Indonesia’s Carbon Trading Value Could Reach US$565.9 Billion

Indonesia seeks to gradually reduce total emissions through various efforts, one of which is carbon trading.

Carbon trading is one of the solutions to global warming that has been agreed voluntarily by various countries in the Paris Agreement of 2015. Along with the vast forest area in Indonesia that can absorb large amounts of carbon, the value of domestic carbon trading could reach US$ 565.9 billion.

ICDX Head of Carbon Market Zulfal Faradis said that data from the Coordinating Ministry for Maritime Affairs and Investment shows that Indonesia has the third-largest tropical rainforest in the world with an area of ​​125.9 million hectares that can absorb carbon emissions of around 25.18 billion tons.

Furthermore, Indonesia also has a large area of ​​mangrove forest and peatland, which can increase the value of carbon trading.

“From this data, the total carbon emissions that Indonesia can absorb are approximately 113.18 billion carbons. If the Indonesian government can sell carbon credits for US$5 on the carbon market, then Indonesia’s potential revenue will reach US$565.9 billion,” Zulfal said to Bisnis, Wednesday (6/7/2022).

For information, the area of ​​mangrove forests in Indonesia currently reaches 3.31 million hectares and can absorb up to 33 billion carbon for all mangrove forests in Indonesia.

In addition, Zulfal continued, Indonesia also has the largest peatland in the world, covering an area of ​​7.5 million hectares, which is capable of absorbing around 55 billion tons of carbon emissions.

Furthermore, according to data from the Boston Consulting Group (BCG), Indonesia’s NBS potential is 1.4 GtCO2e per year, so it is estimated that Indonesia’s voluntary carbon credit market can reach a value of Rp60-85 trillion by 2030.

Three catalysts must be considered to boost domestic carbon trading, namely providing the right framework through local regulations.

Furthermore, the Indonesian government must also prepare the right supporting infrastructure and ecosystem.

This includes financing to support NBS projects with capital flows from domestic and global investors and financial institutions. In addition, it is necessary to implement an organized market or carbon exchange that is following global best practices, so that it will provide acceleration for rapid carbon trading.

“The right organized market can provide many benefits such as price transparency, direct access to the market, and being able to take advantage of futures instruments as well as other commodities aimed at hedging,” added Zulfal.

Currently, the relevant ministries are still in the process of determining the competent authority to manage the carbon market.