Compare ETS
Use this function to compare the design elements and characteristics of up to three ETSs from around the world.
USA - Washington Cap-and-invest Program
General Information
Washington’s Cap-and-Invest Program began operating in January 2023. It covers around 70% of the state’s emissions, and its cap trajectory is consistent with the long-term target to reduce statewide emissions to 95% below 1990 levels by 2050.
The program covers emissions from 96 entities in the mining, energy, industrial, buildings, and transport sectors. Many of the Cap-and-Invest Program’s design elements are similar to those of California’s Cap-and-Invest Program. Covered entities must surrender allowances for all their covered emissions. Allowances are distributed through auctioning and free allocation, with the latter based primarily on benchmarking. The program has a cost containment reserve and auction reserve price to support market stability and moderate covered entities’ compliance costs.
The Cap-and-Invest Program was established by the “Climate Commitment Act” (CCA), signed into law by then-Governor Jay Inslee in May 2021. Washington is the second state in the United States to pass a law requiring such an economy-wide program, after California. Launched as a standalone system, the CCA directed the Department of Ecology to pursue linkage with California and Québec. “Senate Bill 6058”, which is designed to facilitate linkage, went into effect in January 2025.
Washington’s Cap‑and‑Invest Program saw significant changes in 2025, with the Legislature enacting “HB 1975” (Chapter 320, Laws of 2025; effective July 27, 2025). The bill directs Ecology to analyze and model the program’s allowance and other compliance‑instrument markets, including scenarios with potential linkage, to support market-dynamics assessment and future design adjustments. Though price ceiling units were already in effect as a backstop to offer additional units issued at the price ceiling if Allowance Price Containment Reserve (APCR) supply is exhausted, HB 1975 established the fixed price ceiling of USD 80 for 2026 to 2027.
Ecology expanded its “Program Updates and Linkage” rulemaking (CR‑101 refiled March 31, 2025), published draft rule language through spring and summer 2025, and set a timetable to propose linkage rules in spring 2026, with a view to adopting them in autumn 2026 to enable potential linkage with California and Québec.
Ecology also concluded an offsets rulemaking, adopting an updated Ozone Depleting Substances protocol from Aug 2025. In parallel, Ecology advanced a separate US forest protocol update. On January 9, 2026, Ecology submitted a statutory report to the Legislature on no-cost allowance allocation for emissions-intensive, trade-exposed industries (EITEs) for 2035–2050.
Ecology held a planned pre-compliance APCR auction in October. The September quarterly auction cleared above the APCR Tier 1 trigger, prompting an additional reserve auction on November 12 at the fixed reserve price of USD 60.43. The final auction of the year (and 12th auction since the start of the Cap-and-Invest Program) took place on December 3. All 7,424,390 current vintage allowances offered for sale by Ecology and consigning entities were sold at a settlement price of USD 70.86 apiece. All 1,945,905 future vintage allowances were sold in the advance auction at a settlement price of USD 29.40 each.
Emissions & Targets
96.1 MtCO2e (2021)
By 2030: 45% reduction from 1990 GHG levels (“Greenhouse Gas Emission Limits – Amendment 2020”)
By 2040: 70% reduction from 1990 GHG levels (Greenhouse Gas Emission Limits – Amendment 2020)
By 2050: 95% reduction of total GHG emissions below 1990 levels and achievement of net-zero emissions (Greenhouse Gas Emission Limits – Amendment 2020)
- Average auction price (current vintage): USD 60.95
- Average secondary market price: USD 61.36
Size & Phases
FIRST COMPLIANCE PERIOD: Four years (2023 to 2026)
SECOND COMPLIANCE PERIOD: Four years (2027 to 2030)
THIRD COMPLIANCE PERIOD: Four years (2031 to 2034)
Under Senate Bill 6058, the Department of Ecology may be required to revise the definition of “compliance period” through rulemaking to align with a linked jurisdiction. However, the length of the first compliance period will not change.
An absolute cap limits the total emissions allowed in the system and is fixed ex-ante.
FIRST COMPLIANCE PERIOD: The cap for 2023 was set at 63 MtCO2e, which is equal to 93% of average emissions levels of covered entities between 2015 and 2019. The cap declines annually by 7%, to reach 49 MtCO2e in 2026.
SECOND COMPLIANCE PERIOD: The cap for 2027 will be set at 93% of the sum of the 2026 cap and emissions from new entities entering the program for the second compliance period. The cap declines by 7% annually through 2030.
