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Carbon market hot issue ahead of climate summit
Beauty in nature: A postcard from before 1938 (top) shows the Rhone Glacier and Belvedere Hotel in Obergoms, Switzerland
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eauty in nature: A postcard from before 1938 (top) shows the Rhone Glacier and Belvedere Hotel in Obergoms, Switzerland. The bottom photo shows the hotel, sans glacier, on Aug. 21 of this year.(ETH Library Zurich/Handout via Reuters (top) and Reuters/Denis Balibouse (bottom))
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.
Dida added that a study about the implementation of such schemes on several industries — electricity generation, cement manufacturing, pulp and paper, and fertilizer production — would help push for a 0.02 percent increase in the gross domestic product (GDP).
He said the market was only ready to be opened now as the government had to prepare all necessities regarding the operation of the market.
“We needed to prepare a good measurement, reporting and verification [MRV] system prior to opening the market, so we can produce a reliable figure for the amount of emissions that people actually reduce before exchanging them for money,” Dida said.
The government recently launched a public service agency (BLU) tasked with managing and disbursing funds related to environmental protection and conservation, named the Indonesian Environmental Estate Fund (BPDLH).
During the agency launch in October, Environment and Forestry Minister Siti Nurbaya Bakar said the agency would support climate change mitigation and adaptation efforts, which include carbon trading.
Starting Jan. 1 next year, the agency will manage funds for forest replanting, which was previously handled by an agency under the Environment and Forestry Ministry. The government is also working to allow the agency to manage funds from Norway under the Reducing Emissions from Deforestation and Forest Degradation partnership that was signed in 2010.
Under the US$1 billion pledge, the Nordic country agreed to help Indonesia protect tropical forests in the world’s largest archipelago.
However, the government has yet to finish drafting detailed guidelines for the domestic carbon market. Dida said all necessary regulations and guidelines were expected to be ready next year.
“We might also try out the scheme first in several sectors first, such as power plants managed by PLN,” Dida said, referring to the state electricity firm.
World Resources Institute (WRI) Indonesia director Nirarta Samadhi said carbon trading was a must as it would help all parties reduce their emissions.
“After the trading is activated, there should also be advanced finance and capacity building to help a country or even the whole world in transitioning from ‘dirty’ industries to more clean and renewable alternatives,” he said.
The carbon market and financing are also expected to be key topics of discussion in the 2019 UN Climate Change Summit in Madrid slated to kick off on Monday. Hundreds of participating countries are expected to come up with market mechanisms to help each other in funding measures to stop the planet from getting hotter.
Apart from talks regarding the market, countries are also expected to commit to more ambitious long-term programs to reduce their emissions, following recent reports from the Intergovernmental Panel for Climate Change.
The UN panel of scientists has concluded that the impact of global warming could affect the lives of billions of humans around the world as it will have impacts on the land and water and on food supplies.
Indonesia, however, has yet to outline any intention to submit a more ambitious plan to curb climate change. The country has instead been holding to its 2016 pledge in the nationally determined contributions (NDCs) to reduce its greenhouse gas emissions by 29 percent, or 41 percent with international support by 2030.
The NDCs, first discussed during the 2015 United Nations Climate Change Summit in Paris, comprise the long-term target of participating countries in achieving net-zero emissions by 2050.
“If Indonesia doesn’t commit to a more ambitious plan, the world will be doomed as we can’t hold the rise in temperature to only 1.5 degrees Celsius, because the country is among the biggest greenhouse gas polluters in the world,” said Arief Wijaya of WRI Indonesia.
