Jakarta. Indonesia's carbon trading market is very small compared to the world's largest markets, but the government remains committed to reducing carbon emissions by 43.2 percent by 2030.

Elen Setiadi, Deputy for Business Development & State-Owned Enterprises Innovation at the Coordinating Ministry for Economic Affairs, reported that Indonesia's carbon trading market has reached a transaction value of Rp 36.7 billion ($2.26 million) from its launch on September 26, 2023, to June 30, 2024. The trading volume amounted to 608,000 tons of CO2 equivalent.

In comparison, the global market for carbon dioxide (CO2) permits reached a record 881 billion euros ($948.75 billion) in 2023, marking a 2 percent increase from the previous year, according to analysts at LSEG in February. The EU's emissions trading system (ETS) alone was worth around 770 billion euros, representing 87 percent of the global total. The North American markets were valued at a combined 71.4 billion euros, while the Chinese market was worth 2.3 billion euros.

"Carbon trading is expected to be a vital instrument in reducing greenhouse gas emissions and achieving decarbonization targets," said Elen during a webinar titled Carbon Trading and Market in Indonesia 2024 in Jakarta on Tuesday.

In the first half of 2024, Indonesia recorded a carbon transaction value of Rp 5.9 billion with a trading volume of 114,500 tons of CO2 equivalent.

Elen emphasized that carbon trading is crucial for reducing greenhouse gas (GHG) emissions and achieving the government's net zero emissions (NZE) target by 2060. The World Economic Forum's Global Risk Report 2024 highlighted that five of the top 10 risks facing the world in the next decade are closely linked to climate change.

To address GHG and achieve net zero emissions, 196 countries adopted the Paris Agreement in 2015, aiming to keep temperature rises below 1.5 degrees Celsius and reduce global emissions by 45 percent by 2030. As of April 2024, the average surface temperature of the earth had already risen by 1.28 degrees Celsius above pre-industrial levels.

Indonesia has committed to reducing carbon emissions by 31.89 percent independently and by 43.20 percent with international support. "This effort requires substantial financial support. Therefore, the government has issued several regulations, including Presidential Regulation 98 of 2021 on carbon trading mechanisms," Elen said.

To achieve this target, Elen mentioned that the performance-based payment scheme through Reducing Emission from Deforestation and Forest Degradation (REDD+) is one of the government strategies. East Kalimantan Province will receive $110 million for reducing emissions by 20 million tons of CO2 equivalent from the Forest Carbon Partnership Facility or Carbon Fund.

Jambi Province will receive $70 million for reducing emissions by 14 million tons of CO2 equivalent from the BioCarbon Fund. Additionally, the Green Climate Fund will pay $103.8 million for reducing emissions by 20.3 million tons of CO2 equivalent, while Norway will provide $156 million for reducing emissions by 31.2 million tons of CO2 equivalent.