TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Voluntary carbon markets to strengthen Indonesian NDC
In 2022 alone, 45.8 million tonnes of carbon credits were issued. There were a 3-4 percent growth in demand and 40 percent higher prices than in 2021, with community and nature-based solutions being the strongest.
Change Size
Coal power: Smoke and steam billow from a coal-fired power plant owned by Indonesia Power in Suralaya, Banten province, on July 10, 2020. Indonesia is committed to energy transition toward net zero in 2060. (Reuters/Willy Kurniawan)
A
s a way to facilitate reduction of climate crisis-inducing greenhouse gas emissions, carbon market and trading have been established. Various domestic, regional, international and sectoral markets have been established everywhere.
There are two distinct markets for carbon, namely compliance and voluntary markets. How are they different, and how could we ensure our participation in the voluntary carbon market strengthens and does not undermine efforts to achieve Indonesia’s ambitious nationally determined contributions (NDC)?
The world has been increasingly and devastatingly hotter. The climate crisis is here with us already. To manage the risk of worsening, rapid and massive reduction of emissions that cause greenhouse gases, notably carbon dioxide, are needed. The 2015 Paris Agreement has set a target that the increase in global temperature needs to be kept well below 2 degrees Celsius with the best effort to not exceed 1.5 degrees. This will be achieved by peaking emissions by around 2030 and achieving net zero by mid-century, followed by further reduction.
Article 6 of the Paris Agreement allows for countries’ NDCs to be achieved individually or in cooperation with others through market mechanisms. Specifically, parts of the NDC can be traded with each other while some emission-reducing joint initiatives can also be traded with each other, all to achieve their respective NDCs.
A market mechanism, at least theoretically, will reduce the cost of achieving, or complying with, carbon emission reductions; or, it can achieve more reductions with the same budget. This has been shown in the reduction of sulfuric pollutants in the United States’ 1990 Clean Air Act, for one example, when the cost of compliance was found lower than originally expected when the market mechanism was applied. With lower cost of compliance, aggressive plans to tighten the emissions allocations over time follow an ambitious trajectory toward net zero and beyond.
Indonesia’s new Enhanced NDC, submitted in 2022, commits Indonesia to limiting its future emissions at about 32 percent with its own resources or 43 percent with international cooperation, below the business-as-usual trajectory by 2030. This is more ambitious than the original 2016 NDC or its 2021 update.
To facilitate the achievement of its NDC, Indonesia has embraced the carbon market mechanism through domestic and international carbon trading. Via Presidential Regulation No. 98/2021, Indonesia regulates the economic valuation of carbon and how it could support the achievement of its NDC.
