Indonesia aims to Develop High-Quality and High-Integrity Carbon Credit Projects

SINGAPORE – Indonesia and the International Partners Group (IPG), led by the United States and Japan, have jointly committed to establishing the Just Energy Transition Partnership (JETP) during the 2022 G20 Summit in Bali, Indonesia. JETP aims to accelerate a fair and gradual energy transition in Indonesia's electricity sector. Through JETP, Indonesia pledges to reduce peak greenhouse gas emissions to 290 metric tons of carbon dioxide (Mt CO2) by 2030, accelerate the share of new and renewable energy (NRE) to 34 Mt CO2, and achieve Net Zero Emission (NZE) by 2050. In support of Indonesia's goals, IPG members have promised funding of $20 billion from the public and private sectors for energy transition projects in Indonesia.

According to Edo Mahendra, the Special Advisor to the Coordinating Minister for Maritime and Investment Affairs of Indonesia, JETP has set targets to be achieved by 2030, including 250 Mt CO2 emissions (on-grid) and a 44 per cent share of renewable generation. To meet these targets, an estimated $97.3 billion will be required by 2030.

"In 2030, there will be over 400 priority projects, and we need an investment of $66.9 billion," he stated during a presentation on the JETP Implementation Phase and Indonesia Carbon at an investment forum held in Singapore on Friday (8/12).

The Comprehensive Investment and Policy Plan (CIPP) for the Indonesia Just Energy Transition Partnership (JETP) has been released for public comment. The CIPP, a "living document" requiring regular updates to reflect global trends and national priorities, covers energy transition pathways, policy recommendations, financing, and implementation.

“The JETP website acts as the meta-monitoring platform for the public, facilitating matchmaking between project developers and financiers. It also serves as a dashboard to monitor and evaluate progress.”

Indonesia is pursuing multiple carbon pricing mechanisms to capture value from emissions reductions.

“The carbon pricing mechanism is divided into two – market mechanism and non-market mechanism. For market mechanisms, there is the Emission Trading System (ETS) and offset carbon market.”

Edo added that Indonesia aims to produce high-quality and high-integrity carbon credit projects, with the benefits of spurring investment in emission mitigation activities and low-carbon technology. The country also aims to unlock opportunities from domestic and international entities seeking high-quality carbon credits at a premium price and promote Indonesia as a global carbon market hub.

“To further develop its carbon market, Indonesia needs to focus on three key pillars. First, opening the Indonesian carbon market for carbon credits from projects in Indonesia and other countries and exploring the potential for cooperation for derivative products. Secondly, collaboration with internationally accredited carbon standards to ensure mutual recognition of various traded carbon credits and to build quality of the human capital that manages the Indonesian carbon market.”

According to Edo, the last crucial aspect is technology, “Using technology that can maintain the integrity, security, and transparency of carbon transactions, such as blockchain,” he concluded.