Jakarta, 13 March 2024: ERIA, the Indonesian Chamber of Commerce and Industry (KADIN Indonesia), and the Indonesia Research Institute for Decarbonisation (IRID) organised a stakeholder dialogue regarding carbon pricing mechanisms and market development in Indonesia, attended by 60 key business actors from a number of industries.

The carbon market, encompassing carbon pricing mechanisms and carbon offset trading, aims to put a price on carbon emissions, incentivising businesses to reduce their greenhouse gas (GHG) emissions.

Toru Furuichi, ERIA Director General for Research and Policy Design Administration, opened the meeting and explained its objective to collect business perspectives on evolving climate price mechanisms at the global, regional, and national levels, and identify key drivers for carbon market development in Indonesia; and to solicit reflections on ERIA’s regional study on carbon taxation, revenue recycling, and competitiveness in ASEAN and East Asia.

Dharsono Hartono, Chairman of the KADIN Net Zero Hub and Carbon Centre for Excellence, joined the opening session and introduced the history of the carbon market in Indonesia and its current challenges and potential. Moekti Handajani Soejachmoen, IRID Executive Director, outlined the evolving ecosystem of the carbon tax law in Indonesia and welcomed suggestions from stakeholders regarding the questionnaire survey jointly conducted by ERIA, KADIN, and IRID.

Dharsono Hartono chaired the first session, which focused on existing and emerging carbon pricing mechanisms and interlinkages with carbon market development. The three speakers were Venkatachalam Anbumozhi, ERIA Director of Research Strategy and Innovation, who examined the emerging carbon pricing mechanisms and interlinkages with carbon market development; Ignatius Donny Wicaksono, Indonesia Stock Exchange, who discussed net zero acceleration and unlocking Indonesia's carbon market potential through the Indonesia Carbon Exchange; and Takashi Hongo, Mitsui & Co Global Strategic Studies Institute - MGSSI Japan, who explored the lessons learned from Japan on regulations and voluntary actions.

The panel concluded that by creating a cost for carbon pollution and facilitating efficient trading, carbon pricing and carbon markets work in tandem to incentivise and achieve large-scale emission reductions, contributing to climate change mitigation efforts.

Session 2 was chaired by Moekti Handajani Soejachmoen, who delved into the first steps in setting up appropriate carbon pricing mechanisms and a voluntary carbon market in Indonesia. The session featured presentations from Kaliappa Kalirajan, Australian National University, on carbon pricing practices in Australia; Xianbin Yao, Asian Development Bank, on China’s experience with carbon pricing mechanisms; and Govinda Timilsina, World Bank, on measuring firms’ willingness to pay (WTP) for carbon pricing.

The panel concluded that it is worth exploring carbon pricing through trade as an innovative tool to cut back carbon emissions in Asia. The emerging experiences of China and Australia, and past surveys in Viet Nam and India, suggest people’s WTP for climate change mitigation depends not only on personal characteristics, but also on the payment vehicle used to elicit WTP.

Session 3, chaired by Moekti Handajani Soejachmoen, was an open discussion with business actors to assess Indonesia’s sectoral preparedness for carbon market development, using the Firm-Level Survey on Carbon Pricing Mechanisms and Market Development in Indonesia (conducted by ERIA, KADIN, and IRID) as a tool. In this session, attendees were divided into three groups, moderated by Dharsono Hartono, Moekti Handajani Soejachmoen, and Dian Lutfiana, GIZ Indonesia, to share inputs and recommendations about the questionnaire.

There was a convergence of perceptions within the group that a robust price creates a strong incentive to trade emission allowances, increasing market activity and liquidity. A functional market with clear pricing signals helps determine an effective carbon price that balances economic and environmental goals. 

This dialogue among businesses, consumers, and academia enhanced knowledge and exchanges of sectoral aspirations in unlocking the potential benefits of carbon pricing mechanisms and new carbon market development in Indonesia. Based on the input received, the scope and content of the ERIA firm-level survey on WTP for a carbon price will be finalised for implementation from April to July 2024.