Indonesia, a nation grappling with both economic advancement and environmental sustainability, is making strides in its carbon market. While the initial launch has been slower than anticipated, the government is implementing a robust strategy to accelerate growth and integrate carbon trading into its broader climate action plan.
The Indonesian Stock Exchange (IDX) launched its carbon trading platform, IDXCarbon, in September 2023. Early trading figures reveal a total transaction volume of $1.2 million by December 27, 2024. While modest, this represents a crucial first step. The market currently features three projects with greenhouse gas emission reduction certificates (SPE-GRK): the Lahendong Unit 5 & Unit 6 geothermal projects from PT Pertamina Geothermal Energy (PGEO),the construction of the New Natural Gas Power Plant PLTGU Block 3 PJB Muara Karang,and the Gunung wugul Mini-Hydro Power Plant (PLTM).
The low price of carbon credits – as low as $4.50 per ton of carbon dioxide in some early transactions – highlights the challenges ahead. However, Indonesian Finance Minister Sri Mulyani Indrawati has outlined a clear path forward.“We will continue to strengthen this, including (coordination) with various agencies such as the Ministry of Energy and Mineral resources and even the transportation sector,” she stated at the IDX’s 2025 trading opening in Jakarta on January 2, 2024.
The Indonesian government’s strategy involves a two-pronged approach: implementing carbon taxes and enacting sectoral emission regulations. This comprehensive strategy aims to increase demand for carbon credits, driving up prices and incentivizing further investment in emission reduction projects. The ultimate goal is to create a thriving carbon market that contributes substantially to Indonesia’s climate goals while fostering economic growth.
The participation of 100 companies, representing a total of 1,349,894 tons of CO2e in carbon units, with 427,247 tons already traded, demonstrates growing interest in the market. As the regulatory framework matures and the market gains momentum, Indonesia’s carbon market is poised to play a critically important role in the global effort to combat climate change. The early challenges underscore the complexities of establishing a prosperous carbon market, but the government’s commitment and strategic approach suggest a promising future.
The development of Indonesia’s carbon market offers valuable lessons for other developing nations seeking to balance economic growth with environmental responsibility. The experience highlights the importance of a comprehensive regulatory framework, strategic partnerships, and sustained government commitment to create a robust and effective carbon market.
Indonesia’s Carbon market: A Promising Path for Enduring Growth?
Indonesia is making waves in the fight against climate change, launching it’s own carbon trading platform, IDXCarbon. While still in its infancy, the market shows potential for positive impact both environmentally and economically. Today, we speak with Dr. Ratna Sari Dewi, a leading expert on environmental finance and policy in Southeast Asia, to delve deeper into the complexities and opportunities this new market presents.
Senior Editor, World-Today-News.com: Dr. Dewi, thanks for joining us today. Indonesia’s carbon market has gotten off to a relatively slow start. what are your thoughts on this initial performance?
Dr. Ratna Sari Dewi: It’s true that the early figures may appear modest,but we must remember that this is a nascent market. Establishing a functional carbon trading system requires a complex interplay of regulations,infrastructure,and market participant awareness. Indonesia’s government is taking a proactive approach, actively engaging stakeholders and refining the regulatory framework.This lays a solid foundation for future growth.
Senior Editor, World-Today-News.com: The article mentions a two-pronged strategy: implementing carbon taxes and sectoral emission regulations. why is this approach considered crucial for success?
Dr. Ratna Sari Dewi: Think of it like this: carbon credits need both supply and demand to thrive. Emission reduction projects generate the supply, but we need robust demand to drive up prices and incentivize more investment in thes projects. Carbon taxes and sectoral regulations create this demand. They put a price on emissions, encouraging companies to actively seek ways to reduce their footprint and participate in the market.
Senior Editor, World-Today-News.com: The article highlights low carbon credit prices as a challenge. How significant is this issue, and what steps can be taken to address it?
Dr. Ratna Sari Dewi: Low prices can indeed hinder market development. It frequently enough reflects a lack of confidence and a perception of limited demand. Indonesia’s government is wisely focusing on increasing demand through the aforementioned regulations and also by working closely with various sectors—energy, transportation, and industry. This collaborative approach sends a clear signal of commitment and helps build trust in the market.
Senior Editor, World-Today-news.com: Looking ahead, what are some key milestones or indicators that would demonstrate long-term success for Indonesia’s carbon market?
Dr. Ratna Sari Dewi: We’ll want to see several things: a consistent upward trend in trading volume and carbon credit prices, a growing number of diverse emission reduction projects entering the market, and, critically, clear evidence of emission reductions being achieved on the ground. If Indonesia can successfully foster a thriving and transparent carbon market, it will not only contribute significantly to their own climate goals but also set a valuable precedent for other developing nations navigating this complex
landscape.
