CARBON MARKET in INDONESIA

Written by: Arief Hidayat (Carbon and Environmental Research Indonesia)

Photos: http://www.soxfirst.com

Market is a word that most people have understand what the mean is. There are also many types of market nowadays that in general it is a place where people buy their daily needs. On the last decade there is a new type of market, called a carbon market. It is may be an unfamiliar for common people, so what it is?

s a market had supposed to be, a carbon market also has instruments of a seller, a buyer, and commodity, which is a carbon credit. The seller is a party who conducts a project resulting to reduce their emission level of greenhouse gases (GHG), while the buyer is a party, either its under an obligation or as a voluntary motives, who needs that credits. Buyers are from the industrial sector, national or international government, or may be a broker, that acts as a third-party, who is willing to sell back its credit. Certain currency with fluctuate value is used for the transaction process. At this moment carbon markets have settled in several platforms and mechanisms, such as Clean Development Mechanism (CDM) and Joint Implementation (JI), which is a mandatory mechanism under Kyoto Protocol, voluntary-based markets such as Voluntary Carbon Market (VCM) and free-trade markets such as European Union Emission Trading System (EUETS) and Chicago Climate Exchange. Those markets have already sustained and grown very well as they have their own standards. The question is how is the situation in Indonesia? Does Indonesia need to build its carbon market and has the potential to develop it? In a dynamical situation of climate change, many real actions have to be realized, and one of it is by developing a carbon market in Indonesia. In an interview by Wimar Witoelar, on a few moments ago, Dicky Edwin H., a Market Mechanism Division Coordinator of National Council of Climate Change (DNPI), stated that carbon trading is a part of climate change mitigation actions and this is means an effort to reduce and prevent climate change. He also suggested that Indonesia should develop a National Registry as a coordinator which summarizes Indonesian carbon markets status, and prevent the double-counting of carbon credits. How about the potential of carbon market in Indonesia? According to the CDM statistics, as in 10 June 2011, Indonesia has 68 projects registered in United Nations Framework Convention on Climate Change (UNFCCC), and 9 projects are already got the Certified Emission Reduction (CER), in total of 2,597,902CER. This number is the second highest in South East Asia region below Vietnam, in total of 6,646,339CER. The average of emission reduction from all Indonesian CDM projects registered is 97 ktCO2e. Basically, emission reduction projects in Indonesia are the small-to-medium of scale project, so this explains why the average number is in a medium scale compared to the global average of emission reduction in total of 151 ktCO2e. There are also some technical boundaries in CDM that are complicated and take a long process which make emission reduction projects from Indonesia are not qualified to
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CDM market. On the other side, according to the DNPIs data the number of emission reduction projects in Asia, outside China and India which are the first and second highest of CDM projects, is increase significantly. In recent years, the bilateral cooperation between the developed and the developing countries has been developed. Japan, one of the developed countries that have interest in making cooperation with Indonesia, offers Bilateral Offset Mechanism (BOM) cooperation. Also, in 2010, some of developed countries are designing a concept of carbon market for the developing countries that currently dont have a carbon market yet. In annual conference of UNFCCCC in Cancun, December 2010, Partnership for Market Readiness (PMR), which is facilitated by World Bank, was officially introduced. PMR aims to facilitate capacitybuilding and piloting that is country-led, builds on country priorities, and leverages existing mitigation efforts. It is also to link the gap between the climate change mitigation actions and the low carbon economic growth activities. Indonesia has accepted this cooperation, leading a scheme of carbon market development post2012. DNPI, as the coordinator, and all stakeholders, including government, private sectors, and NGOs, would develop the program in 3 years. Basic foundations of the market readiness are policies, legal institutions, and other technical issues. The implementation of PMR will be started with National scoope on market conditions, which has been planned for 4 months this year. Then PMR activities and pilot projects that will be implemented in 2 years. (CER)

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