When we talk about carbon emissions, we’re focusing specifically on carbon dioxide, or CO2. Carbon dioxide (CO2) is the most significant contributor to climate change that is human-caused and hence which humans can control. However, it has been released to the air faster than the earth can absorb. To be described better, during the period 2004-2013, 25 per cent of total carbon emissions were absorbed by the ocean, and 30 per cent were absorbed by land, with the remaining 45 per cent of emissions accumulating in the atmosphere carbon can be produced by energy generation, transportation, agriculture, land use, land change, and waste. Given this, the incentives to control carbon emissions are apparent, no matter what their cause.

The Indonesia government has just issued rules on carbon markets as a manifestation of Indonesia’s commitment to Nationally Determined Contributions (NDC) related to climate change. To be clear that Indonesia has commitment to achieve emissions reduction, either 29 percent of self-funding or 41 percent with international support, by 2030.

Two methods of carbon reduction are available, command and control method and market-based instruments (MBI) method. Indonesia prefers to impose market-based regulation bases its policies, in form of carbon pricing. In general, carbon pricing includes carbon trading and non-trading instruments. Trading instruments consist of cap and trade and offsetting mechanisms, while non-trading instruments include levies on carbon and result-based payments (RBP).

Finance Minister Sri Mulyani Indrawati mentioned that the price of carbon in Indonesia is too cheap, it is IDR 30.000/tCO2 or $2/tCO2. As a comparison, the price of carbon in China remain below $10/tCO2, Canada is $40/tCO2 and now rises to $125/tCO2, while EU carbon price is €88/tCO2 ($101) per Dec 2021.  According to a commitment of the Change Conference of the Parties (COP26) in Glasgow, the price of carbon must be more expensive if we seriously want change the course of climate change.

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Picture: Yahoo.com