POLICY

Minister: Indonesia not closed to international carbon trade
May 8, 2023

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JAKARTA (FORESTHINTS.NEWS) - In a comprehensive position paper released recently (May 5), Indonesia's Minister of Environment and Forestry Professor Siti Nurbaya has clarified that the accusation claiming that Indonesia's carbon trading for international markets is legally and technically closed is untrue.

The position paper reiterates that international carbon trading through the transfer of carbon units, or Internationally Transferred Mitigation Outcomes (ITMO), can only be carried out with appropriate authorization in accordance with the Paris Agreement.

The position paper also reaffirms that Indonesia is open to international cooperation through trade in emission reductions, including using its power to balance emissions from friendly countries to a certain extent as part of the country’s Forestry and Other Land Use (FOLU) Net Sink 2030 climate goals.

“This is aligned with the cooperation mechanism regulated in the Paris Agreement and refers to the methodology and arrangements for carbon trading under the UNFCCC. Cooperation mechanisms enable the public and private sectors to participate in reducing GHG emissions,” Minister Nurbaya stressed.

According to the position paper, detailed provisions on carbon in the forestry sector, as well as protocols for international carbon trading through investment cooperation to achieve NDC targets and other specific objectives, are shortly to be finalized.

Business actors, explained the Minister, must calculate GHG emission reductions in accordance with the MRV (Measurable, Reportable, Verifiable) principles and with a calculation method in line with the methodology issued by the UNFCCC, IPCC, and/or the Indonesian National Standards (SNI).

If the GHG emission reductions are to be traded, she underlined, then the legal requirement primarily includes an Emission Reduction Certificate (SPE), as proof of GHG emission reduction performance.

Authorization is a must

Minister Nurbaya asserted that authorization for international carbon trading is legally required, because the number of carbon units transferred out of Indonesia, their purpose, the number of carbon units to be recorded or used by participating parties, as well as the applicable price per carbon unit, need to be known by the government, such that recording and tracing can be consistently carried out to support the achievement of the NDC.

Minister Nurbaya emphasized this as a top priority in Indonesia's carbon governance. “We are finalizing detailed procedural regulations for this, and also trying to make it as simple and practical as possible for stakeholders to participate in the carbon economy.”

The Minister also underlined the importance of carefully regulating carbon trading to avoid double counting and double claims of GHG emission reductions and to ensure that these reductions can only be claimed by buyers.

The Indonesian government, she pointed out, is committed, both through the domestic and foreign private sectors, to achieving NDC targets and/or other international goals such as CORSIA, as well as voluntary goals, by shifting to lower GHG emission development, and by making new investments, whereby authorization is required to transfer emission reduction results or ITMOs to global partners.

The Minister declared that Indonesia adheres to its constitution, such that both domestic and international carbon trading is required to be governed by the relevant regulations.

Environmental integrity, transparency

Minister Nurbaya reemphasized that carbon trading through international trade mechanisms must not reduce the achievement of the NDC target in 2030, and all carbon unit records, traded both domestically and abroad, must be carried out through the National Registration System (SRN PPI).

“Any transfer of carbon units abroad requires authorization. Currently, arrangements for carbon trading through carbon exchanges are also being prepared,” the Minister said.

Furthermore, she continued, Indonesia legally requires standardized carbon credits to be generated with high environmental integrity and transparency, which is important so that existing Voluntary Carbon Schemes, such as Verra, Plan Vivo, Gold Standard, and others, can be accepted and used in efforts to meet NDC targets or carbon neutral goals by companies/businesses.

According to the Minister, efforts to ensure that the carbon credits produced are of high quality and have environmental integrity are currently being carried out by VCMI, the World Economic Forum, Tropical Forest Carbon Initiative, The Guardian Germany, and the University of Berkeley.

Minister Nurbaya drew attention to the importance of several suggestions made by these institutions. “They recommend private participation in selecting high quality credits, improving standards and best practices, creating market transparency to avoid greenwashing practices, and ensuring a high level of integrity.”

Overall, the Minister elaborated, these regulatory measures aim to provide a framework for achieving NDC targets while protecting the environment and ensuring the sustainability of the FOLU sector.

Next Steps

Following a recent Cabinet Meeting (May 3, 2023), as laid out in the position paper, the Indonesian government has established technical steps as a basis for international carbon trading. 

“The steps include immediate detailed technical regulation on international trade procedures that align with national regulations and also comply with international/UNFCCC regulations,” Minister Nurbaya explained.

Additionally, she added, a Carbon Trading Roadmap for the forestry sector is being prepared, and carbon levies or taxes will likely be established by mid-year.

