commonly known as the cap and trade mechanism,” Dida told journalists during a press briefing on Wednesday.

Under the cap and trade mechanism, parties are required to keep their greenhouse gas emissions below a certain level, or cap, set by either the authorities or the market. Should their pollution be found to have exceeded the maximum level, they must pay the excess pollution to other parties that successfully maintain their emissions below the cap.

To cut greenhouse gases, the cap can be gradually reduced, forcing companies to figure out new ways of running their businesses with fewer emissions.

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