The Indonesia Stock Exchange (IDX) on Tuesday launched a carbon trading bourse, as the coal-dependent country seeks to mobilize market incentives to support its emission cut targets.
The Financial Services Authority (OJK) appointed the IDX as the operator of Indonesia’s carbon trading market, following the passage of an omnibus law on the financial sector in February that includes mandatory carbon trading for coal power plant operators.
Under the carbon trading mechanism, companies engaged in renewable energy or decarbonization activities will be able to sell carbon credits, while emitters such as coal power plant operators can buy those credits to compensate for their carbon emissions.
Participants must register with the Ministry of Environment and Forestry to engage in carbon trading at the IDX.
President Joko Widodo attended the launch, mentioning the potential for carbon trading at the exchange to reach more than IDR 3 quadrillion (USD 194 billion), though he did not offer a time frame. “This will be a new sustainable economic opportunity as the world is heading toward the green economy,” he said.
OJK identified 99 coal power plants that could participate in trading. The authority also expects projects from forestry, agriculture, waste, oil and gas, processing and marine industries to participate in the market.
Actual trading commenced after the official launch. The first instance was a registered geothermal project of state-owned energy giant Pertamina in North Sulawesi province. It had registered around 800,000 tonnes of carbon dioxide equivalent with traded volume of 459,914 CO2 equivalent priced at 69,600 rupiah per tonne. The transaction recorded 13 total trades and orders from 16 registered users.
As of 11 am in Jakarta, total traded volume had reached 954,495 tonnes CO2 equivalent at 77,000 rupiah per tonne. The transaction recorded 28 total orders from 16 registered users including local banks and securities companies. Among buyers were Bank Central Asia, Bank Mandiri, BNI Sekuritas and Danareksa Sekuritas.
Indonesia, which ratified the Paris Agreement in 2016, set its nationally determined contribution (NDC) for greenhouse gas emission reduction at 43.2% by 2030 and has established a goal of reaching net-zero carbon emissions by 2060.
Those initiatives include implementing the carbon trading scheme.
State-owned electricity company Perusahaan Listrik Negara (PLN), the main user of coal energy in Indonesia, operates 130 coal power plants producing over 20 gigawatts as of 2022. It has announced a plan for the early retirement of coal power plants and to end all new construction by 2030.
The Ministry of Finance estimated the amount needed to achieve the 2030 NDC would be at least USD 310 billion. Widodo has also signed the Just Energy Transition Partnership (JETP) with developed nations to boost the coal power plant phasedown with the financial support of USD 20 billion.
The government is looking into alternative energy sources with an identified amount of 3,686 GW from solar, micro-hydro, bioenergy, wind turbine, geothermal and sea currents. But as of last year, the total utilized capacity had reached just 12.56 GW.