“We plan to launch a Carbon Stock Exchange alongside an enhanced version of the National Registration System (SRN) and “Rumah Konsultasi Karbon” (a technical and policy center dedicated to all relevant stakeholders for consultation on carbon-related issues) in June 2023,” Minister Nurbaya confirmed.

Moreover, an integrated Standard Operating Procedure (SOP) for carbon trading is being developed in the Indonesian Carbon Trading Exchange System/SRN-Carbon Registry-Carbon Stock Exchange (International/Domestic Carbon Trading).

“The SOP will include an information service center, technical guidance, continued operationalization of the National Registry System (SRN), the tracking and recording of carbon credits, and the determination of the ratio between carbon credits for meeting Indonesia's NDC targets and tradable carbon credits,” the position paper highlighted.

This SOP, according to the position paper, will serve as the rules of the game for the entire SRN process, as well as a guideline for every implementer of mitigation and adaptation actions as part of their commitment and contributions towards achieving NDC targets, as well to prepare for carbon trading.

The government will also regulate the distribution of payments for the results of mitigation actions (result-based performance), with the principle of distribution to the government, local governments, private sector, communities, and supporting organizations/NGOs, as stated in the position paper.

“The Indonesian Environment Fund (IEF) will maintain its legal mandate in international, bilateral, and multilateral engagements and also play a role as an intermediary institution by executing and channelling funds to national, regional and local stakeholders in support of their programs and activities,” the Minister stated.

Meanwhile, the position paper also emphasized that the requisite relevant detailed regulations are being developed for the economic value of carbon in various sectors, such as Industrial Processes and Product Use (IPPU)/industry, transportation, waste, agriculture, marine, and fisheries, towards the formulation of the 2nd NDC before 2025 as well as for carbon trading roadmaps in these sectors.

Finally, Minister Nurbaya affirmed that the Indonesian government will provide updates on the progress of Emission Reduction Certificates (SPE) which are being mainstreamed into the Carbon Registry as well as lay out concrete steps for companies to perform GHG emission reduction actions registered in the SRN.

TAGS: CLIMATE ACTIONS , ENHANCED NDC , CARBON GOVERNANCE

RELATED STORIES


POLICY

Minister: Indonesia not closed to international carbon trade
May 8, 2023

facebookfinal.png wafinal.png twitterfinal.png emailfinal.png

JAKARTA (FORESTHINTS.NEWS) - In a comprehensive position paper released recently (May 5), Indonesia's Minister of Environment and Forestry Professor Siti Nurbaya has clarified that the accusation claiming that Indonesia's carbon trading for international markets is legally and technically closed is untrue.

The position paper reiterates that international carbon trading through the transfer of carbon units, or Internationally Transferred Mitigation Outcomes (ITMO), can only be carried out with appropriate authorization in accordance with the Paris Agreement.

The position paper also reaffirms that Indonesia is open to international cooperation through trade in emission reductions, including using its power to balance emissions from friendly countries to a certain extent as part of the country’s Forestry and Other Land Use (FOLU) Net Sink 2030 climate goals.

“This is aligned with the cooperation mechanism regulated in the Paris Agreement and refers to the methodology and arrangements for carbon trading under the UNFCCC. Cooperation mechanisms enable the public and private sectors to participate in reducing GHG emissions,” Minister Nurbaya stressed.

According to the position paper, detailed provisions on carbon in the forestry sector, as well as protocols for international carbon trading through investment cooperation to achieve NDC targets and other specific objectives, are shortly to be finalized.

Business actors, explained the Minister, must calculate GHG emission reductions in accordance with the MRV (Measurable, Reportable, Verifiable) principles and with a calculation method in line with the methodology issued by the UNFCCC, IPCC, and/or the Indonesian National Standards (SNI).

If the GHG emission reductions are to be traded, she underlined, then the legal requirement primarily includes an Emission Reduction Certificate (SPE), as proof of GHG emission reduction performance.

Authorization is a must

Minister Nurbaya asserted that authorization for international carbon trading is legally required, because the number of carbon units transferred out of Indonesia, their purpose, the number of carbon units to be recorded or used by participating parties, as well as the applicable price per carbon unit, need to be known by the government, such that recording and tracing can be consistently carried out to support the achievement of the NDC.

Minister Nurbaya emphasized this as a top priority in Indonesia's carbon governance. “We are finalizing detailed procedural regulations for this, and also trying to make it as simple and practical as possible for stakeholders to participate in the carbon economy.”

