Fair Carbon Trading

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Laila Afifa

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  • TEMPO.CO, Jakarta - The government is drawing up a presidential regulation on the economic value of carbon. This regulation must be fair and must force all business sectors to reduce emissions.

    THE regulation on carbon trading that has long been neglected should be drawn up based on the principles of fairness. With the environment now vulnerable as a result of the Job Creation Law, the deliberations of the draft presidential regulation on the value of the carbon economy give Indonesia another opportunity to play a role in the mitigation of global warming.

    The climate crisis is the most serious problem in the world today. Without joint mitigation, the rise in global temperatures will exceed 1.5 degrees Celsius by 2050. Indonesia promised at the 2015 Paris climate conference to reduce emissions by the equivalent of 834 million tons of CO2 by its own endeavors, or by 1.1 billion tons with international assistance, by 2030. One way to achieve this target is through carbon trading.

    In essence, carbon trading is a way for polluters to show appreciation to those who absorb carbon emissions around the world - through protecting forests, preventing land degradation, recycling trash and switching from dirty energy production. In the carbon market, conservation and restoration are no longer a cost, but a commodity that has economic value.

    Under a scheme like this, the regulations concerning the economic value of carbon must first of all be fair to participants. With this draft regulation, the government emphasizes that Indonesian carbon is the right of the state, such that the state is the main purchaser to meet the 2030 target for the reduction of emissions.

    This obligation should not close the door to those wanting to sell carbon on the market voluntarily at a price set by the mechanism of the market. A negotiated price that is higher than that set by the government will be an incentive for conservation efforts.

    Going by the donations from the United Nations and the Norwegian government in August 2020 for the endeavor to prevent deforestation and land degradation from 2016 to 2017, Indonesian carbon is priced at US$5 per ton. On the international carbon market, prices are set by supply and demand, meaning this value has in the past exceeded US$30 per ton. With a flexible scheme, fluctuation of prices will stimulate our carbon market.

    In Indonesia, carbon has been bought and sold on the international market since 2015. Managers of village forests in Bujang Raba, Jambi, managed to sell their conservation endeavors for US$6 per ton. Holders of restoration permit concessions have sold their carbon to large global companies. By giving people the right to select buyers, the Indonesian carbon market will be more liquid.

    If people worry that this method will not achieve our target for emission reductions by 2030, the government could produce quotas for those in the carbon business and set the proportions for the state and other purchasers. This would require valid data regarding measurements of emissions from each sector to avoid claims of double counting. A solid calculation standard in the National Registry System will lead to a fair carbon quota regulation.

    Polluters should be forced to gradually reduce their emissions. This will push them to switch to more environmentally friendly technologies. Without an obligation to reduce emissions, carbon trading will become simply an excuse for polluters to continue producing emissions because they will feel that their sins have been absolved as they have paid for absorption by others.

    Preventing global warming must be the main theme of every government policy. Emissions trading and the development of low carbon technologies will balance the industrialization that threatens the environment as a result of the passing of the Job Creation Law.

    Read the Complete Story in Tempo English Magazine