The OECD Clean Energy Finance and Investment Mobilisation Programme (CEFIM), along with the International Energy Agency, are assisting the Indonesian Government’s efforts to develop a domestic ETS through a series of technical Focus Group Discussions (FGDs). Building on international experience and OECD/IEA work, these FGDs will make deep-dives into a variety of critical aspects of the development of effective ETS schemes, relevant to the Indonesian context. These events will be taking place in Q4 2021-H1 2022.
As a key driver of energy-related emissions, decarbonising Indonesia’s power system will be determinant to achieve the country’s climate objectives. Indeed, under its recently updated nationally determined contribution (NDC), Indonesia aims to reduce its greenhouse gas (GHG) emissions by 29% (or 41% with international support) by 2030 and achieve a net-zero emissions target by 2060. As the country’s second largest greenhouse gas emitter, the energy (and power) sector is to make a major contribution towards these emission reduction targets.
Given the size of the challenge, Indonesia has been taking key steps to promote a clean energy transition. Most notably, Indonesia implemented a coal moratorium for new plants starting in 2022 and is planning for a massive increase of low-carbon power generation until 2060. In total, this transition away from coal will require a whopping USD 1.165 trillion.
To support these measures, Indonesia is now looking to set a carbon price for the power and industry sectors in the form of a domestic ETS, with a view to helping stimulate and drive investment towards low-carbon energy sources. As an initial step, Indonesia ran a voluntary emissions trading trial in the power sector from March to August 2021. The results of the pilot will be used to inform the mandatory ETS.
In light of these issues, this third FGD discussed how other ETS schemes have been implemented in their pilot or early phases with a particular focus on design elements that can enhance participation. During the discussion, country experts shared their experience designing and implementing such schemes as well as highlighted lessons learned that could also be useful in the Indonesian context. An open dialogue, convening representatives from government institutions, development partners and other relevant stakeholders, will be organised towards the end of the event to inform and identify priority areas for future consideration in Indonesia’s ETS development.
Panel Discussion on lessons from implementation of ETS during pilot or early phase and expansion to other sectors
Moderator: Cecilia Tam, CEFIM Programme Team Leader, OECD
Panel Discussion on carbon tax imacts on ETS design and implementation
Moderator: Kieran McNamara, Senior Analyst, IEA