Global carbon trading, one of the mechanisms for reducing greenhouse gasses under the Kyoto Protocol, has been increasing over time, and is today worth tens of billions of dollars. But Indonesia has been far left behind the rest of the pack.
Tony Beck, coordinator of the Australiasia Emission Trading Forum, told a Pacific Economic Cooperation Council (PECC) conference here Wednesday that over 600 projects have been registered with the Clean Development Mechanism (CDM) Executive Board in Bonn, Germany.
These are all greenhouse gases abatement projects that would generate tradable emission credits, or CERs, valued at a little over US$10 billion. The credits can be sold to companies in developed countries to meet their countries' Kyoto emission targets.
Of the projects, India dominates the tally with 226 projects, followed by Brazil with 99, Mexico on 78, and China on 71. Indonesia has managed to secure only eight projects, behind Malaysia on 15 projects.
"The designated national authority in Indonesia should be actively involved in identifying projects that might be suitable for CDM projects, and then communicating it with their counterparts in Europe and Japan, to invest in those projects," Beck told The Jakarta Post.
The designated authority in Indonesia is the National Commission on the CDM (Komnas MPB).
Beck noted that Indonesia has huge potential to benefit from carbon trading, especially in the areas of energy, mining and forestry, which are now eligible for the process.
The latest forestry project approved by the CDM Executive Board is the Pearl River Basin Project in China, which involves the reforestation of cleared land along the Pearl River basin.
Once the projects are approved and registered by the CDM Executive Board, the board then certifies tradable credits for the projects, which can be offered to individual companies in developed countries, mainly in Europe, Japan and Canada, for investment. Alternatively, the credits can be sold on the international market, including on the London Alternative Investment Market.
The United States and Australia are obviously out of the market as they are not parties to the Kyoto Protocol.
Beck noted that demand for carbon credits from the European Union, Japan and Canada is expected to amount to three to four billion tons of carbon dioxide equivalent by 2012, worth dozens of billions of dollars.
Currently, the United Kingdom is the largest investor in carbon trading, accounting 36 percent of all carbon trading, followed by the Netherlands on 18 percent, Japan on 11 percent and Switzerland on 8 percent.
Beck added that some 1,000 projects worth about $20 billion are in the pipeline up until 2012.
The future of the carbon trading mechanism, however, is unclear after 2012, when the Kyoto Protocol ends.
"We are still looking into how to make the Kyoto protocol would work effectively beyond 2012, and that includes encouraging more CDM projects," Beck said.
Speaking at the same forum, Warwick McKibbin, a professor at the Australian National University, questioned the effectiveness of global carbon trading under the Kyoto Protocol for reducing greenhouse gasses, and said he therefore supported Australia's decision not to sign up to the protocol.
He said the main flaw with the protocol was that it set the targets of greenhouse gas reductions for developed countries, and carbon trading was only one of the ways to achieve this.
As it focused on targets, the mechanisms for achieving these, including carbon trading, could sometimes be too expensive, which was why Australia had been unwilling to participate.
He suggested that after 2012, a new international mechanism to reduce greenhouse gasses be introduced, and he proposed that this new mechanism should focus on national institutions, with global common pricing for carbons.
"A regional and global approach is best implemented by coordinating national policies designed around a common price for carbon in the long run, but differentiation in the short run," he said.
Beck agreed that after 2012, there would be a new international agreement to replace the Kyoto Protocol so that it would be attractive enough for the United States to join.
Nevertheless, he said the new format would still adopt parts of the Kyoto protocol, including global carbon trading. Carbon trading under the Clean Development Mechanism would continue to be appealing, he said , as it allowed for a drastic reduction in costs for the developed countries, while achieving the same amount of emission reductions under their Kyoto obligations.