www.pwc.com/idIndonesiaCarbonMarketWhitePaperDecember2024Page2|IndonesiaCarbonMarketWhitePaperForewordTheParisAgreement,endorsedby196nationsin2016,aimstokeepglobaltemperaturerisewellbelow2°C,ideallylimitingitto1.5°C.Despiteglobalefforts,wearelaggingbehindasourcurrentactionscouldleadtoapotentialtemperatureriseof2.7°Cbytheendofthecentury.Inaworst-casescenario,wheregreenhousegasemissionscontinuetoincreasewithoutsignificantmitigation,thetemperaturecouldrisebyasmuchas4°Cormore,accordingtotheIntergovernmentalPanelonClimateChangeSixthAssessmentReport(IPCCAR6).Astheworldincreasinglyrecognizestheurgentneedtoaddressclimatechange,theroleofcarbonmarketsinmitigatinggreenhousegasemissionshasgainedsignificantattention.Indonesia,withitsvasttropicalforestsandrichbiodiversity,standsatapivotaljunctureincontributingtoglobalclimatesolutions.ThedevelopmentofarobustcarbonmarketinIndonesianotonlypromisestoenhancethecountry’senvironmentalstewardshipbutalsoofferssubstantialeconomicopportunitiesandsocialco-benefits.Thiswhitepaperexploreshowthecarbonmarketcanhelpaddressthisfinancialchallenge.InitiatedbyPresidentialRegulationNo.98of2021,Indonesia’scarbonmarketframework,whichincludescarbontaxesandcarbonoffsetcredits,isacriticalstepforward.Currently,carbonpricingistoolowtogeneratesufficientdemandforcredits,necessitatingadjustments.However,Indonesia’svastrainforestsandextensivelandareapresentsignificantopportunitiesforforestryprojects,withanestimatedannualemissionreductionpotentialof247milliontonnesofCO2-equivalent.By2030,Indonesiacouldgenerateupto1,283milliontonnesofcarboncreditseachyear.Toharnessthispotential,IndonesianeedstodevelopaninternationallyrecognisedMonitoring,ReportingandVerification(MRV)framework,clarifyregulationsforinternationaltrading,adjustcarbontaxpricing,enhancetransparencywithintheSRN-PPI,andprovideclearguidanceonaccountingandtaxtreatmentsforcarboncredits.Leveragingtechnologytoimprovegovernanceisalsoessential.ThiswhitepaperofferskeyinsightsandrecommendationscrucialforadvancingandsustainingIndonesia’scarbonmarket.PwC,inpartnershipwiththeIndonesiaCarbonTradeAssociation(IDCTA),iscommittedtoexploringandmaximisingthepotentialofIndonesia’scarbonmarket,supportingthecountry’sNDCcommitmentsandeconomicgrowththroughstakeholderengagementandinfrastructuredevelopment.Wehopeyoufindourfindingsbothenlighteningandthought-provoking,andwewishyouapleasantread.YulianaSudjonnoPartnerPwCIndonesiaIndonesiaCarbonMarketWhitePaper|Page3Dr.RizaSuargaChairmanIndonesiaCarbonTradeAssociation(IDTCA)QuotingIndonesia’sPresidentialSpecialEnvoyforClimateandEnergy,HashimDjojohadikusumo(Bisnis.com,October29,2024),Indonesiaisprogressivelyadvancingitscarboncreditstotheglobalmarket.In2018–2020alone,thecountry’scarbonmarketpotentialwasanimpressive577milliontonnesofCO2e,andfrom2021to2023,itreached600milliontonnesCO2e—anupwardtrendthatreflectsthenewadministration’scommitmenttoexpandingitscarbonmarketbothdomesticallyandinternationally.Forprojectowners,developers,andinvestorsalike,navigatingIndonesia’scarbonmarketregulationshasbeenajourneymarkedbyhighsandlows,especiallyoverthepastthreeyears.Thisperiodwitnessedasurprisingmoratoriumoninternationaltrading,therevocationofseveralhigh-integritynature-basedprojects,andanongoinguncertaintysurroundingthefutureofinternationalcarbonoffsetmechanisms.Tounderstandthewholeconc...
