On 18 March 2021, the Indonesian Minister of Energy and Mineral Resources announced the launch of a voluntary emissions trading trial in the power sector, which will initially run from March to August 2021. Eighty coal-fired power plants will participate, of which 59 are owned by the state electricity company PLN. Together, these generators make up over 75% of CO2 emissions from the power sector.

The voluntary program is considered a pilot and aims to familiarize stakeholders with ETS compliance and offset mechanisms, as well as to inform the development of a national ETS. The overall cap will be intensity-based, with different intensity benchmarks for three subgroups: generators with a capacity between 100 and 400 MWh, with a capacity of over 400 MWh, and generators (with a capacity between 100 and 400 MWh) that are located directly next to the coal mine.

The benchmarks are based on the weighted average of GHG emission intensity of power generators in each participant subgroup in 2019. Participants can trade allowance units as well as offset credits from renewable energy generation. The voluntary program is set to continue, with yearly trading periods and reviews, until the implementation of a national ETS.

Indonesia has been developing a domestic ETS since it passed the “Government Regulation on Environmental Economic Instruments” in 2017, which provides a mandate for an emissions and/or waste permit trading system to be implemented by 2024 (for more, see ICAP’s Indonesia factsheet). Monitoring, reporting, and verification (MRV) guidelines for the power sector were released in mid-2018. A presidential regulation that would establish a national framework for carbon pricing instruments, including a national ETS, is currently under consideration and expected to be passed in the first half of 2021.