THIRD COMPLIANCE PERIOD AND BEYOND: The cap for 2031 will be set at 98.2% of the sum of the 2030 cap and emissions from new entities entering the program for the third compliance period. In the period from 2032 to 2042, the cap declines annually by 1.8%.
In the period from 2043 to 2049, the cap declines annually by 2.6%, reaching a 95% reduction from 1990 emissions levels by 2050.
FIRST COMPLIANCE PERIOD: All facilities with emissions over 25,000 tCO2e, including industrial facilities, electricity generators, importers of electricity, fuel distributors, and natural gas suppliers. Excludes emissions from waste-to-energy and solid waste management. Starting in emissions year 2025, electric power entities (EPEs) which meet the 10,000 tCO2e emissions reporting threshold and have over 0 tCO2e emissions from unspecified sources, also have to participate in the Cap-and-Invest Program.
SECOND COMPLIANCE PERIOD: Waste-to-energy facilities with emissions over 25,000 tCO2e in at least one year between 2023 and 2025 will be added.
THIRD COMPLIANCE PERIOD: Railroad companies with emissions over 25,000 tCO2e in at least one year between 2027 and 2029 will be included.
VOLUNTARY OPT-IN PARTICIPATION: Any facility that is already covered by the mandatory MRV system but with emissions below the 25,000 tCO2e Cap-and-Invest Program inclusion threshold may voluntarily participate as an opt-in entity. Other facilities, including federal power marketing administrations (FPMA), can also participate as opt-in entities. Opt-in entities become covered by the mandatory MRV system and must follow the same MRV requirements as other covered entities.
Upstream (building, power [imported electricity] transport); point source (mining, industry, power).
96 covered entities, covered sources, or opt-in entities.
Allowance Allocation & Revenue
Proportion of auctioned allowances: 35% (2025)
Allowances are distributed via free allocation, free allocation with consignment, and auction.
FREE ALLOCATION: Emissions-intensive, trade-exposed facilities receive free allowances to mitigate the risk of carbon leakage. Allocation is done using facility-specific benchmarks, based on their average carbon intensity over the period between 2015 and 2019. Facilities could request free allocation based on their average emissions (i.e., grandparenting) only in a few instances where they were unable to calculate the emissions intensity of their production over this period. The reduction schedule that is applied to the allocation of no-cost allowances to eligible facilities will be based on four-year periods that are specified in the statute, instead of compliance periods.
FIRST COMPLIANCE PERIOD: Set at 100% of the benchmark multiplied by actual production, or historical emissions level.
SECOND COMPLIANCE PERIOD: Set at 97% of the benchmark multiplied by actual production, or historical emissions level.
THIRD COMPLIANCE PERIOD: Set at 94% of the benchmark multiplied by actual production, or historical emissions level.
FREE ALLOCATION WITH CONSIGNMENT: Electricity utilities receive free allowances based on forecasts of the electricity supply and administrative costs associated with complying with the Cap-and-Invest Program. During the first compliance period, they can choose to consign up to 100% of their allowances to auction. Natural gas facilities received an initial free allocation equal to 93% of their average emissions in the period from 2015 to 2019. The amount reduces annually in line with the cap decline factor. In 2023, 65% of free allowances must have been consigned for auction. This amount increases by 5% each year, reaching full consignment in 2030. Freely allocated allowances that are not consigned for auction may only be used for surrender and cannot be traded. Whether consigned or not, the allowance value allocated to electricity utilities and natural gas suppliers is required to be used for ratepayer benefit.
AUCTIONING: Auctions occur four times a year. Unsold allowances are held for future auctions and only sold if the settlement price is above the auction floor price for two consecutive auctions. Any that remain unsold within 24 months are transferred to an emissions containment reserve (see ‘Market Stability Provisions’ section).
USD 4.3 billion of state revenue since the beginning of the program (USD 5.6 billion including consigned allowances)
USD 1.7 billion in 2025 (USD 2.3 billion including consigned allowances)
USE OF REVENUE FROM FREE ALLOWANCES CONSIGNED FOR AUCTION: Revenues raised from the auctioning of free allowances on behalf of electricity utilities and natural gas facilities must be used to benefit ratepayers or customers, prioritizing those from low-income groups. In most cases the state’s Utilities and Transportation Commission determines how the revenues are used.
