Indonesia Opens Carbon Exchange to International Investors

In an effort to raise money to support its ambitious domestic climate targets, Indonesia opened its carbon exchange to purchasers from across the world. The action makes it possible for foreign investors to join a market that was opened to domestic participants in September 2023.

Carbon credits are produced by actions that prevent or lessen the release of carbon dioxide, one of the most powerful greenhouse gases. Companies who want to "offset" or cancel out part of their own emissions can buy them to strengthen their "green" credentials or to comply with requirements.

Indonesia is one of the most polluting countries in the world, and its expanding economy is mostly dependent on coal. Its multibillion-dollar investment plan to wean its power system off of coal, which was agreed upon with the United States and European countries in 2022, has not advanced much.

In addition to promising to shut down hundreds of coal and fossil fuel power facilities by 2040, new President Prabowo Subianto last year advanced the nation's carbon neutrality target by ten years, to 2050.Though it hasn't provided any information on how it plans to do so, the government has stated that it wants to construct more than 75 gigawatts of renewable energy capacity by 2040.

It anticipates that a portion of the green transition will be financed by the money produced from the selling of carbon credits on the exchange. The action follows last year's COP29 agreement on new rules for national carbon credit trading.