OPINION
MEMR Regulation 16/2022:
Kick-starting carbon trading
for coal-fired power plants?
Overview
MEMR Reg 16/2022 is the first
sectoral regulation issued regarding
carbon trading for power plant Sub-
sector. This regulation aims to provide
guidance for carbon trading for power
plants, as follows:
1. Emission trading until 2024 will
first focus on coal-fired power
plants (PLTU) connected to PLN’s
electricity grid.
2. Emission Ceiling Technical
Approval (Persetujuan Teknis Batas
Atas Emisi/PTBAE) for PLTU
connected to PLN’s electricity
grid will be established within 20
business days after MEMR Reg
16/2022 is issued, i.e: 17 January
2023. PTBAE for PLTU located
outside of PLN’s business area/
wilayah usaha and/or PLTU for
self-use will be established no later
than 31 December 2024.
3. MEMR Reg 16/2022 indicates
that PTBAE for business actors
(PTBAE untuk pelaku usaha /
PTBAE-PU) for each PLTU
connected to PLN’s grid will
be established no later than 31
January 2024. MEMR Reg 16/2022
indicates that domestic emission
trading for PLTU may be carried
out afterwards.
4. MEMR Reg 16/2022 expressly
states that new and renewable
50 COALMETAL ASIA | JANUARY 2023
energy power plants can carry out
GHG emission offset.
5. The independent validator and
verifier for power plant Sub-sector
must obtain a business license on
electricity supporting services.
Background
Since the issuance of Presidential
Regulation No. 98 of 2021 on Carbon
Pricing for Achieving Nationally
Determined Contribution (NDC) Target
and Controlling GHG Emission in
National Development (PR 98/2021),
power plant has been one of the Sub-
sectors that is prioritized for carbon
trading, particularly emission trading
for coal-fired power plants (PLTU).
However, the emission trading must
wait until the Minister of Energy and
Mineral Resources (MEMR) establishes
a greenhouse gas (GHG) emission
ceiling for PLTU. The issuance of
MEMR Regulation No. 16 of 2022
on The Procedures for Carbon Pricing
Implementation for Power Plant
Sub-sector (MEMR Reg 16/2022),
which primarily regulates GHG
emission ceiling for PLTU, indicates
that emission trading for PLTU may
commence soon.
Establishment of PTBAE and
PTBAE-PU
Establishment of PTBAE
Under MEMR Reg 16/2022, MEMR
determines Emission Ceiling Technical
Approval (Persetujuan Teknis Batas
Atas Emisi/PTBAE) specifically for
each type of fossil power plant based
on: (i) GHG emission baseline for
power plant Sub-sector; (ii) the NDC
target for power plant Sub-sector; (iii)
the result of GHG emission inventory of
power plant Sub-sector from APPLE-
Gatrik; and/or (iv) the period to achieve
the NDC target for power plant Sub-
sector. MEMR may change the PTBAE
to be stricter, if needed.
PTBAE will be conducted in three
phases:
a. first phase is from 2023 to 2024.
This phase will only focus on
PLTUs, particularly: (i) PLTUs
connected to PLN’s electricity
grid which will be determined
within 20 business days since the
issuance of MEMR Reg 16/2022
(i.e.: 17 January 2023) and (ii)
PLTU outside of PLN’s Business
Area (Wilayah Usaha/Wilus)
and/or PLTU for self-use which
is determined no later than 31
December 2024.
The PLTUs connected to PLN’s
electricity grid is divided into four
categories: (i) non-mine mouth and
mine mouth PLTU with capacity
of 25MW -100MW, (ii) non-mine
mouth PLTU with capacity of
 Kirana D. Sastrawijaya | Angela Vania Rustandi
| Kimp Yustisiana D. Hermawan
| Indriyane Vera Natalia | Zuhal Dwi Saputra
100MW – 400 MW, (iii) non-mine
mouth PLTU with capacity of >
400 MW, and (iv) mine mouth
PLTU with capacity of ≥ 100 MW
(First Phase PLTU);
b. second phase is from 2025 to 2027;
c. third phase is from 2028 to 2030.
