Indonesia-UK Signs UK-PACT Agreement to Set Carbon Pricing

TEMPO.CO, Jakarta - The Coordinating Minister of Maritime and Investment Affairs Luhut Binsar Pandjaitan, and the UK Embassy for Indonesia signed an Implementing Agreement on UK Partnering for Accelerated Climate Transitions (IA on UK-PACT) in Jakarta, on Monday, July 24, 2023. With this agreement, the UK committed to providing £2,7 million of technical assistance in the development and coordination of carbon pricing policies.

"The government of Indonesia in this case realizes that this country needs the support and collaboration from other parties to reach an ambitious target," said Luhut in his statement on Monday, July 24, 2023.

According to Luhut, Indonesia and the UK realized the importance of partnership to face the global challenge of climate change, and agreed to sign an MoU on UK-PACT. He added that there are various tools and strategies to mitigate climate change and reduce GHG emissions, including carbon pricing.

Various countries have adopted and implemented carbon pricing to boost the transition towards sustainable and low-emission practices. Indonesia has started the foundation of carbon pricing by implementing the Presidential Regulation on the Economic Value of Carbon.

Additionally, Energy and Mineral Resources Ministry has issued a Ministerial Regulation concerning the Governance of Carbon Economic Value in the Power Generation Sub-sector. Meanwhile, other complementary instruments, such as the Sectoral Carbon Pricing Roadmap, Carbon Exchange regulations, International Carbon Trading regulations, and Online GHG Emission Reduction Inventory, are simultaneously being developed.

Indonesia is planning to launch carbon trading in September 2023, as part of the effort to boost renewable energy and achieve net-zero emissions by 2060 or sooner. 

Luhut emphasized that only entities operating in Indonesia are allowed to trade in the bourse which has a similar scheme with the stock market. Financial Service Authority (OJK) will also supervise the carbon trade. According to Luhut, climate change mitigation in Indonesia needs to control carbon emissions. He believed this program will accelerate the drafting of a carbon pricing roadmap in agriculture, industry, and transportation sectors with international standards. Further, Indonesia could implement Carbon Capture Storage (CCS) as a short-term strategy to reduce emissions in the oil and gas sector. 

Meanwhile, the UK Ambassador for Indonesia and Timor Leste Owen John Jenkins said that the collaboration allows both countries to share knowledge and experience. Especially on carbon pricing through technical assistance, development capacity, and transfer of knowledge. Jenkins reported that the first year of the partnership has shown a significant result specifically to support Indonesia to build the database for its carbon pricing policies and achieve key milestones such as setting the carbon floor price. "We hope we can continue to support Indonesia's Net Zero ambition in the future," Jenkins concluded.

RIANI SANUSI PUTRI

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