November 14, 2019

Carbon credit arrangements to be finalized: Minister

JAKARTA ( - Indonesian Environment and Forestry Minister Siti Nurbaya has made the continuation and finalization of a carbon credit and trading scheme one of the main policy priorities of her second term in President Joko Widodo’s administration.

“The President emphasized that the arrangements on carbon credit and trading have been assigned to me (as the authorized minister according to the relevant laws and regulations). As such, previous efforts will be continued and finalized in this period.” 

Minister Nurbaya mentioned this in a policy discussion, which included the issue of carbon credit and trading, with at the ministry building (Nov 12).

The minister said that she has reported the latest update concerning the progress made on carbon credit and trading to the President, and duly received directions for further follow-ups from him.

"Indonesia continues to be consistent in making efforts to reduce emissions from deforestation and forest degradation. It also remains committed to maintaining the MoU with Norway despite all the difficulties encountered," she affirmed.

She went on to say that efforts to control climate change are getting better and more systematic with the declaration by Indonesia - in line with its responsibility - of nationally determined contributions (NDCs), or intended reductions in greenhouse gas emissions under the UNFCCC.

“Indonesia already has a results-based payment (RBP) in the MoU with Norway of 4 million tons of carbon. The payment requirement processes for this are now being set up,” the minister explained.

“This must be expedited so that the funds from the proceeds of this RBP can be requested and then delivered to the newly-launched, state-controlled LH fund,” she added.

In early August this year, President Jokowi signed a permanent primary forest and peatland moratorium encompassing a map covering more than 66 million hectares, an area greater in size than France. The objective of this is to reduce emissions from deforestation and forest degradation and to improve forestry and peat governance. 

The photos below show the peat forest cover in the Rawa Singkil wildlife reserve, an area larger than Singapore almost all of which remains relatively intact. This wildlife reserve, which forms part of the permanent moratorium map, lies in the Leuser Ecosystem and is home to Sumatran orangutans, tigers, elephants and rhinos alike.

“(The issue of) peat carbon will also be followed up with a number of regulatory-based instruments, discussion of which will take place in substance with the finance minister," Minister Nurbaya continued. 

Existing arrangements 

The minister pointed out that her ministry was collating all existing contracts related to carbon credit and trading undertaken by the private sector so that these can be regulated.

“The target is for the arrangements on existing contracts (related to carbon trading) to come out by the end of December,” said the minister.

According to the minister, it is therefore necessary for any parties that conducted carbon trading before the NDCs were determined to align themselves with existing mechanisms.

“The existing contracts need to be collected as references and (their ongoing activities) carried out," Minister Nurbaya explained.

Carbon pricing 

Minister Nurbaya reemphasized that the goal of carbon pricing are measured efforts to reduce emissions 29% unconditionally by 2030, or by as much as 41% if certain conditions are met, including through market-based policies.

“For this initial stage, the value of carbon to be rewarded is around USD 5-11/ton of carbon,” she confirmed.

The minister also elaborated on the options for carbon pricing which include through an emissions trading system (cap-and-trade), caps and taxes, and offset mechanisms, as well as a combination of all three. 

Minister Nurbaya stressed very clearly that carbon pricing continues to take into account the extent of its implications for the emissions reduction targets that Indonesia has committed to at the global level, while also allowing Indonesia to achieve its economic growth targets and conserve carbon stocks.