Regulation 16/2022, released by the Ministry of Environment and Forestry, regulates the procedures for implementing carbon trading in the electricity generation subsector by determining the limits of the terms used in the regulation. Through the implementing of carbon trading, power plants must carry out power generation efficiency measures in accordance with the provisions of laws and regulations in the electricity sector and must prioritize GHG Emission Offsets. Business actors are subject to levies on sales and purchase transactions of carbon units in carbon trading in accordance with statutory provisions.

In order to support the achievement of Indonesia’s NDC greenhouse gas (GHG) emissions reduction targets and to implement the provisions of Presidential Regulation Number 98 of 2021 on the Implementation of Carbon Pricing to Achieve the Nationally Determined Contribution Target and Control Over Greenhouse Gas Emissions in National Development, this Regulation introduces the procedure for implementing carbon pricing in Indonesia. Carbon pricing applies to the following sectors: energy; waster; industrial processes and product uses; agriculture; forestry; and other sectors in accordance with developments in science and technology. The implementation of the carbon pricing is carried out through the following mechanisms: carbon trading; result-based payments; and carbon levies, as well as other mechanisms that accord with developments in science and technology. Carbon trading may be carried out through domestic and international trading procedures. The Regulation sets out the provisions of a Carbon Trading Roadmap, which carbon trading activities must comply with, and establishes the rules for offsetting GHG emissions from activities that are either uncapped or do not meet the sectoral GHG Emission Baseline.The Regulation further outlines the procedures for Result-Based Payments and the Carbon Levy.

On September 13, 2022, the President of the Republic of Indonesia issued the Presidential Regulation No. 112 of 2022&nbsp;concerning the Acceleration of Development of Renewable Energy for Electric Power Supply (PR 112/2022).&nbsp; Key measures include:<ul><li>Mandating the state’s electricity company to prioritise the purchase of electricity from power plants that utilise renewable energy sources.&nbsp;</li><li>Allowing the state electricity company to implement more straightforward procurement processes when purchasing electricity from renewable energy power plants.&nbsp;</li><li>Instructing the Minister of Energy and Mineral Resources to formulate a roadmap for the accelerated end date for coal-fired steam power plant operation.&nbsp;&nbsp;</li><li>Banning any development of new coal-fired steam power plants unless it has been stipulated in the electricity supply business plan prior to the enactment of PR 112/2022, or if it meets set criteria (including being of strategic importance, and ceasing operation by 2050).</li><li>Enabling the government to grant incentives for development of renewable energy power plants.</li></ul>

<div>The Presidential Regulation is intended to serve as a basis for the implementation of carbon pricing (NEK) and to be a guideline on GHG emission reduction through policies, measures, and activities to achieve NDC target and to control GHG emissions in the national development. The aim, as set out in article 3 para. 1, is to regulate GHG emission reduction, climate resilience enhancement, and NEK in order to achieve NDC target.</div><div> The scope of this Presidential Regulation is set out in article 4 and includes:</div><ul><li>efforts to achieve the NDC target;</li><li>procedure for carbon pricing implementation;</li><li>transparency framework;</li><li>monitoring and evaluation;</li><li>capacity building and finance; and&nbsp;</li><li>steering committee.</li></ul><div> Pursuant to article 47 para. 1, the implementation of carbon pricing is carried out through mechanisms of:</div><ul><li>Carbon Trading;</li><li>Results-based Payment;</li><li>Carbon Levy; and/or</li><li>other mechanisms in accordance with the development of science and technology determined by the Minister.</li></ul>

This regulation sets the Indonesian Sustainable Palm Oil Certification system (ISPO). Art 3 states that the ISPO shall notably be aimed at increasing the programs to accelerate the decrease in GHG emissions.

Law No. 7 on the Harmonisation of Tax Regulations contains provisions on the carbon pricing instruments in Indonesia, including a carbon tax. Article 13 stipulates that Indonesia’s carbon tax has been introduced to control greenhouse gas (GHG) emissions and to support the achievement of the emissions reduction targets outlined in Indonesia’s NDC. To support the implementation of the carbon tax, a carbon tax roadmap will be produced, containing an emissions reduction strategy that reiterates Indonesia’s commitment to achieving net zero GHG emissions by 2060, will identify priority sectors for taxation (such as the forestry sector which accounts for 97% of Indonesia’s NDC emissions reduction target) and identify sectoral targets. Article 13 further outlines the timescales along which this carbon tax will be implemented and outlines plans for expanding carbon pricing in the future. The Law states that the carbon tax rate will be made higher than or equal to the domestic carbon price.

This law notably takes into account mitigation and adaptation dimensions.

This law updates previous geothermal laws and regulations, and separates geothermal activities from other natural resources exploitation such as mining. This may mean that geothermal exploitation will no longer be subject to the restrictions that apply to mining activities. It also specifies that tenders for geothermal exploration will now be issued by central government. 
 
The new law also requires that local communities either receive a share in revenue or a production bonus from the geothermal power plant. 
 
The basic structure of the law (building on Law No. 27/ 2003 and associated regulations) seeks to provide a stronger legal basis for upstream geothermal energy development, including private investments in the sector and to expand regional autonomy to support sustainable energy alternatives to fossil fuels. There is a fiscal incentive for new renewable energy development. 
 
In 2005, the Directorate of Geothermal Enterprise Supervision and Groundwater Management was created, to strengthen the sector's management efficiency. 
 
The regulations set out all the requirements and obligations for businesses seeking to establish themselves in this sector, including the coordination with the different levels of government, and the requirements to adhere to environmental quality and conservation legislation.

The Law about Prevention and Eradication of Forest Destruction establishes the framework to ensure forestry protection.&nbsp; The law aims to : 1) guarantee legal certainty and provide a deterrent effect for perpetrators of forest destruction; 2) ensure the existence of forests in a sustainable manner while maintaining sustainability and not destroying environment and surrounding ecosystems; 3) optimize the management and utilization of results forest with due regard to the balance of functions forest to create a prosperous society; 4) increase capacity and coordination of officials law enforcement and related parties in handle destruction prevention and eradication forest.&nbsp;

This law formally recognises that decreasing environmental quality is a serious problem for Indonesia, and that climate change presents further systemic threats. It seeks to ensure that development is underpinned with the principle of sustainably and environmentally sound development principles. 
 
In practice this means that environmental protection and management should be integrated into all efforts to preserve the functioning of the environment, which includes the development of environmental monitoring programmes and development project impact evaluations.It concerns ecosystem integrity (such as forest ecosystems, which is why the legislation is relevant to REDD+) but also the release of toxic materials into the environment.

Indonesia's Adaptation communication, Adaptation Communication from Indonesia in 2022

Enhanced NDC Cover Letter, Nationally Determined Contribution from Indonesia in 2022

Submission by the Government of the Republic of Indonesia to the global stocktake, Submission to the Global Stocktake from Indonesia in 2022

Indonesia. Biennial update report (BUR). BUR3., Biennial Update Report from Indonesia in 2021

Indonesia First NDC (Updated submission), Nationally Determined Contribution from Indonesia in 2021

Strategic Plan of the Ministry of Environment and Forestry for 2020-2024

Approved

This plan notably sets the sector's strategy vis-a-vis climate change.

Strategic Plan of the Ministry of Environment and Forestry for 2020-2024

Main documents

Timeline

Note

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