Directorate General of Electricity

Ministry of Energy and Mineral Resources

Republic of Indonesia

INDONESIA’S EMISSION CAP AND TRADE IN POWER SECTOR

Focus Group Discussion (FGD) Approaches to Emission Trading System (ETS) Schemes
in The Power Sector

Bayu Nugroho
Directorat of Electricity Engineering and Environment

Jakarta, November 23th,2021

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INDONESIA'S COMMITMENT TO REDUCING EMISSIONS

Net Zero Emission (NZE) Principal President’s Instruction

01 Enhancement utilization of UNFCCC - COP21, DECEMBER 2015

New Renewable Energy (NRE)
Reducing GHG emissions by 29% (self-
effort) or 41% (with international
Reducing fossil energy assistance) by 2030 according to NDC
02 • Carbon tax & trading
• Co-firing of CFPP with NRE
• Retirement of CFPP LEADERS SUMMIT ON CLIMATE, APRIL 2021
Attracting investment in the energy transition
03 Electric vehicles through the development of biofuels, lithium
battery industry, and electric vehicles.

Enhancement of electricity
04 consumption in household and PRESIDENT RI STATE’S SPEECH ON
industry AUGUST 16, 2021
Energy transition towards NRE and the
Utilization of Carbon Capture
05 and Storage (CCS).
acceleration of a green technology-based
economy, will be an important change in our
economy.

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EMISSION TRADING SYSTEM (ETS) TRIAL IN POWER SECTOR
Offset

According to article 52 Government Regulation No. 46/2017 Trading

Purchase
Sale
on Economic Instrument of Environment, emission trading
must be implemented maximum in Nov, 2024. For preparing Cap Deficit

the mandatory ETS in 2024, starting this year Directorate Surplus

General of Electricity conducting ETS trial (voluntary

scheme). ETS trial will be accordance with Presidential
Regulation on Carbon Pricing implementation to achieve NDC
UNIT A UNIT B
target and controlling emission carbon in National
Emission Trading System trial on power plants will be implemented through Cap &
Development.
Trade and Offset
Cap : The upper limit of GHG emissions allowed set by the Government
Voluntary Mandatory Trade : Activities for selling and buying the allowances to meet the GHG emissions
(2021-2024) 2025
allowed
Offset : Reductions in GHG emissions in one place that can be used to compensate for
emissions elsewhere
GHG emission cap in Coal Fired Power Plant (CFPP)
Objectives of ETS trial are:
 Increasing GHG emission reduction to achieve NDC target
 Implementing of cap emission in CFPP
 Strengthening Measurement, Reporting and Verification in
Inventory GHG emission
 Raising awareness in implementation of carbon pricing,
especially in cap and trade, and offset  CFPP capacities distribution according to the MEMR Regulation No 9/2020 on
the Efficiency of the Electricity Supply of PT PLN (Persero).
 The cap value based on the 2019 weighted average GHG emission intensity in
each CFPP groups and considering the emission quota status.
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ETS TRIAL IN ENERGY EFFICIENCY SOEBROTO AWARDS (PSBE)

GHG Em is s io n Re p o rtin g Tra d in g p e rio d Judging Period

Subroto Awards
Apple - Gatrik Trial Category C of PSBE

APPLE-GATRIK
1. Participants report GHG emissions
in 2020 through APPLE-Gatrik
Emission Balance
2. Participants confirm their
participation to the Directorate
Tradeable
Unit of Power Plant Trading Emission 70% General of Electricity.
3. Participants can trade or offset
Either NRE power plants or
fossil fuel power plants Potential Offset of after confirming their participation
demand 30% NRE and sending it to the Directorate
General of Electricity
Note: 4. Trial implementation period in
• Trading is carried out between the power plant participating in the
trial. Trade-able emissions from surplus generating units are capped at
March - August 2021 (reporting,
70%. transaction, judging stages)
• Surplus generating units (sellers) are required to have made EE / NRE 5. Trading is carried out not in same
efforts since at least 2015 to be able to sell tradeable emissions.
• Offsets are determined from the mitigation action of NRE power plant. power generation unit
With a potential demand of 30%

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PSBE OFFSET

1. Offset can apply to unit of power plant with a positive initial carbon balance as well as to unit of power plant with a
negative initial carbon balance;
2. Offsets from renewable energy mitigation actions that have carbon credit certificates from mechanisms such as ICER,
CDM, VCS/VERRA, Plan Vivo, JCM, Gold Standard and others, with a Commercial Operation Date (COD) in 2011 or later.
3. Unit of power plant needs to submit a certificate of cancellation from the above mechanism in accordance with the
number of carbon credits (tons of CO2);
4. Mitigation actions that do not yet have a carbon credit certificate can be registered in the Emission Reduction Book (PPE)
with the following conditions:
a. units of power plant COD in 2011 or later
b. mitigation actions included Wind Power Plant, Hydro power plant, Solar power plant (on-grid and off-grid) and Energy
efficient public street lighting (PJUHE)
c. emission reduction is the result of emission reduction achievement in 2020
d. verification and validation by the Ministry of Energy and Mineral Resources (MEMR)
e. PPE will be issued by the MEMR for PSBE 2021
f. PPE that has been used for offsets in the PSBE cannot be used for other purposes (e.g. traded in other mechanisms).

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ETS TRIAL (VOLUNTARY SCHEME) CONDUCTED THROUGH SUBROTO AWARD
IN ENERGY EFFICIENCY CATEGORY C

CANDIDATE PARTICIPANTS OF ETS TRIAL PARTICIPANTS THROUGH PSBE IN 2021

From 84 candidate participants, there are 39 units of

CFPP that have confirmed their participation, but there
is 1 unit of CFPP that withdrew and there are 32 units
of CFPP that have submitted documents to the
PSBE committee.