(PTBAE Phases)
PTBAE for each type of fossil
power plants after 2030 will be carried
out pursuant to the GHG emission
control target for energy Sector for the
same phase.
Establishment of PTBAE-PU
In addition to PTBAE, MEMR REG
16/2022 also provides further details
on PTBAE for business actors (PTBAE
untuk pelaku usaha / PTBAE-PU) for
each type of fossil power plants. MEMR
determines PTBAE-PU for each power
plant unit by considering: (i) PTBAE for
each type of power plant; (ii) the average
GHG emission intensity data based on
power plant GHG emission report; and
(iii) the average GHG emission data
based on power plant GHG emission
report. MEMR Reg 16/2022 indicates
that PTBAE-PU is determined for each
power plant unit in ton CO2e by dividing
PTBAE with the average GHG emission
intensity of the previous year and then
multiplying it with the average GHG
emission of the previous year.
If data (ii) and (iii) above are not
available yet, PTBAE-PU is calculated
proportionally by comparing power plant
units that have been in operation for: (i)
the same type; (ii) equivalent installed
capacity; and (iii) the same technology.
The PTBAE-PU allocated to business
actors must not exceed the accumulated
value of PTBAE and will be determined
at the latest on 31 January.
Prior to the establishment of
PTBAE-PU, business actors must
prepare and submit an annual GHG
emission monitoring report for each
power plant unit no later than 31
December of the ongoing year for
the next planning period. Given that
PTBAE for PLTU connected to PLN’s
grid will be established on 17 January
2023 maximum and then business actors
must submit the annual GHG emission
monitoring report on 31 December 2023
maximum, this indicates that MEMR
will establish the first PTBAE-PU for
PLTU connected to PLN’s grid by no
later than 31 January 2024.
Unlike PR 98/2021 and MEMR
Reg 21/2022 that do not expressly state
whether carbon trading is mandatory
or not, MEMR Reg 16/2022 explicitly
requires business actors to carry out
carbon trading after receiving PTBAE-
PU. Business actors who do not carry
out carbon trading after obtaining
PTBAE-PU will receive a warning
letter from MEMR and its PTBAE-PU
allocation for the following carbon
trading period is limited to 75%. It is
unclear from which the 75% allocation
will be counted, but this seems to
indicate that business actors cannot opt
to save up all of its PTBAE-PU (if its
emission is below the PTBAE-PU) or
opt to receive sanctions for exceeding
the PTBAE-PU without conducting
carbon trading (e.g.: pay carbon tax).
Further clarity is needed.
The PTBAE-PU allocation for
PLTU for 2023 is 100%. The PTBAE-
PU allocation after 2023 will be given
based on the result of carbon trading
transactions conducted one year earlier,
with the following conditions:
a. if the carbon trading transaction
result is more or equal to 85%,
PTBAE-PU allocation is given in
accordance with the transaction
result; or
b. if the carbon trading transaction
result is less than 85%, the PTBAE-
PU allocation is 85%.
However, MEMR Reg 16/2022 does
not provide further clarity on the basis to
calculate the 100% and 85% PTBAE-PU
allocation.
Auction of PTBAE-PU
MEMR Reg 16/2022 introduces a
new concept called PTBAE-PU auction.
If there is short supply of PTBAE-PU
in the carbon market, MEMR can carry
out PTBAE-PU auction to increase the
PTBAE-PU availability in the carbon
market. The results of PTBAE-PU
auction will be used to reduce the GHG
emission for power plant Sub-sector,
including: (i) the development of new
and renewable energy; (ii) energy
efficiency; and/or (iii) other GHG
emission mitigation actions for power
plant Sub-sector.
However, MEMR Reg 16/2022 does
not regulate further the mechanics for
carrying out the auction and from where
MEMR will provide the PTBAE-PU.
If the additional PTBAE-PU for the
auction is issued by MEMR, this may
beat the purpose of establishing PTBAE-
PU and carrying out carbon trading for
achieving the NDC target as MEMR
can easily issue more PTBAE-PU which
can potentially exceed the established
PTBAE and GHG emission reduction
target for power plant Sub-sector.
