The carbon trading market, much like the cryptocurrency and NFT markets, are particularly vulnerable to fraud because it deals in nontangible goods.
he Financial Services Authority (OJK), the regulator and supervisor of the financial services industry, issued on Aug. 23 OJK Regulation No. 14/2023 on Carbon Trading Through the Carbon Exchange to serve as a guideline for market operators organizing carbon trading. This is one of the government's concrete efforts to combat rising pollution, as well as its commitment to supporting the reduction of greenhouse gas (GHG) emissions in the Paris Agreement.
Several countries, such as the United States, Canada, the European Union, Australia and Japan, have set up carbon markets.
The US launched its carbon trading program in 2009 as part of the Regional Greenhouse Initiative. The program contributed US$699 million in net economic value to the US in 2018-2020 and a GHG emissions reduction of 46 percent over the last 12 years.
Carbon trading also occurs in the EU under the European Union Emission Trading Scheme (EU ETS), with 30 European countries participating. In practice, the EU ETS employs the cap and trade scheme, in which the cap is a limit or quota on the level of GHG emissions companies produce, to be gradually reduced over time. Since its launch in 2005, the EU ETS has contributed to a 43 percent reduction in industry emissions.
Despite effectively reducing GHG emissions, carbon trading has imploded in several countries worldwide: It has become a new type of financial crime. Carbon trading is described as "largely a sham" in Australia because it causes $1 billion of money lost. Public money is being misdirected because there has been no discernible reduction in carbon emissions.
Could this happen in Indonesia? Without a doubt.
For starters, carbon trading does not offer tangible products, which is the same as investing in cryptocurrencies or non-fungible tokens. As a vehicle for carbon trading, the carbon market is subject to abuse due to a lack of regulations, transparency and oversight, just like other financial markets. This situation will be aggravated because Indonesia is still in the early stages of development, leaving several opportunities open to fraud and other illegal activities.
Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.
Thank you for sharing your thoughts. We appreciate your feedback.