What Is The Carbon Exchange That Has The Potential To Generate Cuan 565 Billion US Dollars?

Illustration of the carbon market (Pixabay)

YOGYAKARYA Trading in carbon exchanges or carbon trading is one of the topics discussed in the meeting between President Joko Widodo (Jokowi) and the financial services industry. So, what is a carbon exchange?

A complete explanation of what carbon exchanges can be seen in the following reviews.

Carbon trading is a trading exchange that has obtained a business license from the authorities that organizes an integrated regulatory and surveillance system for all activities within the financial services sector regarding carbon trading and/or carbon unit ownership records.

This is stated in Article 27 of the Regulation of the Minister of Environment and Forestry Number 21 of 2022 concerning Procedures for the Application of Carbon Economic Values.

In the LHK regulation, it is said that the development of carbon trading infrastructure through carbon exchanges is carried out by developing carbon trading infrastructure, regulating the use of state revenues from carbon trading, and/or carbon transaction administration.

Furthermore, the trading mechanism through the carbon exchange is regulated in the Financial Sector Development and Strengthening Law (P2SK).

In the law, carbon exchanges can only be held by market organizers who have obtained a business license from the Financial Services Authority (OJK).

In this regard, the President Director of the Indonesia Stock Exchange (IDX) Iman Rachman said that his party appreciated the P2SK Law which was officially promulgated on December 15, 2022.

"We appreciate P2SK as a form of our market deepening in the future and also the expansion of IDX trading. Not only stock exchanges but also carbon exchanges," said Iman at a press conference at the Presidential Palace, Monday, May 16, 2023.

OJK Prepares Carbon Exchange Trading Infrastructure

Previously, the Chief Executive of OJK Capital Market Supervisory, Inarno Djajadi, said that his party had prepared the carbon trading market infrastructure.

"OJK has prepared its regulatory infrastructure related to the institutional and operational implementation of carbon exchanges and in it will be designated a carbon unit instrument as an effect that can be traded on carbon exchanges," said Inarno in early November, according to Antara.

However, there is no time line regarding the plan for this carbon exchange and the OJK is still making adjustments with related institutions, one of which is with the Ministry of Environment and Forestry (KLHK).

"We are still conducting studies, studying business specifications by OJK and SRO. And we are benchmarking with Europe, namely the EU Emissions Trading System (EU ETS) and with Korea (South Korea's Emissions Trading Scheme (KETS)," said Inarno.

Currently, continued Inarno, Indonesia is starting to step up to use the carbon market initiative as an alternative to financing for the real sector.

Indonesia has the potential to lead the carbon market. With the third largest tropical forest in the world covering an area of 125 million hectares, Indonesia is predicted to be able to absorb 25 billion tons of carbon.

The potential for carbon absorption does not include potentials that can be absorbed by mangrove forests and other greater carbon absorption potentials.

Based on this figure, Indonesia can generate as much as 565 billion US dollars only from carbon trading.

Inarno assessed that the determination of carbon prices is very important in overcoming climate change because the government can provide incentives to encourage emission reduction and disincentive for those who produce emissions more than the tolerated limit.

As of April 2022, there are 68 carbon pricing instruments including a carbon tax and efficient trade schemes that have been developed globally. Likewise, Indonesia has set a Presidential Decree on the value of the carbon economy which regulates the implementation of carbon pricing through several mechanisms, one of which is carbon trading through exchanges.

That's the information about what a carbon exchange is. Get the latest news update only on VOI.id.