Heaptalk, Jakarta — The threat of climate change has become an international concern due to its terrible impact on human life. Several countries, including Indonesia, continue to arrange efforts to overcome the issues, one of which is through the carbon trade mechanism.
As a testament to the government’s commitment to decarbonization, a pivotal step has been taken by issuing the Presidential Regulation (Perpres) No 98 2021. This regulation focuses on implementing Carbon Economic Value to Achieve Nationally Determined Contribution Targets and Control Greenhouse Gas Emissions in National Development.
Nevertheless, before the issuance of the presidential regulation, the Founder and Senior Partner of Umbra, Kirana Diah Sastrawijaya, delivered that the carbon projects have been going on for a long time which generally operate under the voluntary carbon mechanism, whereby the majority of certificates are traded internationally. She further elaborated on the scheme involved in the Nature Base Solution (NBS) and the joint credit mechanism supported by Japan’s government.
Even though it has a legal basis, Kirana sees that several regulations still need to be fully implemented, such as provisions regarding Nationally Determined Contributions (NDC) and international carbon trading regulations from the Ministry of Forestry. In addition, the government has established a carbon exchange to facilitate trading activities. However, in terms of pricing, she observed that the carbon price remains relatively low at around USD4 – USD5, indicating the policy implementation still needs to be maximized.
“At this moment, pricing is still not moving significantly, and then for the incentive for the reputational only, and we can say that because it is still not mandatory for the companies and individuals actually to diminish or conduct certain sustainable activities,” Kirana voiced.
Poempida Hidayatulloh, a carbon exchange activist, also conveyed, “And also, it is not only about the price, but also the frequency of the trading and the hype is not there (carbon trading orientation) yet.”
A proper carbon trade policy implementation, a better Indonesia’s decarbonization
To maximize the carbon market and carbon exchange progress, Kirana, during the talks with Poempida Hidayatulloh in Forum Carbon Indonesia’s YouTube Channel revealed multiple strategic steps in regulations that must be conducted, covering:
- Incentives provision to boost carbon trade in the carbon exchange. Currently, Kirana perceives a need for more implementation of special incentives to encourage participation in carbon trading, such as tax reduction schemes and reputation recognition, that enable companies’ interest in contributing to this sector. The characteristics of carbon trading, which involve the removal (retirement) of certificates after they are used as offsets, also need to be considered when providing incentives.
- International carbon trading licensing. Even though the Ministry of Environment and Forestry have issued the related regulation, Kirana said the industry’s players are still waiting for implementing regulations. According to her, an immense international market will increase demand and supply, positively impacting prices and trading activities on carbon exchanges.
- Policy’s expansion into multiple sectors. Currently, she admitted that the related regulation only belongs to the forestry and electricity sectors. At the same time, the industries interested in participating, such as mining and plantations, remain waiting for the issuance of regulations. For this reason, she affirmed that coordination between relevant ministries needs to be improved to speed up regulations formation comprehensively.
- Solid mechanisms regarding carbon trading disputes. Kirana said that agreements between parties are critical, specifically regarding ownership of carbon rights. Based on her perspective, carbon certificates require government licensing and certification. For this reason, she looks forward to a precise ownership rights mechanism to avoid disputes.
“I observed the government has issued plenty of regulations and policies. If the policies can be further implemented by the actual implementation and technical regulation, which will bolster the actual implementation, In that case, it definitely will have to enable carbon trading and carbon exchange to support the government’s goal for decarbonization,” said Kirana.
