Indonesia launches state-backed carbon trading exchange

Indonesia has launched its government-backed carbon exchange, called Indonesia Carbon Exchange, or IDX Carbon, operated by Indonesia Stock Exchange, President Joko Widodo announced Sept. 26 at a launch ceremony in Jakarta.

The exchange is the first of its kind for Indonesia, which has only started to take measures to put a price on carbon emissions, and will help pave the way for emissions trading as well to provide a platform for future environmental commodities.

IDX Carbon kicked off its first trading day with a preliminary trade volume of 459,953 mtCO2e and 27 transactions, the exchange said in a statement. An exchange official said at the launch ceremony that was broadcast live that the initial trading price was IDR 69,600/mtCO2e ($4.50/mtCO2e).

The provider of carbon units in the first trade was Pertamina New and Renewable Energy (PNRE) under the Project Lahendong Unit 5 and Unit 6 PT Pertamina Geothermal Energy, the exchange said. This is an upstream and downstream development, including drilling, construction and operation activities, of 2 x 20 MW new geothermal power plant at Tompaso Geothermal Field, North Sulawesi Province, Indonesia.

Currently, IDX Carbon has four trading mechanisms called Auction Market, Regular Market, Negotiated Market, and Marketplace, and the exchange is connected to the National Registry System - Climate Change Control under the Ministry of Environment and Forestry, which makes it easier to administer the transfer of carbon units and avoid double counting, the exchange said in its statement Sept. 26.

It said that companies who wish to voluntarily reduce their GHG emissions can register to become users and buy available carbon units, and project owners who already have carbon units registered can sell them.

The buyers in the initial IDX Carbon trade 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 facilitate the nation's fulfilment of its climate targets and unlock more capital to finance its decarbonization, the Indonesia's Financial Services Authority (OJK) said in a statement Sept. 18.

OJK had issued a regulation outlining rules for trading on the exchange that would also serve as a reference for market participants. The regulation is part of OJK's efforts to assist the government in implementing climate change control initiatives through the reduction of Greenhouse Gas (GHG) emissions, it said in the statement.

The regulation, which took effect on Aug. 2, stated that the carbon exchange operator must be an Indonesian enterprise and shares in the entity can only be owned by Indonesian nationals, Indonesian legal entities, and/or authorized foreign legal entities, with a cap of 20% of ownership for foreign entities.

Carbon units sold on the carbon exchange will be considered securities and must be registered, and market operators will need to be licensed by the regulator while adhering to restrictions on the types of environmental products they are allowed to trade.