On 29 October 2021, shortly before the 2021 United Nations Climate Change Conference (COP 26), Indonesia issued Presidential Regulation No. 98 of 2021 on the Implementation of Carbon Economic Value to Achieve Nationally Determined Contribution Targets and Control over Greenhouse Gas Emissions in Relation to National Development (“Regulation“). The Regulation builds on Indonesia’s ratification of the Paris Agreement (via Law No. 16 of 2016), under which Indonesia expressed its hope to better manage the impact of climate change and stated its commitment to reduce greenhouse gas emissions and to achieve the nationally determined contribution (“NDC“).
The Regulation prescribes mitigation and adaptation actions as the two main methods to tackle climate change and to achieve the NDC. It also introduces the concept of “carbon economic value” (nilai ekonomi karbon) – it develops a regulatory framework on carbon pricing and carbon trading arrangements (including registration and valuation, economic incentives, and carbon levies and taxes) and signals Indonesia’s readiness to graduate from a voluntary carbon market into a compliance carbon market. As one would expect with such a substantial and wide-ranging piece of legislation, details on implementation will need to be fleshed out in future ministerial level regulations.
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