Indonesia will issue emission quotas for several coal-fired power plants before the end of January 2023, as a first step towards creating a mechanism for domestic carbon trading. The first phase of the country’s carbon trade mechanism will cover coal-fired power plants with a minimum capacity of 25 MW that are directly connected to power grids and owned by the state-owned utility Perusahaan Listrik Negara (PT PLN). Carbon emission quotas will be stricter for large power plants (911 kgCO2/MWh for non-mine mouth plants above 400 MW, 1.011 tCO2/MWh for those between 100 MW and 400 MW, 1.089 tCO2/MWh for mine mouth plants above 100 MW, and 1.297 tCO2/MWh for all plants between 25 and 100 MW).
According to Indonesia’s Ministry of Energy, there are 99 coal plants with a combined installed capacity of 33.6 GW that could join the carbon trade during the course of 2023. The plants that emitted carbon smaller than their quota will be able to trade their remaining allotment with those whose emissions exceed their quota. Companies not implementing carbon trades will be granted lower emission allocations in 2024.
In September 2022, Indonesia unveiled its new updated nationally determined contribution (NDC) under the Paris Agreement, which increases the country’s 2030 emission reduction target from 29% to 31.89% (unconditionally) and from 41% to 43.2% (conditionally), compared to a business-as-usual (BAU) scenario. Indonesia’s previous targets were set in its July 2021 updated NDC. In the energy sector, Indonesia’s updated NDC plans a reduction of emissions of 358 MtCO2eq (12.5%, unconditional) and 446 MtCO2eq (15.5%, conditional).
