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Carbon Market Harmonization Strategy

Comprehensive strategy for integrating ETS, carbon tax, and offset mechanisms

Updated: November 7, 2025•Created: November 6, 2025
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# Carbon Market Harmonization Strategy
Market Design Overview
Indonesia's carbon market integrates three complementary mechanisms: 1. Emissions Trading System (ETS) 2. Carbon Tax 3. Offset Credits System
Emissions Trading System (ETS)
## Emissions Trading System (ETS)

Phase 1: Power Sector (2025-2027)

- Coverage: Coal-fired power plants >100 MW - Cap: 10% below BAU emissions - Allocation: 90% free allocation, 10% auction - Banking: Unlimited - Borrowing: Not allowed

Phase 2: Industrial Expansion (2028-2030)

- Additional sectors: Cement, steel, petrochemicals - Tightened cap: 15% below BAU - Allocation: 70% free, 30% auction

Phase 3: Full Coverage (2031+)

- All sectors >25,000 tCO2e/year - Cap aligned with NDC pathway - Allocation: 50% free, 50% auction
Carbon Tax
## Carbon Tax

Current Rates (2024)

- Coal: IDR 30,000/tCO2e ($2/tCO2e) - Planned increase: IDR 75,000/tCO2e by 2025

Revenue Recycling

- 50%: Green investment fund - 30%: Just transition support - 20%: Administrative costs
Offset Credits System
## Offset Credits System

Eligible Project Types

- Renewable energy (solar, wind, hydro, geothermal) - Energy efficiency improvements - Forestry and land use (REDD+, afforestation) - Methane capture and utilization - Carbon capture and storage (CCS)

Certification Standards

- Additionality requirements - Permanence guarantees - Leakage prevention - Co-benefits assessment
Market Infrastructure
## Market Infrastructure

Indonesia Carbon Exchange (IDX Carbon)

- Launched: September 26, 2023 - Trading platform: Electronic spot and futures - Settlement: T+2 - Clearing: Central counterparty

Registry System

- National Carbon Registry (SRN) - Project registration - Credit issuance and tracking - Retirement and cancellation
Price Stabilization Mechanisms
## Price Stabilization Mechanisms

Price Floor

- Initial: IDR 30,000/tCO2e - Annual increase: 5% + inflation

Price Ceiling

- Initial: IDR 150,000/tCO2e - Trigger: Reserve auction

Market Stability Reserve

- 10% of allowances held in reserve - Automatic injection/withdrawal based on price signals
Regional and International Linkage
## Regional and International Linkage

ASEAN Carbon Market Integration

- Harmonization of MRV standards - Mutual recognition of offsets - Cross-border trading protocols

Article 6 Implementation

- Bilateral agreements under Article 6.2 - Participation in Article 6.4 mechanism - Corresponding adjustments framework