Indonesia’s energy ministry registered about a million tonnes of taxable carbon emissions throughout a recent trial, including 32 coal power plants. A senior official stated on Monday that the country is planning to start a carbon trading mechanism.
The world’s eighth-largest greenhouse gas emitter points to achieving carbon neutrality by 2060 and practicing a carbon tax and trading to help curb emissions.
Next April, Indonesia will begin charging a carbon tax of 30,000 rupiahs ($2.09) per tonne of CO2 equivalent (CO2e), levied on coal-fired power plant operators with emissions over a set limit.
The tax will be the reason for setting up a carbon market by 2025.
Throughout the trial, the ministry arranged a cap of 0.918 tonne CO2e per megawatt-hour for power plants with a capacity over 400 MW and 1.013 tonnes for plants with 100 MW-400 MW and 1.094 tonnes for mine-mouth plants with the corresponding degree.
Excess emissions taxed
The trial included power plants releasing more carbon than an allotted cap trading their excess product with those emitting under the cap. Under the current plan, excess emissions that could not be included by carbon trading will be taxed.
The energy ministry has not yet confirmed an emissions cap to the finance ministry for the carbon tax.
The head of the finance ministry’s fiscal office, Febrio Kacaribu, stated that authorities would keep affordable tariffs and flexible emissions limits in the short term.
When the market becomes liquid, the government may improve parameters, Febrio replied.
Finance Minister Sri Mulyani Indrawati has told cross-border carbon trade won’t receive approval until Indonesia reaches its emission goals, indicating its domestic carbon price to be among the most affordable globally.
Indonesia required a $365 billion investment within 2020-2030 to cut 29% of emissions. They combined a financing gap of 40% that he believes green bonds could receive partial finance.
Distinctly, a government study revealed last month that to relinquish its 2060 decarbonization target, Indonesia needs to fund $200 billion per year in 2021-2030.
