Indonesia's financial regulator said on May 5 that the government plans to launch carbon trading in the second half of this year, as part of efforts to boost renewable energy and meet its 2060 net zero emissions target.
Indonesia is one of the world's biggest carbon emitters, with coal making up more than half of its power mix. The country aims to cut its emissions by more than 30% by 2030.
"We are planning to have a carbon trading mechanism to support early retirement of coal-fired power plants," the regulator said, according to Reuters.
Earlier this week, Indonesia's Investment Minister Bahlil Lahadalia said only entities operating in Indonesia could participate in carbon trading, likening the mechanism to stock trading. The financial regulator will oversee carbon trading activities jointly with the Environment Ministry.
Under the mechanism, emissions above a cap will be subject to allowance trading, while those below the cap can trade credits.
Initially, Indonesia had planned to tax carbon emissions not offset by carbon credits but did not implement the mechanism due to the poor global economy.
Most analysts expect carbon trading to encourage big emitters to cut emissions faster. But more policies around infrastructure, finance and regulations are needed to significantly slash Indonesia's coal use and promote alternative energy over the long run.
(Writing by Alex Guo Editing by Harry Huo)
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