By Happy Tarumadevyanto
Carbon trading in the context of forestry is maintaining carbon absorption from the existence of forests. The government is aiming for the forestry and land use sector to be not only carbon neutral but also a carbon sink by 2030 as part of a greater emissions reduction strategy.
Indonesia has targeted to reduce emissions by 29 percent independently and 41 percent with international assistance in its nationally determined contributions (NDCs) submitted to the United Nations Framework Convention on Climate Change (UNFCCC) secretariat in 2016.
Indonesia itself has developed the Implementation of Carbon Economic Value for the Achievement of Nationally Determined Contribution Targets and Control of Greenhouse Gas Emissions in National Development [Peraturan Presiden (PERPRES) Nomor 98 Tahun 2021]
Climate change mitigation activities in order to achieve Indonesia’s NDC targets have not insignificant financial consequences. The estimated accumulated climate change mitigation costs reached Rp. 3.461 trillion by 2030. Therefore Policies are needed to ensure that these funding needs can be met. The NEK is one part of a comprehensive policy package for climate change mitigation.
The two NEK instruments used are trading and non-trading instruments. Non-trade instruments include taxes/levies on carbon (carbon tax) where the government determines the carbon price and the emission level is left to business actors. The emission trading instrument (Cap and Trade) appears to complement the carbon tax, as exemplified the emission level is determined by the government and the business actor determines the emission price. The carbon tax aims to change the behavior of economic actors to switch to low-carbon green economic activities, support emission reductions and encourage innovation and investment with fair, affordable, and gradual principles by taking into account the readiness of each sector so as not to burden the community.