(Bloomberg) -- Indonesia’s domestic carbon exchange opened trading to foreign participants as the nation aims to restore its position as a major hub for offsets and attract more investment for local climate action.
Nine overseas buyers took part in transactions Monday on IDXCarbon, operated by the Indonesian stock exchange, after the bourse began offering domestic credits from five energy generation projects owned by utility PT Perusahaan Listrik Negara.
Indonesia expects to add forestry and land use-based carbon credits as soon as March, Environment Minister Hanif Faisol Nurofiq said in an interview. Those credits, generated from projects like peatland conservation and reforestation, are likely to trade at a higher price than existing products.
“There should be a premium for the sector for benefits like oxygen production, water conservation and biodiversity protection,” he said.
President Prabowo Subianto, who aims to generate billions of dollars in revenue from the carbon sector, has pledged to accelerate by a decade the nation’s current target to hit net zero by 2060. Indonesia would need investment of as much as $3.8 trillion in renewable energy, power grid capacity and electric vehicles to zero out its emissions by mid-century, according to BloombergNEF.
Indonesia was among Asia’s largest suppliers of voluntary carbon credits before exports were restricted in 2022, as the government reviewed the role of domestic offsets in meeting the nation’s own climate goals. Companies including Volkswagen AG and Shell Plc have been among major buyers of the nation’s credits, data compiled by BNEF shows.
Since its launch on September 2023, IDXCarbon has suffered from weak demand, in part because of Indonesia’s delays in implementing a emissions cap-and-trade system. The bourse traded a total of 413,764 tons of credits in 2024, with an average price of 47,682 rupiah ($2.90), according to exchange data.
IDXCarbon on Monday listed more than 1.7 million domestic carbon credits for purchase by local or overseas entities. The Indonesian Authorized Carbon Credits are being generated through efforts to improve energy efficiency at PLN sites including gas-fired power plants and a mini-hydropower project.
In initial trading, the exchange sold 41,822 tons of credits priced at 96,000 rupiah a ton for projects at the gas plants, and at 114,000 rupiah per ton for the hydropower facility.
The bourse expects carbon trading volumes to reach 500,000 tons to 750,000 tons this year, including both domestic and international buyers, Indonesia Stock Exchange president director Iman Rachman was cited as telling local media at the Monday launch.
Indonesia’s move to open up the market follows agreement at the COP29 climate summit in November over rules for nation-to-nation trading and to allow countries to use the credits against their climate targets.
Concerns over the quality of Indonesia’s energy generation credits, including the extent of their contribution to emissions reduction, could limit interest from global buyers, according to BNEF analysts including Joy Foo. Poor demand and the introduction of a large volume of new supply could add more pressure on local carbon prices, the analysts said.
--With assistance from Sheryl Tian Tong Lee.
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