Indonesia’s financial regulator announced on Friday its plan to establish a carbon exchange in the latter half of this year, as reported by Reuters on May 5. The aim is to increase the use of renewable energy and achieve net-zero emissions by 2060, as the country is one of the world’s biggest carbon emitters and is looking to cut emissions by more than 30% by 2030. The carbon exchange is being established to facilitate the early retirement of coal-fired power plants. Only entities operating within Indonesia will be permitted to trade on the exchange, which will operate under a cap-and-trade system where pollution levels are restricted and allowances can be traded by businesses. The Indonesian government aims to attract international investors to the carbon exchange and position the country as a leading player in the global carbon market. The carbon exchange will offer various types of carbon credits, including those generated from renewable energy projects, forest conservation, and agriculture.
In February, mandatory carbon trading was initiated for around 100 coal power plants owned by state utility Perusahaan Listrik Negara (PLN), which produces over half of Indonesia’s power. Indonesia had previously planned to introduce a carbon tax for emissions that had not been offset by carbon credits but postponed the implementation, citing adverse global economic conditions.