Indonesia publishes carbon pricing regulations including emission trade and carbon tax

New Regulation on carbon pricing published by Indonesia. The Regulation of the Minister of Environment and Forestry No. 21/2022 on Procedure for Implementation of Carbon Pricing was declared in Indonesia on October 22, 2022.

The Regulation comprises of measures in order to reduce the emission of greenhouse gases (GHG) which involves trading of emission quotas, emission reduction incentives,and carbon taxes.

The “economic value of carbon” which in Indonesia is referred to as NEK (Nilai Ekonomi Karbon) is considered as the value of each unit of greenhouse gas emitted both through human and industrial activities. NEK initiates to take measures like carbon trading, emission reduction incentives (RPB: Result-Based Payments), and carbon levy, to reduce the emission of GHG. The record of GHG emission reduction target is to be maintained by business operators which is to be verified by an eligible third party. The National Registry System for Climate Change (SRN PPI) needs to take charge of the establishment of NEK measures by the state government.

The measure under the Regulation includes emission trading which consist of trading of emission quotas among different industrial entities. If a business operator’s emissions are less than its quotas, it can choose to either keep the remaining emissions for two years or trade them with other entities. For this a Certificate of GHG Emissions Reduction (SPE-GRKs) for the remaining quota should be issued by the government. In the contrary case, emission quotas can be purchased from other entities. Another measure under NEK is called carbon levy which comprises of imposition of tax based on carbon content emission.