Carbon trading in Indonesia has reached a major milestone with the launch of its first international carbon trading platform. This initiative, introduced on January 20, 2025, aims to attract global investors while bolstering the nation’s position in the worldwide carbon market. By connecting local and foreign companies, this effort is set to play a pivotal role in Indonesia’s environmental and economic ambitions.
Understanding the Basics of Carbon Trading
Carbon trading is a system designed to reduce greenhouse gas emissions by creating a market for buying and selling carbon credits. Each credit represents one ton of carbon dioxide that a company or country is allowed to emit.
Organizations that emit less than their allocated amount can sell their surplus credits to others that exceed their limits. This system incentivizes emission reductions by rewarding companies that adopt greener practices. For Indonesia, carbon trading is a key tool to balance economic growth with environmental sustainability, contributing to global efforts against climate change.
Global Interest in Carbon Trading in Indonesia
The launch of the Indonesia Carbon Exchange (IDXCarbon) has sparked significant global interest, with 19 foreign companies already expressing intent to participate. President Director of the Indonesia Stock Exchange, Iman Rachman, highlighted this interest and emphasized continued outreach to listed companies with foreign affiliations. “Currently, there are 19 foreign companies that will participate in trading,” he said as reported by detik.com.
This initiative also aligns with Indonesia’s broader environmental goals. By launching this platform, the country aims to achieve its Nationally Determined Contribution (NDC) targets, control greenhouse gas emissions, and reach net zero emissions by 2060. The government’s commitment, supported by Regulation No. 21 of 2022 on Carbon Economic Value, underscores the nation’s determination to become a key player in the global carbon market.
Through international collaboration and local efforts, IDXCarbon is positioned to connect global investors with Indonesia’s abundant natural resources, further solidifying its importance in global climate action.
Balancing Growth and Sustainability in Indonesia
While Indonesia’s carbon market holds significant potential, it also faces challenges that must be addressed to ensure success. One major concern is the use of currency in transactions. While the Indonesia Carbon Exchange uses rupiah, many foreign companies prefer to conduct transactions in their own currencies. This creates complexities in settlement processes and poses a barrier for international participants.
President Director Iman Rachman acknowledged these issues, stating, “Their concerns are, first, related to the time it takes to open accounts since they are foreign entities, and second, the settlement of transactions. Their transactions are usually in foreign currencies, while ours are in rupiah. These are concerns we are currently addressing.”
Additionally, the Ministry of Forestry is actively preparing schemes to boost enthusiasm for carbon trading. Minister of Forestry Raja Juli Antoni emphasized the importance of carbon trading as a milestone in implementing the Carbon Economic Value (NEK). He highlighted its potential in the forestry and land-use (FOLU) sector, which could become a vital contributor to Indonesia’s carbon trading ambitions.
By addressing these challenges and capitalizing on opportunities, Indonesia aims to create a thriving and inclusive carbon market that benefits both domestic and international stakeholders.
What’s Next for Carbon Trading in Indonesia?
Indonesia’s carbon market continues to gain momentum, marked by a significant rise in participation. Since its domestic launch in September 2023, the number of registered users has grown from 16 to 104. Furthermore, the market recently celebrated a remarkable achievement of trading 1 million tons of carbon cumulatively.
These milestones demonstrate Indonesia’s readiness to expand its carbon trading platform and attract more global stakeholders. With a strong foundation and ongoing improvements to address challenges, Indonesia is set to play a vital role in global climate action while boosting its economic potential. The future of carbon trading in Indonesia looks bright as the nation builds on its success and strives for sustainability.
Source: finance.detik.com, rri.co.id, cnbcindonesia.com
Image: Aris Nurjani/VOI