Indonesia Opens Carbon Exchange to Foreign Participants, Boosting Climate Action

Indonesia's domestic carbon exchange, IDXCarbon, has commenced trading with foreign entities, marking a significant step in the nation's efforts to revitalize its role as a global carbon offset hub and attract investments for local climate initiatives.

Key Highlights:

* Nine overseas buyers participated in IDXCarbon's initial trading session on Monday.
* The exchange offers domestic carbon credits from PT Perusahaan Listrik Negara's energy projects.
* Indonesia plans to introduce forestry and land use-based credits, expected to command higher prices.
* President Prabowo Subianto aims to generate billions in carbon revenue and accelerate the net-zero target to 2050.
* Indonesia seeks $3.8 trillion in investments for renewable energy, grid capacity, and electric vehicles by mid-century.

Increased Market Access:

Indonesia was a leading supplier of voluntary carbon credits in Asia before export restrictions were imposed in 2022. The reopening to foreign buyers is expected to enhance the nation's competitiveness.

Trading Activity:

Since its launch in September 2023, IDXCarbon has experienced low demand due to delays in implementing an emissions cap-and-trade system. In 2024, the exchange traded 413,764 tons with an average price of $2.90.

New Listings:

IDXCarbon currently offers over 1.7 million domestic carbon credits from energy efficiency initiatives at PLN's gas-fired power plants and mini-hydropower projects.

Trading Volume Projections:

The exchange anticipates trading volumes of 500,000 to 750,000 tons in 2025, encompassing both domestic and international buyers.

Quality Concerns:

Analysts caution that concerns over the quality of Indonesia's carbon credits, particularly their actual impact on emissions reduction, could limit their appeal to global buyers. Additionally, the introduction of new supply could suppress local carbon prices.