Indonesia, the world’s top exporter of thermal coal, recorded about 1m tons of taxable carbon emissions during a trial of carbon trading mechanism covering 32 coal power plants, as reported by Reuters on November 29. The experiment was intended to determine the emission cap for coal electricity plants, in preparation for the country’s first carbon tax policy coming next April. Precisely, Indonesia’s Energy Ministry set emission limits ranging from 0.918 to 1.094 tons of carbon dioxide (CO2) per megawatt-hour (MWh) for the 32 coal-fired power plants. The projects exceeding the limitation can purchase carbon credits from those that emit less than the emission cap or pay a carbon tax. According to the current plan, the excess emissions that could not be offset by carbon trading will be levied.

As the world’s eighth-biggest greenhouse gas (GHG) producer, Indonesia aims to reach carbon neutrality by 2060 through measures including carbon tax and emission trading. The country will impose a tax of USD2.10 per ton of CO2 on enterprises exceeding the emission cap from April 1, 2022. The move would make it the second country in Southeast Asia to price carbon behind Singapore, which priced excessive CO2 emissions at USD3.72 a ton. Citing Finance Minister Sri Mulyani Indrawati, Indonesia’s carbon price would be among the cheapest globally, making the country prevent cross-border carbon trade of domestic entities until it reaches its GHG reduction goal. For reference, the carbon tax rate for CO2 stands at around USD8.4 per ton in China and USD67 in the EU market. The Indonesian government would lower the emission cap and raise the tax rate step-by-step to balance energy transition and economic growth, according to fiscal policy chief Febrio Kacaribu. 

Sources:

https://www.reuters.com/markets/commodities/indonesias-carbon-trade-trial-indicates-taxable-emissions-2021-11-29/

https://www.bloomberg.com/news/articles/2021-11-29/indonesia-sees-148-billion-funding-gap-to-curb-carbon-emissions

https://www.reuters.com/markets/commodities/indonesia-keep-carbon-trade-local-until-greenhouse-gas-target-met-2021-11-19/

https://asia.nikkei.com/Spotlight/Caixin/China-s-carbon-market-records-its-first-cross-border-deal