The forestry ministry is drafting a proposal to facilitate growth of a domestic voluntary carbon trading market, while regulated markets are demanding for local firms to administer and uncertain after 2012.
The plan emerges as a response to the state of the current international carbon credit market, which is considered too costly and complex by local industry players interested in sustainable development projects.
Director general of forest production development Hadi Daryanto told The Jakarta Post on Monday that Indonesia’s potential to contribute to green house gas emission reduction had been held back by barriers such as cost and complexity.
Hadi hinted that the voluntary domestic carbon market could be more accessible to local companies if the government could help establish Indonesia’s own voluntary certification agency for carbon trading.
Nevertheless, he said, such an agency could adopt most standards currently adopted by the existing global voluntary carbon market. He assured domestic firms this was different from the regulated markets.
“We’ve been meeting with businessmen and institutions that are concerned [with emission reduction], and a number of non-governmental organizations. We’ll also meet with capital market watchdog Bapepam-LK to discuss the draft,” Hadi said.
He said that his ministry was still open to any inputs from other institutions or the general public.
“This is part of our effort to improve the effectiveness of institutional structures governing the forestry sector so that we can attract more investors,” Hadi said.
Taufiq Alimi, Executive Chairman of the National Forestry Council, said he supported the initiative and there were two international standards on voluntary carbon trading that could be adapted.
“With some adjustments, Indonesia can apply either of the two standards now prevailing in the international market. They are the VCS [Voluntary Carbon Standard] and the CCBS [Community Climate Biodiversity Standard],” he said.
VCS and CCBS operate criteria for validating, measuring, and monitoring carbon offset projects on similar lines to the Kyoto Protocol.
Agus P. Sari, Country Director of Eco Securities in Indonesia, said good regulations are key factors in attracting carbon traders to enter the Indonesian carbon market.
Agus added analysts saw the voluntary carbon market as weak, with strong supply but weak demand.
“But the demand will be created through the soundness and effectiveness of regulations prevailing in the market and the growing awareness of green principles,” he said.
Indonesia has huge potential to trade carbon from its forestry, energy, and marine sectors. In the forestry sector alone, he quoted a report from the foundation of Prince Charles that estimated Indonesia had about 88.4 million hectares of forests with a total potential carbon market value of US$852 million.
Based on data from the Indonesian National Council on Climate Change (DNPI) between 2008 and 2012 Indonesia would have the potential to trade about 125 million tons of non-emitted carbon or 25 million tons per year from the energy sector, and up to 23 million tons per year from the forestry sector.