Jakarta. Indonesia is set to launch international carbon trading on January 20, 2025, as part of its efforts to reduce greenhouse gas emissions and strengthen its role in global climate action. The move follows the country's growing commitment to the Paris Agreement and aims to accelerate the global carbon market, supported by a recent agreement at COP 29 UNFCCC.

"Through the authorization agreement at COP 29 UNFCCC, Indonesia is further solidifying its position in the global carbon market. We invite all parties to collaborate in significantly reducing emissions," said Ary Sudijanto, Deputy for Climate Change Control at the Environment and Forestry Ministry on Wednesday.

Indonesia launched the domestic carbon exchange platform IDXCarbon in September 2023. Since then, domestic carbon trading has reached a value of Rp 55.237 billion, with a volume of 1.040 million tons of CO2e.

"With great potential in the domestic carbon trading sector, Indonesia is now preparing to enter the international market," he continued.

Wahyu Marjaka, Director of Carbon Economic Value Governance at the Ministry of Environment and Forestry, emphasized the importance of strong regulations and infrastructure supporting carbon trading. Indonesia has also begun implementing Article 6 of the Paris Agreement with a national registry system to ensure accountability.

"The development of a carbon trading roadmap, referring to NDC targets, will be a key guide in determining the number of quotas," he added.

In addition to contributing to climate change control, international carbon trading also presents a significant opportunity for Indonesia to drive economic growth through the global carbon ecosystem.

Indonesia, a country rich in ecosystem diversity and natural resources, faces serious challenges related to climate change. The industrial and forestry sectors are major contributors to GHG emissions.

With a total forest area of more than 130 million hectares, Indonesia has great potential to store or emit GHGs. However, deforestation, which has led to forest degradation, has made Indonesia’s forests a source of GHG emissions.

To address the impacts of climate change, the Indonesian government has taken progressive steps through regulations and institutions. Indonesia has ratified various international agreements, such as the UNFCCC, Kyoto Protocol, and Paris Agreement, which require countries to implement policies to tackle deforestation and apply sustainable forest management practices.

One of the key instruments introduced is carbon trading, a market-based mechanism where emissions allowances or carbon units can be traded to reduce total GHG emissions. Carbon trading is seen as a mechanism that enhances flexibility for countries to meet their emissions reduction commitments. The European Union Emissions Trading System (EU ETS) is the oldest carbon exchange, applying a cap-and-trade system that includes around 11,300 energy-intensive installations across 27 member states.

EU ETS has set an emissions reduction target of 8 percent by 2012 compared to 1990 levels. To date, EU ETS has generated a total profit of 184 billion euros.

The carbon exchange in Indonesia, known as IDXCarbon, introduces carbon units as securities, unlike international exchanges that treat them as commodities. This allows the management of carbon units as securities that can be resold as derivatives, although this conflicts with the principle of "retired carbon," where carbon units should be used once to reduce emissions.

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