Carbon Markets as a Driver of Sustainable Economic Growth

What are Carbon Markets?

Carbon Markets are trading systems where carbon credits can be bought and sold. Companies and individuals can use carbon markets to reduce or offset the carbon emissions they produce by purchasing carbon credits from another entity that sells them. One tradable carbon credit represents the reduction of one ton of carbon dioxide or other equivalent greenhouse gas emissions. Once a credit has been purchased and used, it cannot be used again to offset future emissions; the company or individual must purchase new carbon credits.

How Do Carbon Markets Work?

Every company inevitably produces carbon emissions, from small actions like turning on lights or using vehicles for commuting, to the massive emissions generated by giant corporate activities. Over time, the government has become more proactive in its efforts to reduce carbon emissions produced by companies in Indonesia. In early 2024, the Indonesian government targeted an unconditional emissions reduction of 31.89% and a conditional reduction of 43.20%. Therefore, companies that produce more carbon emissions than the government’s targets can purchase carbon credits in the Carbon Markets to reduce or offset a portion of their emissions. It’s not just about buying; companies and individuals can also sell carbon credits by facilitating projects or activities that absorb carbon emissions—farmers are a key example.

Implementation of Carbon Markets

Beberapa entitas terkenal memanfaatkan pasar karbon untuk mengimbangi jejak karbon mereka. Contohnya meliputi:

• Microsoft: Dilaporkan menghasilkan 12.510.000 metrik ton emisi karbon dari tahun 2020 hingga 2021, setara dengan emisi seluruh negara Panama. Untuk mengatasinya, Microsoft secara ekstensif membeli kredit karbon untuk mengurangi atau menghilangkan emisi karbon mereka.
• Taylor Swift: Pada tahun 2022, dilaporkan bahwa jet pribadi penyanyi Taylor Swift menghasilkan 8.293 ton emisi karbon, 1.100 kali lebih tinggi dari emisi tahunan rata-rata orang. Untuk mengimbanginya, ia sering membeli kredit karbon untuk mengurangi dan/atau mengimbangi emisi yang dihasilkan.

The Potential of Carbon Markets in Indonesia

Indonesia is a country incredibly rich in green landscapes. The types of forests in Indonesia, namely tropical and mangrove forests, have a great capacity to absorb carbon emissions. Indonesia can leverage this potential to play an active role in the Carbon Markets. As of September 23, 2023, Indonesia’s Financial Services Authority (OJK) officially launched the Indonesia Carbon Exchange. This can encourage Indonesian farmers to sell their carbon credits on the market, as they can earn 30,000 Rupiah—or approximately two USD—per unit of carbon emissions that their land or crops can absorb.