Press Release: Jakarta, September 26, 2023. Without systemic changes, the launch of a carbon exchange, marked by the appointment of the Indonesia Stock Exchange as the exchange's organizer by the Financial Services Authority (OJK), is seen as potentially becoming a mere means of profit-seeking without contributing to saving humanity from climate change. This was stated by Nadia Hadad, Executive Director of MADANI Berkelanjutan, in response to the launch of the Indonesian Carbon Exchange.
" Currently, the earth's temperature has risen by 1.1°C and is expected to exceed 1.5°C by the early 2030s. The impacts of climate change are unavoidable. Therefore, simultaneous and comprehensive mitigation and adaptation measures are not an option but a necessity," added Nadia Hadad.
"Indonesia as an archipelagic country feels the significant impact of the climate crisis, especially on vulnerable groups such as the poor, people with disabilities, children, the elderly, women, indigenous and local communities, and communities on the front lines of areas affected by climate disasters such as droughts, floods, hurricanes, rising sea levels, forest and land fires, and so on. In the last 10 years (2013-2022), the National Disaster Management Agency recorded 28,471 weather and climate-related disasters, resulting in 38,533,892 people suffering, more than 3.5 million people displaced, and more than 12,000 people injured, missing, and killed. Bappenas even predicts economic losses of up to IDR 544 trillion during 2020-2024 due to the impact of climate change," explained Nadia Hadad.
Carbon trading is one of three mechanisms for the Economic Value of Carbon (NEK) mentioned in Presidential Regulation No. 98 of 2021. Carbon trading can be conducted directly or through a carbon exchange. There are two types of carbon trading: emissions trading and GHG emission offsets . In emissions trading, parties that emit excessive Greenhouse Gas (GHG) emissions can purchase permits to pollute or upper limits on GHG emissions (PTBAU-PU). In the offset scheme , parties that emit GHG emissions can compensate for their emissions by purchasing offset credits (SPE-GRK).
Meanwhile, Giorgio Budi Indrarto, Deputy Director of MADANI Berkelanjutan, explained that there are seven points that must be considered to prevent carbon trading from becoming an image-building or greenwashing practice . "First, all countries, including Indonesia, must increase the ambition of their nationally determined contributions (NDCs) to align with the path to 1.5 degrees Celsius and align domestic development policies across all sectors with these climate commitments. Second, there needs to be a strict and transparent GHG emission ceiling. Currently, only coal-fired power plants are subject to an emission ceiling. The determination of GHG emission reduction obligations for Business Actors in the forestry sector also needs to be emphasized because Business Actors control large amounts of forest and land."
"Third, offsets must be limited to residual emissions , that is, emissions remaining after polluters have optimally reduced GHG emissions. Without this limitation, offset schemes risk becoming perverse incentives, which could hinder the implementation of ambitious mitigation actions. Fourth, carbon trading rules need to ensure social and environmental integrity , including additionality , reliability , and permanence . Compensating emissions in the energy sector with offset credits from the forestry and land sector should be avoided due to various unresolved integrity issues. The regulation of social and environmental safeguards, which are subject to various existing national and international standards, also needs to be clarified," added Giorgio Budi Indarto .
The regulatory framework for forestry carbon trading must also encourage policies to reduce the inequality in forest and land ownership, which is a major barrier to community participation. This can be done by accelerating the recognition of community rights, including indigenous and local communities, accelerating the implementation of social forestry and genuine agrarian reform, prioritizing forest use for landless communities when there are conflicting claims with companies, and developing public standards for developing scientifically validated carbon assets that are freely accessible to forest-guarding communities.
The government must also ensure transparency and accountability throughout the carbon trading chain, from the development of the carbon trading roadmap, carbon project licensing, allocation of emission ceilings, to the implementation of the carbon exchange itself, including by preventing practices that lead to speculation and manipulation of the carbon market, as well as potential conflicts of interest between regulators and other related parties.
Finally, given that forests and ecosystems themselves are highly vulnerable to the impacts of climate change, building resilience in these ecosystems and communities is crucial. Therefore, the Economic Value of Carbon, as an instrument for achieving NDC targets and controlling GHG emissions, requires ensuring adequate funding for effective and equitable climate change adaptation. Without meeting the preconditions and requirements mentioned above, it will be very difficult for carbon trading to be part of the realization of climate justice.
Climate justice is a crucial principle amidst environmental and ecological injustice , whose patterns are recognizable in development and economic growth driven by extraction, environmental and biodiversity destruction, human rights neglect, and greenhouse gas emissions. The impacts are injustice, inequality, poverty, and a decline in people's ability to survive and the loss of livelihoods and healthy living spaces.
These forms and patterns of climate injustice ultimately undermine the ability of the environment and communities to survive and overcome the impacts of the climate crisis. Therefore, all climate crisis mitigation and adaptation interventions must adopt the principle of justice as a primary applicable principle, including the implementation and governance of the Carbon Exchange.
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People and Nature for Sustainable Indonesia (MADANI) is a non-profit organization working to address the climate crisis through research and advocacy. Founded in 2016, MADANI Berkelanjutan strives to achieve balanced development in Indonesia between economic, ecological, and social aspects. We formulate and promote innovative solutions to the climate crisis by bridging collaboration between various parties. MADANI Berkelanjutan's current focus includes forest and climate issues, sustainable commodities, sustainable development at the regional level, and biofuels.
