There’s nothing to cover up. One person and business contribute to GHG emissions daily. From the electricity, you use 24/7, your personal vehicle’s emissions, to your favourite food production. All contribute to your carbon footprint. While everyone can reduce one’s carbon footprint, offsetting carbon is another choice. How does it work? Learning from the EU was the main discussion in our October Sustainable Talk: Learning About the Indonesian Carbon Offset Market. This month we had a guest of honour, Jenni Kahkonen. Jenni is a Finnish lawyer & consultant specialising in EU and climate governance and legislation. In the fruitful discussion, we mainly focused on the challenges and potential ways Indonesia could participate in the international carbon market.

Indonesia has a big opportunity for the carbon market with our extensive land and sea and balanced with good governance; the carbon market can improve Indonesia’s economy. Indonesia has NDCs (Nationally Determined Contributions) and has voluntarily committed to reducing 29% of its GHG against the BAU scenario by 2030 and 41% with international support.
The question is, how does this work with the company’s participation in the international Carbon market? Looks like it’s not simple, as the government needs to define the long-term project of the carbon market in Indonesia. The project will probably have to be registered with the SRN (Sistem Registri Nasional / National Registry Sistem) under the Environmental Ministry (KLHK). After registering our project in SRN, we have to check the international credits’ eligibility before putting ourselves in the international carbon market.

Another thing to consider is the Paris Agreement has Corresponding Adjustments (CA’s written in article 6(2) of the Paris Agreement). We must understand that when Parties transfer a mitigation outcome internationally to be counted toward another Party’s mitigation pledge, this mitigation outcome must be ‘un-counted’ by the Party that agreed to transfer it. Thus, we have to make sure that the project we registered will not be double counted, and that also means Indonesia needs to appoint an agent who will register and retire carbon credits.

Where does Indonesia stand at this point? This question is hard since Indonesia hasn’t clearly developed the regulations and is still facing many challenges. The current issue that we are facing is that carbon credit issuances from Indonesia are on hold by the Government. The developers await clarity (since April 2022). It happened because of the lack of transparency in regulatory guidelines on the Indonesian carbon credit market, which put credit issuances on hold.

To overcome this issue, Indonesia finally finalised its carbon trading regulations that entered into force on 20 October as “Permen LH No. 21 Tahun 2022”. This regulation is a guide to our domestic and international carbon trading. This helps us to understand the terms of international carbon trading. First, we must comply with the Carbon Trading Roadmap before placing it for the relevant sector; then, companies will need to apply for export credits.
Along with this regulation, we also need to create a buffer where a share of the credits will be retained; 5% for domestic trade and 10-20% for foreign trade. This will allow us to begin carbon trading at the start of next year. This further needs to be monitored.

Any suggestions for businesses that want to offset carbon? This is interesting. First, they should monitor the government regulation development in Indonesia closely. For sure, they should get ready to be able to account for their GHGs or savings. Once the regulations are clearer, they can register to sell their credits locally or internationally. Sure, the Pertiwi-Consulting team would be happy to assist companies with this.