The Minister also underlined the importance of carefully regulating carbon trading to avoid double counting and double claims of GHG emission reductions and to ensure that these reductions can only be claimed by buyers.

The Indonesian government, she pointed out, is committed, both through the domestic and foreign private sectors, to achieving NDC targets and/or other international goals such as CORSIA, as well as voluntary goals, by shifting to lower GHG emission development, and by making new investments, whereby authorization is required to transfer emission reduction results or ITMOs to global partners.

The Minister declared that Indonesia adheres to its constitution, such that both domestic and international carbon trading is required to be governed by the relevant regulations.

Environmental integrity, transparency

Minister Nurbaya reemphasized that carbon trading through international trade mechanisms must not reduce the achievement of the NDC target in 2030, and all carbon unit records, traded both domestically and abroad, must be carried out through the National Registration System (SRN PPI).

“Any transfer of carbon units abroad requires authorization. Currently, arrangements for carbon trading through carbon exchanges are also being prepared,” the Minister said.

Furthermore, she continued, Indonesia legally requires standardized carbon credits to be generated with high environmental integrity and transparency, which is important so that existing Voluntary Carbon Schemes, such as Verra, Plan Vivo, Gold Standard, and others, can be accepted and used in efforts to meet NDC targets or carbon neutral goals by companies/businesses.

According to the Minister, efforts to ensure that the carbon credits produced are of high quality and have environmental integrity are currently being carried out by VCMI, the World Economic Forum, Tropical Forest Carbon Initiative, The Guardian Germany, and the University of Berkeley.

Minister Nurbaya drew attention to the importance of several suggestions made by these institutions. “They recommend private participation in selecting high quality credits, improving standards and best practices, creating market transparency to avoid greenwashing practices, and ensuring a high level of integrity.”

Overall, the Minister elaborated, these regulatory measures aim to provide a framework for achieving NDC targets while protecting the environment and ensuring the sustainability of the FOLU sector.

Next Steps

Following a recent Cabinet Meeting (May 3, 2023), as laid out in the position paper, the Indonesian government has established technical steps as a basis for international carbon trading. 

“The steps include immediate detailed technical regulation on international trade procedures that align with national regulations and also comply with international/UNFCCC regulations,” Minister Nurbaya explained.

Additionally, she added, a Carbon Trading Roadmap for the forestry sector is being prepared, and carbon levies or taxes will likely be established by mid-year.

“We plan to launch a Carbon Stock Exchange alongside an enhanced version of the National Registration System (SRN) and “Rumah Konsultasi Karbon” (a technical and policy center dedicated to all relevant stakeholders for consultation on carbon-related issues) in June 2023,” Minister Nurbaya confirmed.

Moreover, an integrated Standard Operating Procedure (SOP) for carbon trading is being developed in the Indonesian Carbon Trading Exchange System/SRN-Carbon Registry-Carbon Stock Exchange (International/Domestic Carbon Trading).

“The SOP will include an information service center, technical guidance, continued operationalization of the National Registry System (SRN), the tracking and recording of carbon credits, and the determination of the ratio between carbon credits for meeting Indonesia's NDC targets and tradable carbon credits,” the position paper highlighted.

This SOP, according to the position paper, will serve as the rules of the game for the entire SRN process, as well as a guideline for every implementer of mitigation and adaptation actions as part of their commitment and contributions towards achieving NDC targets, as well to prepare for carbon trading.

The government will also regulate the distribution of payments for the results of mitigation actions (result-based performance), with the principle of distribution to the government, local governments, private sector, communities, and supporting organizations/NGOs, as stated in the position paper.

“The Indonesian Environment Fund (IEF) will maintain its legal mandate in international, bilateral, and multilateral engagements and also play a role as an intermediary institution by executing and channelling funds to national, regional and local stakeholders in support of their programs and activities,” the Minister stated.

Meanwhile, the position paper also emphasized that the requisite relevant detailed regulations are being developed for the economic value of carbon in various sectors, such as Industrial Processes and Product Use (IPPU)/industry, transportation, waste, agriculture, marine, and fisheries, towards the formulation of the 2nd NDC before 2025 as well as for carbon trading roadmaps in these sectors.

Finally, Minister Nurbaya affirmed that the Indonesian government will provide updates on the progress of Emission Reduction Certificates (SPE) which are being mainstreamed into the Carbon Registry as well as lay out concrete steps for companies to perform GHG emission reduction actions registered in the SRN.

TAGS: CLIMATE ACTIONS , ENHANCED NDC , CARBON GOVERNANCE

RELATED STORIES