USE OF REVENUES FROM ALLOWANCES AUCTIONED BY THE DEPARTMENT OF ECOLOGY: Proceeds from auctions are split into five accounts:
- Carbon Emissions Reduction Account (CERA);
- Climate Investment Account (CIA);
- Climate Commitment Account (CCA);
- Natural Climate Solutions Account (NCSA); and
- Air Quality and Health Disparities Improvement Account (AQHDIA).
Each account is intended for different environmentally beneficial activities. Not all projects funded from these accounts are intended to reduce GHG emissions. Funds in each of these five accounts are to be appropriated for specific types of climate, environmental justice, and ecological projects. The CCA requires that a minimum of 35%, with a goal of 40%, of money from CCA accounts be used for projects that provide a direct and meaningful benefit to vulnerable populations within overburdened communities. At least 10% of CCA account funds are required to be used for projects formally supported by the resolution of a Tribe.
Prior to June 2025, the CERA included two additional accounts, the Climate Active Transportation and Climate Transit Program Accounts. The Legislature repealed these accounts in Chapter 417 Laws of 2025 (ESSB 5801, Sec 801). All residual funds in the two accounts were deposited back into CERA.
For the 2023 to 2025 Biennium, the Legislature appropriated a total of USD 2.75 billion across all budget types (operating, capital, and transportation) and total spending for the same period reached USD 1.5 billion or 55% of legislative appropriations. During fiscal year 2025 (July 1, 2024 through June 30, 2025), approximately USD 1 billion was spent.* Of the amount already spent during the Biennium, approximately USD 375 million was through CTPA, USD 650 million through CCA and USD 220 million through NCSA
*The annual report titled “Distribution of Funds from CCA Accounts” for Fiscal Year 2025 is available here.
Flexibility & Linking
Unlimited banking is allowed between periods; however, covered entities are subject to general holding limits, which depend on the cap level. Allowances held in a compliance account to be used for compliance or that are to be consigned for auction do not count towards the holding limit.
Borrowing is not allowed.
The use of offset credits is allowed.
QUALITATIVE LIMITS: Washington has adopted – with modifications – the following offset credit protocols developed under the California Cap-and-Trade Program:
- Livestock projects;
- Ozone depleting substance projects;
- US forest projects; and
- Urban forestry projects.
Ecology adopted amendments updating the ozone depleting substances protocol on July 21, 2025 (effective August 21, 2025), and is separately advancing a US forest protocol update, with draft language released in July and September 2025 and a proposal (CR‑102) slated for January 2026.
QUANTITATIVE LIMITS:
First compliance period: Up to 8% in aggregate. Up to 5% of an entity’s compliance obligation from projects not located on federally recognized tribal land. An additional 3% can be met from projects located on federally recognized tribal land.
Second compliance period: Up to 6% in aggregate. Up to 4% of an entity’s compliance obligation from projects not located on federally recognized tribal land. An additional 2% can be met from projects located on federally recognized tribal land.
Third compliance period and beyond: Up to 6% in aggregate. Up to 4% of an entity’s compliance obligation, including from projects located on federally recognized tribal land. An additional 2% can be met from projects located on federally recognized tribal land.
In the event of a link to another trading system, at least 50% of offset credits must provide direct environmental benefits to the state (DEBS) in the first compliance period, rising to 75% from the second compliance period. Without a link, all offset credits must provide DEBS.
Entities surrendered 26,280 offset credits in 2023, corresponding to 0.13% of total instruments surrendered for compliance.
The Washington Cap-and-Invest Program is not currently linked with any other system. However, in November 2023, the Department of Ecology announced that it would pursue linkage with the cap-and-trade programs of California and Québec. In March and September 2024, joint statements from the governments of Washington, California, and Québec affirmed their commitment to explore potential linkage. The state’s linkage-related rulemaking and Environmental Justice Assessments are ongoing. The state anticipates full linkage occurring by 2027. Quarterly status updates on linkage are posted on the Ecology Linkage Website.The most recent update occurred in December 2025.
Compliance
Four years
Except for the year following the last year of a compliance period, compliance instruments equal to at least 30% of the previous year’s verified emissions must be surrendered annually, by the start of November (or the first business day thereafter). Compliance instruments equal to all remaining emissions must be surrendered by the start of November (or the first business day thereafter) of the year following the last year of a compliance period.
FRAMEWORK: The MRV framework was established by the regulation “Reporting of Emissions of Greenhouse Gases” (WAC 173-441).