Emission Trading for PTBAE-
PU Holders
Under MEMR Reg 16/2022, the
period of carbon trading starts from 1
JANUARY 2023 | COALMETAL ASIA 51
 OPINION
January and ends on 31 December each
year. Following the end of the carbon
trading period (i.e., 31 December) in
each year, carbon trading transactions
will be calculated according to the
performance of PTBAE-PU and/or
GHG Emission Reduction Certificate
(Sertifikat Pengurangan Emisi Gas
Rumah Kaca/SPE-GRK), for each
power plant unit.
Any PTBAE-PU surplus at the end
of the carbon trading period can be
traded in the following year for up to
two years since the end of said carbon
trading period where PTBAE-PU surplus
occurs, so long as such trading does not
pass the abovementioned PTBAE Phases.
MEMR Reg 16/2022 expressly states
that applications cannot be submitted
for PTBAE-PU surplus to become
SPE-GRK. In contrast, Article 13(4) of
MOEF Reg 21/2022 provides that if the
actual emission is below the PTBAE-PU,
business actors can apply for SPE-
GRK which can be used for domestic,
international, and cross-Sector carbon
trading. Further clarity is needed on this.
MEMR Reg 16/2022 briefly
provides the mechanics for
implementing carbon trading that is in
line with PR 98/2021 and MOEF Reg
21/2022, which indicates that PTBAE-
PU can only be used for domestic
carbon trading between business actors
with the same GHG emission ceiling
and/or emission quota. Please see our
client alert on MOEF Reg 21/2022 for
further elaboration on this.
MEMR Reg 16/2022 prohibits
emission trading between power plants
unit in the same power plant unit (unit
pembangkitan tenaga listrik) which may
comprise more than one power plant units.
Prior to the issuance of MEMR
Reg 16/2022, it is indicated that carbon
tax will be imposed on PLTU that
exceeds its GHG emission ceiling even
52 COALMETAL ASIA | JANUARY 2023
after conducting carbon trading. The
relationship between the imposition
of carbon tax and carbon trading for
PLTU is not mentioned in MEMR Reg
16/2022. We suspect that further clarity
will be provided in the Minister of
Finance regulation relating to carbon tax
which is currently being prepared by the
Ministry of Finance.
MEMR Reg 16/2021 also requires
business actors conducting carbon
trading through direct carbon trading to
submit the result of the carbon trading
implementation (as explained further
below). For carbon trading conducting
through carbon exchange, the reporting
of carbon trading implementation result
is conducted pursuant to applicable
regulations.
Carbon Trading for New and
Renewable Energy Power Plants
Article 2 (2) of MEMR Reg 16/2022
clearly states that new and renewable
energy power plants carry out carbon
pricing through GHG emission offset.
GHG emission offset applies to
businesses and/or activities without
PTBAE that provide a statement of
emission reduction by using the result of
mitigation actions from other businesses
and/or activities. GHG Emission Offset is
carried out for businesses and/or activities
that have obtained SPE-GRK which may
come from GHG emission reduction
activities in the energy Sector, including:
a. new and renewable energy power
plants;
b. activities of the transportation,
building, and industry Sub-sectors,
including the implementation of
energy efficiency; and
c. other activities in the energy Sector.
In line with MOEF Reg 21/2022,
MEMR Reg16/2022 recognizes
the existence of emission reduction
certificates in the energy Sector for
GHG emission offset other than SPE-
GRK. Such certificate can be declared
equivalent with SPE-GRK pursuant to
applicable regulations, i.e.: the mutual
recognition scheme as regulated under
MOEF Reg 21/2022.
Similar with emission trading,
business actors developing new and
renewable energy power plants must
also comply with PR 98/2021 and
MOEF Reg 21/2022 in conducting GHG
emission offset, e.g.: preparation of
DRAM and procedures for SPE-GRK
issuance.
