Indonesia's carbon trade trial indicates taxable emissions

by Reuters
Monday, 29 November 2021 10:00 GMT

FILE PHOTO: Smoke and steam billows from a coal-fired power plant owned by Indonesia Power in Suralaya, Banten province, Indonesia, July 10, 2020. REUTERS/Willy Kurniawan/File Photo

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Indonesia will start charging a carbon tax next April, levied on coal-fired power plant operators with emissions above a set limit, as a basis for setting up a carbon market by 2025

 - Indonesia's energy ministry recorded around a million tonnes of taxable carbon emissions during a recent trial covering 32 coal power plants, a senior official said on Monday, as the country prepares to launch a carbon trading mechanism.

The world's eighth-biggest green house gas emitter aims to achieve carbon neutrality by 2060 and to use a carbon tax and trading to help control emissions.

Indonesia will start charging a carbon tax of 30,000 rupiah ($2.09) per tonne of CO2 equivalent (CO2e) next April, levied on coal-fired power plant operators with emissions above a set limit.

The tax will be the basis for setting up a carbon market by 2025.

During the trial, the ministry set a cap of 0.918 tonne CO2e per megawatt hour for power plants with a capacity above 400 MW and 1.013 tonne for plants with 100 MW-400 MW and 1.094 tonne for mine-mouth plants with the same capacity.

"We found there were potentially taxable emissions of around 1 million tonnes," Rida Mulyana, a senior official at the energy ministry, told reporters.

The trial involved power plants emitting more carbon than an allotted cap trading their excess output with those emitting below the cap. Under the current plan, excess emissions that could not be covered by carbon trading will be taxed.

The energy ministry has not yet recommended an emissions' cap to the finance ministry for the carbon tax.

"In this trial, we were aiming more for awareness so these power plants operators know what to expect," Rida said.

The head of the finance ministry's fiscal office, Febrio Kacaribu, said in the short term authorities will maintain affordable tariffs and manageable emissions' limits.

When the market was launched and becomes liquid, the government may adjust parameters, Febrio added.

Finance Minister Sri Mulyani Indrawati has said cross-border carbon trade won't be allowed until Indonesia meets its emission goals, underlining that its domestic carbon price would be among the cheapest in the world.

Indonesia required $365 billion investment between 2020-2030 to cut 29% of emissions, Febrio said, adding there was a financing gap of 40% that he hoped could be partly financed by green bonds.

Separately, a government study showed last month that to reach its 2060 decarbonisation target Indonesia needs to invest $200 billion per year in 2021-2030.

($1 = 14,320 rupiah)

(Reporting by Fransiska Nangoy; Editing by Ed Davies)

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