MONITORING: Reporters must follow the calculation, monitoring, quality assurance, missing data, recordkeeping and reporting procedures specified in the applicable sections of the rule.
A written GHG monitoring plan is mandatory for reporters required to report under WAC 173‑441‑030, and must identify roles, data collection methods, quality assurance, maintenance, and repair procedures for meters/continuous monitoring systems, and include simplified block diagrams for facilities.
Calibration and accuracy requirements apply to meters and measurement devices at facilities, with different initial calibration dates for emissions and product data monitoring, and subsequent recalibrations per rule, manufacturer, or industry standards (WAC 173-441-050).
MRV thresholds: mandatory GHG reporting at ≥10,000 tCO2e/year for facilities, fuel suppliers, and electric power entities; facilities report from 2012 onward; suppliers and electric power entities report beginning with the 2022 emissions year reported in 2023 (WAC 173-441-030).
REPORTING: Annual reporting is required; the emissions report is due by March 31 for most reporters, and by June 1 for electric power entities (WAC 173-441-050).
VERIFICATION: Third‑party verification is required from the 2023 emissions year (reported in 2024) for any reporter emitting ≥25,000 tCO2e/year, or any reporter with a mandatory or voluntary compliance obligation under the cap‑and‑invest law.
For reporters subject to third‑party verification, full verification is required at least once every three reporting years (the first year must be full), with less‑intensive verification allowed in the other two years if conditions are met. The verifier’s report is due by August 10 for the prior calendar year (WAC 173-441-085). Verifiers must be certified by Ecology, including active accreditation/recognition under California ARB’s Mandatory Reporting program (WAC 173-441-085).
If a covered or opt-in entity lacks sufficient compliance instruments to cover its annual and final compliance obligations at the relevant deadlines, it must, within six months, submit four penalty allowances for every missing compliance instrument. If the entity fails to submit the penalty allowances, Ecology must issue an order or a civil penalty of up to USD 10,000 per day per violation; each tonne of CO2e not covered by a compliance instrument constitutes a separate violation (WAC 173-446-610).
Market Regulation
MARKET PARTICIPATION: Compliance entities, including opt-in entities; non-compliance entities, including offset project participants; individuals with primary residence in the United States.
MARKET TYPES:
Primary: Auctions are held four times per year, with a calendar giving dates and volumes published in January of each year. Participants must have an account in the Compliance Instrument Tracking System Service (CITSS). Auctions are delivered through the Western Climate Initiative, Inc.
Secondary: Futures and options contracts for allowances are traded on the Intercontinental Exchange and Nodal Exchange. Allowances can be traded over the counter directly between market participants.
LEGAL STATUS OF ALLOWANCES: Allowances are not explicitly defined as “financial instruments” or “securities”, but, alongside offset credits, are treated as “compliance instruments” created and administered by Ecology for compliance purposes, and are subject to specific rules on creation, trading, holding, banking and retirement.
AUCTION PRICE FLOOR
Instrument type: Price-based instrument
Functioning: The auction price floor is set at USD 27.92 for 2026. It increases by 5% plus inflation annually, as measured by the nationwide Consumer Price Index for All Urban Consumers (CPI-U) identified by the US Bureau of Labor Statistics.
ALLOWANCE PRICE CONTAINMENT RESERVE (APCR)
Instrument type: Price-based instrument
Functioning: The APCR is a separate account managed by the Department of Ecology, from which allowances can be auctioned at pre-defined prices in the event of unexpectedly high allowance costs. Ecology places a percentage of each annual allowance budget into the APCR (currently 5% in the first and second compliance periods, 2023 to 2030), rather than a one-time frontload at program outset. The APCR has two price tiers, which in 2026 are set at USD 65.26 and USD 83.84 for Tiers 1 and 2 respectively.* Prices increase annually by 5% plus inflation, as measured by the CPI-U.
APCR auctions are held following any quarter in which the auction settlement price reaches or exceeds the Tier 1 price level, and a pre‑compliance APCR auction is also held before each annual compliance deadline. Only covered and opt-in entities can participate. Sales occur at the fixed tier prices. Purchased allowances are deposited directly into entities’ compliance accounts and cannot be traded on secondary markets. Any unsold allowances are carried over to future APCR auctions. Ecology publishes schedules and results for APCR auctions each year.