Furthermore, business actors must
report the issuance of SPE-GRK and/
or emission reduction certificates in
the energy Sector that are declared
equivalent to SPE-GRK through
APPLE-Gatrik no later than five
business days since the issuance of such
SPE-GRK and/or certificate.
Further Clarity on the Validation and
Verification
MEMR Reg 16/2022 requires
business actors conducting carbon
trading to submit an annual GHG
emission report for every power plant
unit (as explained further below).
MEMR will evaluate the GHG emission
report and if based on the evaluation,
the GHG emission report is deemed in
accordance with the activity data and
business data of the relevant power plant
unit, validation and verification will be
conducted. The report will be validated
and verified by an independent validator
and verifier pursuant to regulations
on environmental protection and
management (e.g.: MOEF Reg 21/2022).
Unlike PR 98/2021 and MOEF Reg
21/2022 that do not provide clarity on
the licenses and the type of business
entity for the independent validator and
verifier, MEMR Reg 16/2022 expressly
requires the independent validators and
verifiers for power plant Sub Sector to
obtain a business license on electricity
supporting services.
The Next Steps for Power Plant
Developers
PLTU and other fossil power plants
The following is the obligations
for PLTU, and other fossil power plant
developers mandated by MEMR Reg
16/2022:
a. Business actors conducting carbon
trading must prepare an annual
GHG emission monitoring plan
for each power plant unit. The
monitoring plan consists of gross
electricity production plan and GHG
emission level target. It is submitted
to MEMR through APPLE-Gatrik
no later than December 31 of the
current year for the following year’s
planning period.
b. Business actors conducting carbon
trading must report the result of the
carbon trading implementation to
MEMR no later than January 31 of
the following year.
c. Business actors conducting carbon
trading must submit an annual GHG
emission report for every power
plant unit, consisting of activity
data and business data of the power
plant unit. The report must be
submitted through APPLE-Gatrik
no later than 31 January of the
following year.
d. Business actors conducting
carbon trading must submit: (i)
PTBAE-PU implementation result,
(ii) evidence of GHG emission
offset implementation, and (ii)
the validated and verified GHG
emission report, to MEMR no later
than 20 April.
e. Business actors must pay levies on
the sale and purchase of Carbon
Units in carbon trading pursuant to
applicable regulations.
New and Renewable Energy Power
Plants
MEMR Reg 16/2022 indicates that
the obligations imposed for new and
renewable energy power plants are:
a. the obligation to report the result
of carbon trading implementation
to MEMR as explained in point (b)
above.
b. the obligation to submit a report
on the business data of the power
plant unit in accordance with the
procedures explained in point (c)
above. If business actors fail to
submit the business data, MEMR
will send a warning letter to the
business actors.
c. the obligation to report the issuance
of SPE-GRK and/or emission
reduction certificates in the energy
Sector that are declared equivalent
to SPE-GRK through APPLE-
Gatrik no later than five business
days since the issuance of such
SPE-GRK and/or certificate.
d. the obligation as explained in point
(d) above.
e. the obligation to pay levies on
the sale and purchase of Carbon
Units in carbon trading pursuant to
applicable regulations.
Closing
After one and a half years of waiting
for various Indonesian ministries to
issue implementing regulations on
carbon trading, carbon trading for
power plant Sub-sector may be able to
commence sooner than later. MEMR
Reg 16/2022 provides further clarity on
the procedures for implementing carbon
trading in the power plant Sub-sector,
particularly emission trading for PLTU
which requires a GHG emission ceiling.
MEMR Reg 16/2022 sets out a tight
deadline for MEMR to establish PTBAE
for PLTU connected to PLN’s grid, i.e.:
17 January 2023, after which business
actors must prepare an annual GHG
emission monitoring plan and MEMR
will establish PTBAE-PU for each
PLTU unit connected to PLN’s grid no
later than 31 January 2024.
The seamless and timely
implementation of emission trading for
PLTU will now depend on MEMR and
business actors as both have obligations
to perform – prior to and after the
establishment of PTBAE-PU – to enable
emission trading to be carried out.

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