What the Indonesia Carbon Exchange is and what it does

Notes by Fadmin Malau

On Tuesday, September 26, 2023, Indonesian President Joko Widodo (Jokowi) officially launched the Indonesian Carbon Exchange (KBI) from the government’s draft where the Indonesian Carbon Exchange or IDX Carbon is under the control of the Indonesia Stock Exchange (IDX).

This is based on the Financial Services Authority (OJK) getting the mandate to implement Law Number 4 of 2023 on Financial Sector Development and Strengthening (P2SK) to regulate and supervise carbon trading.

From the mandate of Law No. 4 of 2023 on Financial Sector Development and Strengthening (P2SK) to regulate and supervise carbon trading, OJK issued OJK Regulation No. 14/2023 on Carbon Trading through Carbon Exchange and accompanied by OJK Circular Letter 12/2023 on the procedures for organizing carbon trading.

A short journey, just a matter of months has resulted in the Indonesian Carbon Exchange where the IDX is the controller. The great thing is that even though it controls the IDX, the carbon exchange is not the same as the stock market.

The author has received many questions, is the Indonesia Carbon Exchange a stock or capital market? The question naturally arises from the public considering that the Indonesian Carbon Exchange is the pilot of the IDX. As a result of the IDX pilot, some people think it is the same as the capital or stock market.

Although the pilot is the same, namely the IDX, what distinguishes it is the product offered. As a result of the products offered are not the same even though the pilot is the IDX, the Indonesian Carbon Exchange is not a capital or stock market.

In carbon exchange transactions, there are two products traded, namely the Technical Upper Limit of Business Emissions (PTBAE-PU) and the Greenhouse Gas Emission Reduction Certificate (SPE-GRK).

Quoting the official statement of the Director of Development of the Indonesia Stock Exchange, Jeffrey Hendrik, Director of Development of the Indonesia Stock Exchange said that carbon trading can only be done by institutions and does not serve retail.

Then he explained that the unit of trading volume is different. The Indonesian Carbon Exchange uses a multiple of 1 lot which is equivalent to 1 ton of carbon dioxide equivalent (CO2e).

The carbon exchange has four trading mechanisms, namely, regular market, negotiation market, auction market and marketplace (non-regular). While the stock market uses the Jakarta Automated Trading System (JATS) system, the system uses blockchain-based technology owned by AirCabon Exchange (ACX).

Still quoting Jeffrey’s statement, the goal is for Indonesia to achieve net zero through carbon trading, not for speculation. IDXCarbon has appointed ACX as the vendor for the carbon exchange trading system with modifications according to Indonesia’s needs.

The ACX system is used because it is already used by the Singapore and Abu Dhabi Carbon Exchanges. The ACX system used for the Indonesian market is not exactly the same as the ACX system used by the Singapore and Abu Dhabi Carbon Exchanges. The Indonesian ACX system has been modified and aligned with SRN-PPI. ACX provides end-to-end services by utilizing blockchain technology to ensure transparency and auditability for trading schemes on carbon exchanges.

It is natural that some people do not understand the Indonesian Carbon Exchange that has now started. A simple example can be taken from the inaugural trade of the Indonesia Carbon Exchange, which was traded by PT Pertamina Power Energi or Pertamina New and Renewable Energy (Pertamina NRE).

In the inaugural trade, Pertamina NRE offered Carbon Units from the Lahendong Unit 5 and Unit 6 Projects owned by PT Pertamina Geothermal Energy Tbk (PGEO) at a price of IDR 69,600 and IDR 70,000. Where on the inaugural trade or the first day of the Indonesian Carbon Exchange trading volume, there were 27 transactions with a total volume of 459,953 tons of CO2e coming from 15 service users with a transaction value of Rp29.20 billion.

Let’s see for the next trading day, whether the goal of the Indonesia Carbon Exchange so that Indonesia can achieve net zero through carbon trading can be achieved or just speculation. Hopefully, the Indonesia Carbon Exchange will enable Indonesia to reach net zero.