PRICE CEILING UNITS
Instrument type: Price-based instrument
Functioning: If there are no units remaining in the APCR, price ceiling units are made available to covered entities with insufficient allowances to meet their compliance obligations. Price ceiling unit sales only occur at the end of a compliance period and following the request of a covered entity, with advance notice as specified in rule. The ceiling price is set at USD 80.00 for 2026 to 2027 under HB 1975. Subsequent adjustments are determined by Ecology consistent with statute and rulemaking to facilitate potential linkage.
EMISSIONS CONTAINMENT RESERVE (ECR)
Instrument type: Price-based instrument
Functioning: Allowances can be withheld from an auction and placed in the ECR if auction settlement prices fall below the ECR trigger price. The trigger price is currently suspended, and this provision is therefore not operational.
*Until a linkage agreement is signed, APCR auctions only include allowances at the Tier 1 price.
Other Information
Department of Ecology: Responsible for the program rules and implementation of the Cap-and-Invest Program.
Western Climate Initiative Inc.: Non-profit organization responsible for administering auctions, the CITSS registry, and conducting market surveillance.
Other partner jurisdictions utilizing WCI, including California, Québec, and New York State.
By December 2027, and every four years thereafter, the Department of Ecology is required to submit a comprehensive review of the program to the legislature.
Investments made during the 2023 to 2025 biennium are expected to directly reduce GHG emissions by nearly 9 MtCO2e, at an estimated cost of USD 40 per tonne.*
*See the report Distribution of funds from CCA accounts Fiscal Year 2025. Note the disclaimer on the cover page.
Indonesian Economic Value of Carbon (Nilai Ekonomi Karbon) Trading Scheme
General Information
Indonesia’s Economic Value of Carbon, or Nilai Ekonomi Karbon (NEK), Trading Scheme is a mandatory, intensity-based ETS for the power sector that was launched in early 2023. In its first phase spanning from 2023 to 2024, it exclusively targeted coal-fired power plants (CFPPs) connected to the Perusahaan Listrik Negara (PLN) grid with a capacity of 25 MW or greater. In 2025, 563 installations – both connected to and not connected to the PLN grid – were covered under the ETS, consisting of CFPPs with a capacity above 25 MW, combined-cycle power plants, gas engine power plants, and gas-fired power plants. The majority of the plants covered by the NEK are operated by the state-owned electricity company PLN.
The Indonesian government has established intensity targets, known as Technical Emissions Ceiling Approvals, or Persetujuan Teknis Batas Atas Emisi (PTBAE). These targets determine the number of allowances that installations receive for each MWh of electricity generated. Covered entities must surrender allowances for all their covered emissions, with allocation based on PTBAE, emission intensity, and emission average. Additionally, entities have the option to purchase allowances via auctions.
Eventually, the Indonesia ETS is expected to function as a hybrid “cap-tax-and-trade” system, operating concurrently with a carbon tax. Facilities failing to meet their obligations under the ETS will be subject to this tax, the rate of which will be aligned with the domestic carbon market’s price.
While the system currently regulates the power sector, the government is actively preparing to extend coverage to the industrial sector. The Ministry of Industry is coordinating the development of sectoral emissions reporting systems for energy-intensive industries, including cement and fertilizers, which are intended to be integrated into the national MRV framework and the national registry to support a future extension of ETS coverage to industrial sectors.
The Indonesian Carbon Exchange (IDXCarbon) was officially launched in September 2023, under the supervision of the Financial Services Authority of Indonesia (Otoritas Jasa Keuangan, OJK).
“Presidential Regulation No.110/2025” on carbon pricing established the national legal framework for a domestic trading system, a carbon levy that functions as a compliance backstop, and a results-based payment mechanism tied to Article 6 of the Paris Agreement.
In 2025, the scope of the ETS was expanded to cover captive CFPPs that are not connected to the electricity grid and gas power plants (gas fired power plants, gas engine power plants and combined cycled power plants). As a result, the total number of covered installations rose from 146 in 2024 to 563 in 2025.
Due to regulatory changes and revisions of legislation, the allocation of allowances for 2025 has been postponed, no allowances were issued and no trading operations took place as of January 2026. Reporting obligations for covered installations still apply.
In 2025, OJK and the Ministry of Environment (MoE) operationalized IDXCarbon as the national carbon exchange, recording participation from more than 130 entities and transactions totaling ~0.6 MtCO2e.
