Carbon Trade in Indonesia: Regulation, Potential, and Development

As a country which has a strategic position in global climate action, Indonesia has reinforced its commitment in reducing Greenhouse Gases (GHG) emissions as part of its climate action. Such commitment is reflected in its various national regulations and ratification in a number of climate-related international agreements. Besides, numerous climate-oriented development programs and initiatives have been carried out by Indonesia; among them is the carbon trade mechanism that marked another milestone for Indonesia’s climate action.

In Indonesia, the matters related to carbon trading are regulated by the Presidential Regulation Number 98 of 2021 on the Implementation of Carbon Pricing to Achieve the Nationally Determined Contribution Target and Control Over Greenhouse Gas Emissions in the National Development. Through this legal framework, carbon trading is defined as a market-based mechanism to reduce Greenhouse Gases (GHG) emissions through buying and selling carbon units. While GHG or carbon itself is construed as a universal performance indicator for climate action which has both essential economic value and international economic benefit.