Regarding the importance of carbon credits as a global mitigation measure in reducing emissions as well as having high economic value as a commodity, B20 Indonesia, where the Indonesian Chamber of Commerce and Industry is playing a role as the organizer of this year's B20, collaborated with the Indonesian Commodity and Derivatives Futures Exchange (ICDX) to hold a virtual discussion on the voluntary organized carbon market, Wednesday (25/05) afternoon. This discussion was held as part of the B20 Indonesia side event which is the focus of the Trade and Investment Task Force.
Chair of B20 Indonesia Shinta W. Kamdani said the market or carbon trading can make global mitigation more efficient and organized in support of the government's efforts to reduce carbon emissions. According to her, the carbon market allows climate change mitigation at a lower cost with greater impact. The carbon market, continued Shinta, if developed properly will have a tremendous impact on the strategy to deal with climate change, especially related to the involvement of economic sectors related to carbon emissions.
“In Indonesia, at present, there is no consensus among stakeholders on what is required to use the carbon market as an emission reduction strategy. We learn from the best practices of other countries regarding this carbon market. So, together, we are all collaborating,” she said.
The initiative taken by the Indonesian Chamber of Commerce and Industry (KADIN) together with the private sector is to launch the Voluntary Domestic Carbon Market which adopts the carbon market as the main instrument for reducing CO2 emissions, which is still a global challenge in achieving emission reduction targets in tackling climate change issue.
KADIN Indonesia also recommends the establishment of a public-private task force to design and implement a carbon market ecosystem outside the Voluntary Carbon Market as outlined in the Presidential Regulation (Perpres) on the Economic Value of Carbon (NEK)—and facilitate the establishment of a carbon market in Indonesia.
Chair of the B20 Trade and Investment Task Force Arif Rachmat said the voluntary carbon market has an important role in global decarbonization. This market enables companies to accelerate a broader transition to a lower carbon future.
“Globally, carbon is classified as a commodity and the carbon market is currently experiencing significant growth, requiring stricter standards and greater transparency to build trust. For this reason, we collaborate with ICDX to provide clear information regarding the development of this carbon market and its utilization in a more organized manner,” said Arif.
In this discussion, Alice Carr, Executive Director of Public Policy, GFANZ was present, who gave her views on how the voluntary carbon market can provide tangible benefits in tackling climate change. Alice also provides a strategy to increase the carbon market while encouraging implementation on a larger scale so that its impact on reducing emissions can be measured.
On the same occasion, CDP Special Advisor, and Member, Distinguished Advisory Board, Integrity Council for the Voluntary Carbon Market, Paula DiPerna outlined important lessons to be learned from the Chicago Climate Exchange (CCX), the world's first voluntary carbon market located in United States of America. This market is legally binding for greenhouse gas abatement and trading for emission source and offset projects in North America and Brazil.
In addition, Paula also explained how this voluntary carbon market can help participating countries achieve their respective Nationally Determined Contributions (NDCs) as each country's commitment to the Paris Agreement. Paula also explains how carbon credits are treated, whether they are a mere commodity or a security at the same time.
Regarding the explanation of carbon as a commodity and a security, ICDX CEO Lamon Rutten provided information on the government's efforts to support the implementation of an organized carbon market and the linkages between NDCs and the voluntary carbon market as well as the opportunities that can be taken and exploited in carbon trading, particularly related to its economic value. and climate mitigation.
The active involvement of the private sector is an important factor to support the government's commitment to addressing climate change in achieving the Net Zero Emission agenda in 2060. Moreover, after the Paris Agreement and COP26 in Glasgow 2021, the urgency of collaboration between the government and the private sector to mitigate the impacts of climate change is crucial. .
As is known, Indonesia has determined the Nationally Determined Contribution (NDC) namely reducing greenhouse gas (GHG) emissions by 41% by 2030. 98 of 2021 on the Economic Value of Carbon. Some of the things regulated in it include trade between two business actors through a cap and trade scheme, offsetting emissions through a carbon offset scheme, result-based payments, to levies on carbon, which are expected to support the achievement of Indonesia's GHG emission reduction targets by drive more green financing and investment.
The economic potential of carbon trading in Indonesia alone is estimated at more than IDR8,000 trillion (US$565.9 billion) from the wealth of forests, mangroves and peat. On the other hand, there are at least five sectors that contribute to carbon emissions in Indonesia, namely forestry and land, agriculture, energy and transportation, waste, and industrial processes and product use, and the government is preparing a number of policies to tackle carbon emissions in these sectors.
So far, carbon trading has been carried out by a number of countries, namely the European Union, Switzerland, New Zealand, Kazakhstan, South Korea, Australia, Canada to China and Mexico. China itself has been conducting carbon trading trials in seven provinces since 2013.