Emissions & Targets
1,053.4 MtCO2e (2023)
By 2030: Absolute national emissions cap of ~1.35 GtCO₂e (unconditional) and ~1.49 GtCO₂e (conditional on international support), replacing previous BAU-based targets (NDC 2.0).
By 2060: Climate neutrality (NDC 2.0; Long-Term Strategy, 2021).
Size & Phases
PHASE 1: Two years (2023 and 2024)
PHASE 2: Three years (2025 to 2027)
PHASE 3: Three years (2028 to 2030)
The total emissions limit under the Indonesian ETS is the sum of the bottom-up output-based emissions limits for all individual covered entities.
The Ministry of Energy and Mineral Resources (MEMR) establishes the PTBAE, or the emissions limit, for the power sector. This is based on: (i) actual emissions, which must be below the emissions reduction target set for the sector, and (ii) the carbon trading roadmap for the power sector.
PHASE 1:
The ETS was applicable only to coal-fired power plants connected to PLN’s grid. The total emissions limit was approximately 256.8 MtCO2e.
The emissions limit for the power subsector for Phase 1 was as follows:
- non-mine mouth coal-fired power plants with a capacity of ≥25 MW to <100 MW: 1.3 tCO2e/MWh
- mine mouth coal-fired power plants with a capacity of ≥100 MW: 1.1 tCO2e/MWh
- non-mine mouth coal-fired power plants with a capacity of 100 MW to ≤400 MW: 1 tCO2e/MWh
- non-mine mouth coal-fired power plants with a capacity of >400 MW: 0.9 tCO2e/MWh
PHASE 2 and PHASE 3:
The emissions limits for the second and third phases have not yet been determined, but they are expected to be more stringent than in the first.
Indonesia’s October 2025 NDC introduces an absolute national emissions cap (1.35 GtCO2e in 2030, unconditional), which the government describes as the carbon budget that future ETS phases will align with as coverage expands beyond the power sector.
PHASE 1: Coverage was limited to coal-fired power generators connected to PLN’s grid only. Details on thresholds are provided below. Phase 1 covered about 37% of national power generation capacity via 99 PLN-connected coal units. With Phase 2 (2025 to 2027) expanding to captive coal and gas-fired plants supplying energy-intensive industries, the system is expected to regulate roughly 55–60% of power-sector emissions.
PHASE 2: The government expanded the scheme to include coal-fired power plants with capacity above 25 MW and not connected to PLN’s grid (captive CFPPs), gas-fired power plants, gas engine power plants and combined cycled power plants connected to PLN’s grid.
PHASE 3: The expansion will encompass all fossil fuel power plants, including diesel power plants with a capacity of 2 MW or greater and coal-fired power plants with capacity below 25 MW regardless of their connection to PLN’s grid.
INCLUSION THRESHOLDS: In 2024, coal-fired power generation facilities with installed capacity exceeding 25 MW are included. Smaller coal and fossil fuel plants will be incorporated at a later point (see above).
The MoE has indicated that the government plans to implement emission caps for four additional sectors in the future: forestry, industrial processes and product use, agriculture, and waste management.
Beyond the power sector, the government has indicated its intention to gradually expand ETS coverage to major emitting industrial subsectors, supported by ongoing development of MRV frameworks in the industrial sector under the Ministry of Industry.
The government has stated that future ETS phases are expected to align sectoral caps with the national absolute carbon budget defined in the 2025 NDC, moving the ETS from a purely intensity-based instrument in the power sector toward a broader economy-wide system.
Point source
In 2023: 42 entities covering 99 installations
In 2024: 63 entities covering 146 installations
In 2025: 563 installations
Note: The number of entities and installations is expected to continue increasing as new installations commence operations and additional categories are included, in line with the roadmap's expansions.
Allowance Allocation & Revenue
In Indonesia, allowances are referred to as Persetujuan Teknis Batas Atas Emisi Pelaku Usaha (PTBAE-PU).
PHASE 1 and 2:
Auctioning: In the NEK, auctioning is conducted through a system managed by IDXCarbon, where bid and offer instructions are matched based on a time and price priority scheme (refer to the ‘Market Design’ section).
- Auction share: 0% (2025)
- Auction volume: None
To date, no auction has taken place. Details regarding auction shares and related requirements or provisions are yet to be determined.
