The Energy and Mineral Resources Ministry has conducted a carbon trading pilot project for coal-fired power plants, acting chief of the State Income Policy Center at the Finance Ministry’s Fiscal Policy Board, Pande Putu Oka Kusumawardani, informed during an online discussion in Jakarta on Friday.
Carbon trade is the practice of buying and selling credits that permit a company or other entity to emit a certain amount of carbon dioxide, she explained. Carbon trade agreements allow for the sale of credits to emit carbon dioxide between nations as part of an international agreement aimed at gradually reducing total emissions.
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“To prepare compulsory carbon emission trading system scheduled for 2025, the Directorate General of Electricity has conducted trial runs under a voluntary scheme since early 2021,” she said during the discussion entitled 'Gauging the Profit and Loss of Carbon Tax'.
The pilot project has involved 32 coal-fired power plants, she informed. In the pilot project, the government has managed to make carbon transfer transactions through a carbon trading system at a price of Rp30 per kilogram of carbon dioxide equivalent.
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“Given the pilot project, we can say Indonesia has conducted carbon trading,” she informed.
Coal-fired power plants are the first sector that will be subjected to a carbon tax starting April 2022 based on the Harmonized Tax Law, Kusumawardani noted.
The energy and forestry and agricultural sectors have been chosen for the pilot project since the reduction of carbon emissions from these sectors are projected to reach almost 97 percent of the total carbon emission reduction target, she said.
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According to her, the government will gradually expand the number of sectors subjected to the carbon tax by 2025.
“The carbon tax introduced in the harmonized tax law is mainly designed to support climate change mitigation efforts whose main focus is to change business entities’ behavior to be more environmentally friendly or low carbon,” she remarked.
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