COORDINATING MINISTRY FOR ECONOMIC AFFAIRS

REPUBLIC OF INDONESIA

Carbon Market Readiness in Indonesia

Dida Gardera
Assistant Deputy of Environmental Preservation

Jakarta, 17 Februari 2020

 Background

Emission Reduction Target (NDC)

29% reduction (unconditional) and up to 41%
reduction (conditional with international
support) below business-as-usual baseline in
2030. Government is
developing carbon
Financing Challenge pricing instruments
Government budget alone is not for scale up cost-
sufficient to finance NDC target. effective mitigation
measures in
Encourage Non-Party Indonesia.
Stakeholders Participation
Urgent to develop enabling environment
for NPS to scale up mitigation.

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 Enhancing Market Readiness
Supported by Partnership for Market Readiness The Results
program, core technical readiness activities were
Emission profiles and
conducted to identify suitable carbon pricing marginal abatement cost
instruments and develop MRV system in power curves for power and industry
sectors.
and industry sectors.
MRV system are developed
and piloted in power and
The readiness activities builds a discussion industry sectors.
platform where stakeholders can have open policy
and technical discussions in three Working A domestic crediting
Groups. mechanism is being
developed and piloted.

The discussions leads to the agreement that An ETS pilot is being

Emission Trading System + crediting prepared.
mechanism is prioritized to be elaborated further.

Market
Readiness
Partners: National Ministry of Energy Ministry of Ministry of Ministry of National Industry
Development and Mineral Finance Environment Industry Electricity Associations 3
Planning Agency Resources and Forestry Company
 Market Readiness Results
MRV System
1. MRV systems and guidelines for power
sector cement and fertilizer industries
2. Online reporting system for GHG
emission for power generations (APPLE-
GATRIK)
3. MRV pilot implementation in power
sector, cement, and fertilizer industries
4. Four drafts regulation for MRV
implementation for power sector and
cement industries
Assessment and Studies
1. Emission profile for power sector and
energy-intensive industries
2. MACC for power sector and energy-
intensive industries
3. Assessment of MBI options for
Indonesia.
Carbon Pricing Pilot Development
1. Pilot implementation for Indonesia Certified
Emission Reduction (ICER) scheme
2. One concept note and detailed plan for
voluntary ETS pilot implementation
Capacity Building and Awareness Raising
1. MRV training workshops for power sector
and energy-intensive industries
2. Capacity building workshops for market-
based instruments
3. Series of activities for communication,
engagement and awareness raising, e.g.
Carbon Pricing Weekly in August 2018.
4. Communication materials, including briefing
papers, technical notes, policy briefs, etc.
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Stakeholder Consultation and Engagement

5
Market Readiness Status

The market
readiness
activities
since 2017
has
improved
more than
90% of the
readiness
element*.

*Carbon
market
readiness is
assessed
according to
the category
given by the
OECD in its
report
Market
Readiness:
Building
Blocks For
Market
Approaches
(2010). 6
 Indonesia is Considering ETS

https://icapcarbonaction.com/en/ets-map

• "Emission/waste permit trading system" has been mentioned in 2009 Environmental

Management Law and was further defined in Government Regulation on Environmental
Economic Instrument in 2019. 7
• Market-based options study in 2018 concludes that ETS is most suitable for Indonesia.
 ETS as Prioritized Carbon Pricing Instrument
• Government Regulation No. 46/2017 on Environmental Economic Instruments mandates
development of emissions trading system.This policy can served as the policy basis for ETS
development, therefore ETS can be developed relatively faster compared to other carbon
pricing instruments.
• Several sectors has sufficient readiness in MRV aspects, i.e. power, cement and fertilizer
sectors.
• According to PMR study, ETS implementation in power, cement, fertilizer and pulp&paper
sectors (~150 companies / >600 plants) can lead to 58.13 MtCO2 emissions reduction (~18
percent of NDC in energy and IPPU) and encourage positive GDP growth.

Challenges in ETS development:

• Implementing regulation for mandatory emission reporting and emission cap is still required.
• ETS capacity in government personnel requires continuous capacity building, especially in
ETS design and development.
• Existing market infrastructure, i.e. registry system, needs to be improved to 'market-ready'
level.
• Cap setting process requires intensive consultation with stakeholders.
• Competitiveness concerns shall be adequately addressed in the instrument's design.
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 Steps Forward in ETS Development
Current Conditions Steps Forward

Crediting mechanism and Designing a Technical

voluntary ETS will be piloted Framework

A study for MBI options for Indonesia is completed Designing a

Regulatory Framework
• Govt. Regulation No. 46/2017 on Environmental Economic Instruments
• Presidential Regulation No. 77/2018 on Environmental Fund
General framework and road
Management
map for national carbon pricing
• Draft of Min. of Energy Regulation on Energy Sector GHG Inventory;
• Draft of Min. of Industry Regulation on GHG Emission Reporting for development
Industry;
• MRV Guideline for Power Sector;
• Improvement on MRV Guidelines for Cement CO2;
• MRV Guideline for fertilizer industry 9
 Development of Indonesia Certified Emission
Reduction (ICER)
• Domestic carbon crediting mechanism is considered a no-regret carbon pricing
instruments and is being developed under the Ministry of Environment and Forestry.
• Guidelines and methodologies have been developed and a pilot
validation/verification for a microhydro power plant for rural electrification have been
conducted.
• It is expected that the ICER mechanism can be fully operational in 2020 and be
linked with the ETS voluntary pilot implementation.

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COORDINATING MINISTRY FOR
ECONOMIC AFFAIR
Coordinating Deputy for Management of
Energy, Natural Resources and Environment

Thank You

Ali Wardhana Bld.

Jl. Lapangan Banteng Timur No. 2 – 4
Jakarta 10710
Tel. 021-3500901, Fax. 021-3441261