Benchmarking: MEMR sets intensity targets based on cap/PTBAE, installations’ average emissions of the previous year, and installations’ average emissions intensity of the previous year. These targets dictate the number of PTBAE-PU allowances allocated for every MWh of electricity generated. If the necessary data is unavailable, allocation is based on comparison with similar plants of equivalent installed capacity. In the first year, allowances will be given 100% for free. For the second year or the following year, installations will receive either 75% or up to 85% of their allowances for free. The gradual reduction from 100% free allocation toward 75-85% is framed by the government as transitional support for energy-intensive and trade-exposed industries such as nickel processing, steel, and cement that currently rely on captive coal and gas power. The deduction percentage depends on the installation’s compliance with the ETS.
Covered entities that receive allowances must participate in trading. If they do not, they receive a written warning and free allocation for the next compliance period is reduced to 75%.
Presidential Regulation No.110/2025 positions a future “carbon levy” as a compliance backstop alongside free allocation and future auctions. The regulation empowers the government to introduce an administratively managed reserve and results-based payment channels so that ETS-covered entities can access additional compliance units or face a financial charge aligned with prevailing market prices.
Not defined
The Ministry of Finance has indicated that future ETS auction proceeds and carbon levy revenues will be channeled through Indonesia’s Environment Fund to support power sector decarbonization, MRV infrastructure, and the financing of the energy transition.
Flexibility & Linking
Banking is allowed within phases, though PTBAE-PUs are valid for a maximum of two years from the end of the previous compliance period. Banking is not allowed across phases.
Borrowing is not allowed.
The use of domestic offset credits – known as carbon reduction units, or Sertifikat Pengurangan Emisi Gas Rumah Kaca (SPE-GRK) – is allowed. Credits equivalent to SPE-GRKs may also be used.
QUALITATIVE LIMITS: Offset credits must stem from mitigation activities from:
- New and renewable energy power plants;
- Transportation, construction, and industry including energy efficiency activities; or
- Other activities in the energy sector.
They must also be issued on the national registry.
QUANTATIVE LIMITS: None
In 2023, 6,260 tCO2 in offset credits were retired, all from the Lahendong geothermal project.
Since January 2025, Indonesia has authorized selected projects (including ~1.78 MtCO2e from PLN-affiliated power projects) for international transfer under Article 6, following the lifting of a four-year moratorium on cross-border carbon credit exports. These credits, issued under national MRV and registered in the national registry, can generate revenue to help meet Indonesia’s 2030 cap under the updated NDC.
The NEK Trading Scheme is not linked with any other system.
Carbon tax: Indonesia carbon tax (upcoming)
Domestic crediting mechanism: Indonesia Emissions Reduction Certification
Compliance
The compliance period for the Indonesian ETS is one year, with trading occurring from January 1 to April 20 of the following year. Surplus allowances at the end of the trading period may be traded in the following period, provided it is within the same phase.
FRAMEWORK: The national MRV system is stipulated in the Presidential Regulation 110/2025 and in the “Ministry of Environment and Forestry Regulation 21/2022”. For the power subsector, the MRV system is stipulated in the “Ministry of Energy and Mineral Resources Regulation 16/2022”.
MONITORING: An MRV system is currently in operation in the industrial sector and the power generation sub-sector. Pilot MRV programs are also being conducted in the cement and fertilizer sectors.
REPORTING: Reports are submitted to the MEMR through the Directorate General of Electricity via an online platform, the APPLE-Gatrik. These reports must be submitted by the end of January of the year following the reporting year. Installations must report CO2, CH4, and N2O emissions, expressed in units of CO2e.
VERIFICATION: Emissions must be verified by a third-party verifier that is accredited by the Komite Akreditasi Nasional (KAN), Indonesia’s national accreditation body. This verification should be completed by the end of March, following the January reporting deadline. Verifiers are required to adhere to the guidelines for GHG emission verification in the power subsector.
The plan was to concurrently implement carbon trading and a carbon tax, with the latter serving as a penalty mechanism. However, as discussions on carbon tax regulations continue and their implementation is postponed, an alternative enforcement approach was introduced:
- Should verified emissions exceed the allocated PTBAE-PU by the end of the period, allocations will be given according to the results of carbon trading transactions in the previous carbon trading period up to a maximum of 85% and the PTBAE-PU will be reduced by up to 15%.
- Entities which fail to report their GHG emissions or participate in carbon trading by the end of the period will see a 25% reduction in their PTBAE-PU.
