Indonesia

Implementation period: 2024-2027 Funding amount: US$5 million Window: Implementation

Indonesia has made substantial progress in establishing the legal and institutional foundations for a national carbon pricing framework. The 2021 Presidential Regulation on the Economic Valuation of Carbon set out a national mandate for carbon pricing, followed by successive ministerial regulations in 2022 and 2023 that govern carbon crediting, allowance-based emissions trading, and sector-specific implementation modalities in energy, forestry, and other sectors. Together, these regulatory steps provided a robust policy basis for a phased introduction of carbon pricing instruments across priority sectors.

The government launched a three-phased allowance-based emissions trading program in the power generation sector in 2022, developed enabling regulations for a forestry sector offset mechanism in 2023, and enabled carbon offset trading via the Indonesian Stock Exchange under oversight of the Financial Services Authority.

Objectives & Activities

The PMI Program in Indonesia supports the government in building institutional capacity to implement and administer carbon pricing policy instruments and access international carbon markets through targeted technical assistance and advisory support across five key components:

• Policy Analysis and Implementation Roadmaps: Provide analytical support to map the sequencing, alignment, and sectoral integration of carbon pricing instruments, and inform roadmap development for ETS and carbon crediting mechanisms across sectors
• Institutional Strengthening and Capacity Development: Enhance the operational capacity of key institutions in the national carbon market ecosystem through technical training, staffing support, and institutional process development
• ETS Instrument Design and MRV Infrastructure: Support the refinement of ETS design for the power sector and future sectors, including development of robust MRV systems, registry functionality, and infrastructure for credit issuance and allowance tracking
• Coordination, Communication, and Consultation Mechanisms: Strengthen cross-sectoral coordination and develop inclusive stakeholder engagement strategies to ensure policy alignment and social acceptance of carbon pricing policies

Additional Resources

• Presidential Regulation No. 98/2021 on Economic Valuation of Carbon
• Ministerial Regulations on Carbon Pricing Instruments (2022–2023)
• ETS in Power Sector – 3-Phase Implementation Plan