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RESUME OF ETS TRIAL THROUGH SUBROTO AWARDS IN 2021

International Carbon Credits

4,500 ton CO2

From VCS/VERRA project retirement with
Carbon Transfer Carbon Price 3 EUR/ton CO2
VCS/VERRA Projects from Hydropower Plant Renun,

42,455.42 ton CO2 TRADING AND

Sipansihaporas and Musi.

The average of Carbon Price is USD 2/ton CO2 OFFSET Indonesian Certificates
From 28 transactions among CFPP

22.248,1 ton CO2

The Average of Carbon Price is IDR 4,000/tonCO2
Indonesian Certificates is issued by MEMR through
The Cost of ETS Trial PPE mechanism from many renewable projects,
either on-grid or off-grid
IDR 1.54 Billions
IDR 1.227 Billions spend in trading and IDR 236
millions spend in offset

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CARBON TAX – ACCORDING to LAW NO. 7 OF 2021

Implementation of Carbon Tax

01 Carbon tax implementation is carried out by taking into
account the carbon tax roadmap set by the Government
and/or the carbon market roadmap.
2022
2025
02 The subject of the carbon tax is an individual or entity
that buys containing carbon and/or engages in activities
2021 until
2024
for further
that produce carbon emissions.

03 Carbon tax revenues can be allocated for climate change

Ca rbon ta x
and regulated by or based on a Government Regulation Deve loping on Emis s io n Trading
after being agreed by the Indonesian Parliament in the ca rbon tra ding im ple m e ntation Sys tem will be
m e cha nis m ba s e d on ca p (ca p implemented in full
preparation of the Draft State Budget. s cale (mandatory)
a nd ta x) for Coa l
Fire d Powe r Pla nt and carbon tax will

04 The carbon tax is set at a minimum of IDR 30.00 per kg

CO2e.
(CFPP)
be extended to
other s ectors with
taking into acco unt
secto r readiness with
05 Implemented in April 1, 2022 for coal-fired power plant Cap and Tax co nsidering economic
co nditio n,
with a cap & tax scheme. stakeho lders
Tax
Cap readiness , impact
and/ o r scale

Before After

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IMPLEMENTATION OF CAP AND TAX MECHANISM IN CAP AND TRADE

Cap and Trade Cap and tax

Carbon Tax
EP/ERC
EP/ERC
Defisit
Cap EP/ERC
EP/ERC

Surplus

Trading Trading
EP/ERC EP/ERC

A B A C

Entities emitting emission above the cap are required to If entity cannot purchase emission permit (EP) or
purchase an emission permit (EP) from the entity under the cap emission reduction certificate (ERC/carbon offset) to
or purchase an emission reduction certificate (ERC/carbon compensate entire its emission above the cap, the
offset). remaining emissions will be charged with carbon tax.

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SIMULATION OF CAP & TRADE and CAP & TAX

Ilustration

Unit of Coal Fired Power Plant (CFPP)

Capacity = 800 MW Unit of CFPP

200.200 tCO2
Emission Cap = 0,918 100.000 tCO2 Carbon Tax

Deficit
Gross Electricity Production (GEP) = 6.100.000 MWh
CO2 Emission = 5.800.000 tCO2 100.200 tCO2 Trading & Offset

Cap

Surplus/Deficit = Emission quota allocation – CO2 Emissi

= (Cap x GEP) – CO2 Emission
= ((0.918 x 6.100.000)) – 5.800.000
= - 200.200 tCO2 (deficit)

Unit of CFPP have deficit 200.200 tCO2 If the unit of power plants only conducts trading & offset
In order to meet the cap, the unit should pay approximately USD 400.400, (if unit activities of 100,200 tCO2, then there is still a remaining
doing trading and cap with the carbon price and carbon tax for 2 USD/ton CO2 emission deficit of 100,000 tCO2, which will be charged
with carbon tax.

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THANK YOU

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CARBON PRICE REFERENCES
Government provide information on range of carbon price based on many references as follows
Activities Approach Minimum Price Maximum Price References
Trading between CFPP Mitigation Cost in CFPP Based on PLN Circular Letter for co-firing
- USD 4.69/tCO2
in CFPP, biomass IDR 900/kg with NCV
4,200 kcal/kg
Carbon price in USD 2/tCO2 USD 8.5/tCO2 ETS China
other countries
USD 5/tCO2 USD 7/tCO2 ETS RGGI - USA
Carbon price for emission trading between CFPP in a range of USD 2 - 8.5 per ton CO2
Offset CFPP – RE Mitigation cost in
- USD 20/tCO2 Power Sector MACC in Indonesia
power plants RE power plants
Voluntary carbon
Carbon price on Hydro Power Plant (min
pricing for RE USD 0.2/tCO2 USD 3.9/tCO2
price) and Solar Power Plant (max price)
power plants
on VCS/VERRA
Min incentive
USD 0.8/tCO2 USD 2.4/tCO2 5 – 15% from LCOE Solar Power Plant
expected
Mitigation cost of USD 40/tCO2 USD 60/tCO2 Nicholas Institute for Environmental Policy
CCS/CCUS Solutions – Duke University
1. Carbon Price for CFPP – RE power plant in a range of USD 0.2 - 20 per ton CO2 (w/o CCS/CCUS)
2. Carbon Price for CFPP – RE power plant in a range of USD 40 – 60 per ton CO2 (w CCS/CCUS)

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