Indonesia as the Leading Global Potential Carbon Market: Everything You Need to Know

What is a Carbon Credit?

A carbon credit is a term for a financial instrument representing a carbon dioxide equivalent (CO2e) unit. Each unit is equal to one tonne of "excess" CO2e from any activities that reduce carbon emission or produce more carbon emission absorption. In Indonesia, the National Registry System will record every carbon credit as ICER (Indonesia Certified Emission Reduction).

Why Do You Need Carbon Credit?

Our daily activities generate carbon emissions which can exacerbate climate change. Therefore, we need to reduce emissions and increase absorption of carbon into the atmosphere. When you buy a carbon credit, the money is to cover the expense of reducing emissions and increasing the absorption of carbon emissions. In other words, it is a way to offset every 1 ton of CO2e you emit to save the world by embracing the ESG principle.

How to Produce Carbon Credits?

There are two ways to create carbon credits. The configuration is as follows: 

1. Increase the Absorption: Forest has a great potency to absorb GHG emissions such as carbon. By designing the forest projects, enhancing the community’s inclusion within the ecosystem, and endorsing complete 360 ESG principles, the forest can maximize its potential and monetize itself as an excellent carbon credit factory.
2. Decrease the Emissions: We can do many things to reduce the emissions. These could be reducing fossil fuel usage, replacing fossil fuels with renewable energy, and innovating more efficient technologies to produce fewer emissions.

How to Choose High-Quality Carbon Credits in the Market?

There are some aspects to determine whether the performance of carbon credit is reliable or unreliable. Based on internationally recognized guidelines, carbon credits must be real and measurable, permanent, additional, independently verified, also unique and traceable. There is also a range of standards to judge carbon credits' quality, such as Gold Standard, Clean Development Mechanism, and Permanent Forest Sink Initiative.

Where to Buy or Sell the Carbon Credits?

You can buy and sell carbon credits in the carbon market. In Indonesia, so far, the carbon credits trading was done locally in the OTC (over-the-counter) market. 

Is There Any Risk that My Carbon Credit Used by Other Parties?

Indonesia has a National Registry system, which functions for recording the issuance, use, and transfer of ICER. The record allows tracking of every certificate and avoids double counting. Therefore, when credit is "used" to offset a unit of carbon emitted, the registry system will automatically delete (or cancel) it from the record to prevent it from being returned to distribution and re-sold.

Who are The Prospect Buyers in Indonesia?

Indonesia’s carbon credits prospect buyers are enormous industries such as international airlines and FMCG, also countries like the USA, Germany, Norway, Denmark, and Japan. Not only that, every other stakeholder with any initiatives to achieve net-zero carbon emission - whatever the timeline is - is Indonesia’s prospect carbon credit buyer.

When will The Market be Implemented in Indonesia?

The exact implementation path is still unclear. While the presidential regulation did refer to cross-border trading, in November 2021, Sri Mulyani as Indonesia's finance minister, indicated that Indonesia would not allow international carbon trading until it met its domestic targets.

Remember, Indonesia is still in the process of implementing the carbon market. However, abundant natural resources, regulations related to carbon, and support from various parties can make Indonesia an excellent player, especially in addressing the substantial carbon credit supply issue that has been a persistent obstacle in the development of the industry.

Want to know more and need help related to carbon markets?

Talk to our experts today by contacting Askpert.id. We will be happy to help you get the most suitable solution to your problem.