Lesson Learn from Indonesia Carbon Market

Dicky Edwin Hindarto Coordinator of Carbon Trading Mechanism Division National Council on Climate Change of Indonesia Asia Clean Energy Forum, 23 June, 2011

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Structure of Presentation

Domestic mitigation objectives and role of market instrument(s) 2. Indonesia carbon market status 3. How to adapt the next carbon market?
1.

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Indonesia policies on GHG mitigation

Indonesia is the first developing country that announces its voluntary GHG emissions reduction target up to 26 percent by 2020. Further, with international support, Indonesia is confident that it can reduce emissions up to 41 percent. To this end, Indonesia has finalized National Action Plan on GHG Emission Reduction 2010-2020. The plan is aligned with the Medium and Long-term Development Plan; it provides directives to priority development sectors on key and supporting actions necessary to achieve the emission reduction objectives while maintaining economic growth and improving competitiveness. The action plan would be equipped with a measurable, reportable and verifiable (MRV) system as a part of the national carbon accountancy system.
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Indonesia GHG emission projections based

Projected emission1, Million ton CO2e
Indonesia emissions projected to increase from 2.1 to 3.3 GtCO2e between 2005 and 2030
2,052 129 110 760 650 590 96 3,260

75 151
2,534 45 143 103

38 105

Building Cement Oil and gas Agriculture Transportation

Electricity LULUCF2

Peat

2005 5.0%
1 Only sector direct emission are included

2020 Share of global emissions

2030 5.1%

2 LULUCF emission based on clean emission approximation, including absorbtion 4 National Council on Climate Change of Indonesia

Societal perspective1, 2030 Options for Indonesia mitigation actions up to 2030

Reduction cost2 USD per tCO2e
80 60 40 20 0 -20 0 -40 -60 -80 -100 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200

Net Costs

Large hydro

Fire prevention

Sustainable REDD Forest smallholder Management agriculture

REDD timber Peat land extraction rehab.

Geothermal REDD timber plantation

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Reduction potential2 MtCO2e per year We are devising an energy mix policy including LULUCF (Land Use, Land Use Change, and Forestry) that will reduce our emissions by 26 percent by 2020 from BAU (Business As Usual). With international support, we are confident that we can reduce emissions by as much as 41 percent - President Yudhoyonos commitment 1 Societal perspective impliesat the Pittsburgh G-20 Leaders Summit utilizing a 4% discount rate
2 The width of each bar represents the volume of potential reduction. The height of each bar represents the cost to capture each reduction initiative Source: Indonesia GHG Abatement Cost Curve

-120
-140 -160 -180 -200 -220 -240 -260

High efficiency appliances Switching to LEDs Net Savings

Internal combustion engine improvements in passenger cars

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Market and non market approaches to climate change mitigation

Market and non-market approaches to climate change mitigation

Market
Compliance market (CDM) Voluntary market (VCM) Future carbon markets
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Non-market
National budget
Private investment Foreign public funding
Policies (e.g fiscal, banking incentives and disincentives) Philanthropic contribution (companies, NGOs)

CDM market in Indonesia

Per 1 May 1st, 2011, there are 145 projects on CDM-EB pipeline Methane avoidance and biomass are the leading sectors 64 projects are registered

Indonesia CDM projects status

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Indonesia CDM projects status per sector

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Indonesia issued CER projects

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Indonesia voluntary carbon market

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More than 20 Indonesian projects in VCM pipeline and all uses Voluntary Carbon Standard (VCS) methodologies. Total VER that already issued are more than 1,000,000 tVER.
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Indonesia and the Future Carbon Markets

Supply
Readiness LULUCF Demand

Power Industry Transport Waste

Institutional Technical Managerial Legal

Bilateral Regional Global compliance post 2012 Global voluntary Domestic

DEEP CUT??

Indonesia is currently focusing on the supply side to meet the demand from the international markets There are now 38 of submissions on new carbon market under LCA at UNFCCC Mechanisms for domestic market are being explored with focus on forestry, small renewable energy, and industry The clarity and certainty on the demand side will boost readiness on the supply side
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Initiatives to develop new market mechanisms at domestic level Forestry:

World Bank Forest Carbon Partnership Facility; Indonesia-Australia Forest Carbon Partnership Pilot projects by non-government and government entities to develop forest related carbon market.

Transport:
Socio-economic analysis, including carbon market opportunities, on emission reductions in industry sector.

Industry:
Standardization of energy usage/consumption based on industry clusters Socio-economic analysis, including carbon market opportunities, on emission reductions in industry sector.

Waste:
Assessment of mitigation in municipal solid waste, incl. technical and cost analyses.

Energy:
Standardization of carbon footprint assessment for pre-combustion, combustion, and postcombustion
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Finance:
Green Paper on fiscal policies to support mitigation

Planned links with the development of future carbon markets

International Carbon Markets

Link via offset mechanism (e.g. ETS)

Link via other domestic market mechanisms (e.g. KVER, JVER)

International crediting mechanisms

DOMESTIC MARKET MECHANISMS that based on voluntary market system

(e.g. Emissions trading scheme or sectoral trading) Indonesia will prepare standard, policies, and market instrument.

REGIONAL AND BILATERAL MARKET

CARBON CREDIT SUPPLIER

Indonesia will produce carbon credit for mandatory and voluntary based market system for international market.

based on regional and bilateral agreements and domestic emission reduction policies (e.g. NAMA or sectoral crediting)
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Terima kasih Salamat po Thank you

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