Indonesia opens carbon exchange to the world: What It means for global climate action - Video
Indonesia has expanded its carbon exchange to international buyers, aiming to attract foreign investment and generate funds for its domestic climate initiatives.
The platform, initially launched in September 2023 for local players, now invites global participation in trading carbon credits.
Carbon credits represent reductions or avoidance of carbon dioxide emissions, allowing companies to offset their emissions to meet regulatory requirements or enhance their environmental credentials.
As one of the world’s largest emitters of greenhouse gases, Indonesia relies heavily on coal to power its economy. Despite a 2022 multi-billion-dollar partnership with the United States and European nations to transition away from coal, progress has been limited.
President Prabowo Subianto has committed to advancing Indonesia’s carbon neutrality goal by 10 years to 2050 and plans to close hundreds of fossil-fuel power plants by 2040.
Additionally, the government aims to develop over 75 gigawatts of renewable energy capacity by 2040, though specific implementation strategies remain unclear.
Proceeds from carbon credit sales on the exchange are expected to fund these renewable energy and decarbonisation initiatives.
Environment Minister Hanif Faisol Nurofiq described the exchange’s expansion as an "important milestone in our collective journey towards a sustainable future."
He assured that the government would guarantee all credits issued on the exchange, implementing stringent measures to prevent double counting of emissions.
The international opening follows new guidelines on carbon credit trade agreed upon during COP29 last year. However, scepticism about the exchange remains.
Fabby Tumiwa, executive director of the Institute for Essential Services Reform, noted that domestic demand for carbon credits had been low, prompting the move to open the market to foreign entities.
"If domestic demand was high, we wouldn't need to open it to foreign entities," Tumiwa told AFP, highlighting concerns about whether projects on the exchange meet the "additionality" standard, which ensures emission reductions would not occur without the credits.
Uncertainties remain about the compatibility of Indonesia’s carbon credits with international standards.
Despite these challenges, initial trading showed activity. The stock exchange reported at least nine transactions on Monday, representing over 41,000 tons of carbon dioxide equivalent.