Presidential Regulation No.110/2025 clarifies that, going forward, entities that do not surrender sufficient units will face a carbon levy set in line with prevailing market prices. This embeds the “cap–tax–and–trade” model in national law by tying the financial penalty directly to the ETS price signal.
Market Regulation
MARKET PARTICIPATION:
Compliance entities, specifically those holding an “Electricity Supply Business License for Public Purpose” or “Electricity Supply Business License for Own-Use,” are eligible to engage in carbon trading. The government has positioned IDXCarbon as the central infrastructure not only for domestic allowance and offset trading but also for Article 6-authorized international transactions, following the October 2025 presidential decree lifting the export moratorium.
MARKET TYPES
Primary:
In the primary market, allowances and offset credits are traded through a mechanism that may be activated upon request by the relevant ministry. This platform facilitates offset selling, with a potential reserve price set as low as IDR 1 (less than USD 0.01), and bids commencing from this figure or higher. As of January 2026, there have been no auctions conducted under this system, and specific details about auction shares, along with associated requirements and provisions, remain to be defined.
Secondary:
Operated by IDXCarbon, launched at the Indonesia Stock Exchange (IDX) in September 2023 and licensed by the Financial Services Authority (OJK), the secondary market encompasses:
- Regular Market or ‘Continuous Auction’: Matching of bids and offers based on time and price priority, with minimum prices set at IDR 200 (USD 0.01) and governed by fraction price rules and an ‘auto rejection’ rule.
- Negotiated Market: Facilitates the settlement of pre-agreed trades through the exchange, requiring details of counterpart, carbon units, price, and volume.
- Marketplace: Enables project developers to list their projects and set prices.
IDXCarbon is integrated with the new centralized registry for carbon units and trading, Sistem Registri Unit Karbon (SRUK). Introduced by Presidential Regulation No. 110/2025, it replaces the SRN-PPI (Sistem Registri Nasional Pengendalian Perubahan Iklim) system for trading purposes; SRN-PPI will now be used solely for reporting mitigation and adaptation actions.
OJK has begun integrating IDXCarbon with the national registry to enable automated tracking of issuance, transfer, and surrender, including for internationally transferred mitigation outcomes under Article 6.
LEGAL STATUS OF ALLOWANCES: PTBAE-PUs and SPE-GRKs are classified as securities, allowing their transfer and trade in the capital market.
EVALUATION BY MEMR
Instrument type: Quantity-based instrument
Functioning: The MEMR evaluates on a regular basis the implementation of the ETS. If the evaluation reveals a shortage of allowances, the Minister and Director General may conduct additional auctions of PTBAE-PUs.
Other Information
Coordinating Ministry of Food Affairs: Chair of the National Steering Committee for Carbon Pricing Implementation; coordinates ministries/agencies in developing the national carbon pricing framework.
Coordinating Ministry for Economic Affairs (CMEA): Vice Chair of the National Steering Committee for Carbon Pricing Implementation.
Ministry of Environment (MoE): National focal point for UNFCCC; leads NDC development and implementation, including national mitigation and adaptation and implementation of carbon pricing (including providing authorization for national and international emission trading, and overseeing offsetting; oversees MRV; operates the national registry, SRUK).
Ministry of Energy and Mineral Resources (MEMR): Coordinates ETS implementation in the power subsector, including oversight of an integrated MRV system with the SRUK; responsible for preparing and implementing the 2021 voluntary pilot carbon market.
Ministry of Industry: Coordinates implementation of CPIs on the Industrial Processes and Product Use sector, including an emissions reporting system to be integrated with the SRUK.
Ministry of Finance: Leads the development and implementation of the carbon tax.
Indonesian Environment Fund: Handles climate funding; manages ETS revenues, including any international carbon credit trading.
Financial Services Authority (OJK): Oversees IDXCarbon, which is hosted on the Indonesia Stock Exchange.
Presidential Regulation No.110/2025 designates a national carbon pricing steering structure that coordinates the ETS, the carbon levy, and Article 6 results-based payments across the Ministry of Environment and Ministry of Forestry, the Ministry of Finance, the Ministry of Energy and Mineral Resources, and the Financial Services Authority (OJK) and other related ministries.
The Minister of Energy and Mineral Resources,
through the Directorate General of Electricity, evaluates the Indonesian ETS every six months. Results of this evaluation may lead to adjustments in the policy.
The Ministerial Regulation of Energy and Mineral Resources 16/2022 is currently being revised to align with the Presidential Regulation 110/2025.