Indonesia launches CO2 emissions trading exchange

Indonesia recently launched its government-backed carbon exchange, called the Indonesia Carbon Exchange (IDX Carbon), an entity operated by the country's Stock Exchange, according to the announcement made by President Joko Widodo at the inauguration ceremony held in Jakarta, according to spglobal.com

The Indonesia Carbon Exchange is the first exchange of its kind in Indonesia, a country that has only just begun to take measures to set prices for carbon emissions. By launching transactions with CO2 emissions, the exchange will provide a platform for other matters related to the environment.

IDX Carbon started trading, on the first day of operation, with a preliminary volume of 459,953 tons of CO2 emissions and 27 transfers, the exchange informed in a statement. An exchange official said at the launch ceremony that the initial trading price was 69,600 Indonesian rupiahs/ton of CO2 emissions ($4.50/ton).

The supplier of carbon units in the first transactions was Pertamina New & Renewable Energy (PNRE), within the Project Lahendong Unit 5 and Unit 6 PT Pertamina Geothermal Energy, the stock exchange also stated. This is an upstream and downstream development that includes drilling, construction and operation of a new 2 x 20 MW geothermal power plant at the Tompaso Geothermal field in Indonesia's North Sulawesi province.

Currently, IDX Carbon has four trading mechanisms, namely: Market, Auction Market, Regular Market and Negotiated Market, and the exchange is connected to the National Register System - Climate Change Control within the Ministry of Environment and Forests, which facilitates the administration the transfer of carbon units.

According to exchange officials, companies that want to voluntarily reduce their greenhouse gas emissions can register to become users and buy available carbon units, and project owners who already have registered carbon units can sell them.

• IDX Carbon will support the fulfillment of Indonesia's climate objectives

Buyers in the initial deals from IDX Carbon included Bank Central Asia, Bank CIMB Niaga, Bank DBS Indonesia, Bank Mandiri (Persero), Pertamina Hulu Energi and Pertamina Patra Niaga, among others, the exchange said.

IDX Carbon is expected to help the Asian country meet its climate goals and unlock more capital to finance decarbonisation, Indonesia's Financial Services Authority (OJK) said this month.

The OJK has issued a regulation that describes the trading rules on the stock exchange. The regulation is part of OJK's efforts to help the government implement climate change control initiatives by reducing greenhouse gas emissions, according to the source cited. The regulation, which came into effect on August 2, stipulates that the operator of the carbon exchange must be an Indonesian company, and the entity's shares can only be held by Indonesian citizens, Indonesian legal entities and/or authorized foreign legal entities, with a ceiling of 20% for foreign entities.

Carbon units sold on the exchange will be considered securities and must be registered, and market operators must receive regulatory approval, while respecting restrictions on the types of environmental products allowed to be traded.