News & Announcements

The Government of Indonesia (“GOI”) has recently issued the long-anticipated Presidential Regulation No. 14 of 2024 on the Implementation of Carbon Capture and Storage (“CCS”) Activities (“PR 14/2024”), which together with Regulation of Minister of Energy and Mineral Resources (“MEMR”) No. 2 of 2023 (“MEMR Reg 2/2023) establishes a comprehensive regulatory framework for the implementation of CCS activities in Indonesia in an attempt to achieve net-zero emissions by 2060.

For your convenience, we have condensed PR 14/2024 into the following major points.

1. New Licensing Regime for CCS Activities
   • Prior to the issuance of PR 14/2024, only holders of the oil and gas contractor business license (“Contractors“) were permitted to conduct CCS activities within the designated working areas after obtaining approval from the MEMR or SKK MIGAS/BPMA. However, under PR 14/2024, the GOI now also permits other business entities to engage in CCS activities, provided that (i) they obtain an Exploration Permit (Izin Eksplorasi) and/or a Storage Operation Permit (Izin Operasi Penyimpanan) from the MEMR and (ii) the CCS activities are carried out within the areas designated by the MEMR as Carbon Storage Permit Areas (Wilayah Izin Penyimpanan Karbon).
   • Before issuing the Exploration Permit (Izin Eksplorasi) and/or Storage Operation Permit (Izin Operasi Penyimpanan), the MEMR will first designate and offer the Carbon Storage Permit Area (Wilayah Izin Penyimpanan Karbon) through a certain selection/tender process either initiated by the GOI or proposed by businesses (including foreign entities registered as Permanent Establishments (Bentuk Usaha Tetap).
   • In contrast to the Contractors scheme, where all goods and equipment purchased by Contractors become the property of the GOI, holders of the Storage Operation Permit retain full rights over the goods and equipment they purchase.

2. Cross-border CCS Activities
   Unlike MEMR Reg 2/2023, PR 14/2024 expressly allows cross-border CCS activities, subject to, among other things, the following provisions:

1. 1. Bilateral Agreement with the Exporter Country.
      
      • Cross-border CCS activities can only be conducted with an exporter country that has entered into a bilateral agreement with the GOI.
      • The importer of carbon emissions must register the imported carbon. While PR 14/2014 is silent on the relevant government authority responsible for the registration, it is understood that in practice registration of imported carbon should be conducted with the MEMR or its designated supervising agency. The registration process is essential to mitigate the risks of carbon credit double counting and carbon leakage due to the importation of carbon emissions. To date, there has been no specific regulation governing the technical aspects of imported carbon registration; thus, businesses should anticipate the issuance of implementing regulations addressing the technical aspects of registration in the near future.
   2. Minimum Domestic Carbon Allocation
      
      • Carbon emissions from overseas must not exceed the limit set by the GOI. Contractors or holders of the Storage Operation Permit are required to allocate at least 70% of the total carbon storage capacity for domestically produced carbon, while the remaining 30% can be allocated to carbon produced overseas. However, it is important to note that the carbon emissions from overseas eligible for storage in Indonesia are restricted to those produced by foreign entities investing in Indonesia (whether directly or indirectly through their affiliates).
   3. Cross-border Transportation of Carbon Emissions
      
      • PR 14/2024 mandates that the transportation of carbon emissions in Indonesia be conducted via pipelines, trucks, vessels, or other means by an Indonesian legal entity holding the Carbon Transportation Permit (Izin Transportasi Karbon) issued by the MEMR.
      • Any leakage of CO2 emissions during transportation across borders will not be included in Indonesia’s greenhouse gas emissions inventory.
   4. Carbon Credits
      
      • PR 14/2024 also requires that carbon credits generated from CCS activities be registered on the national registry system for climate change control (locally known as the SRN PPI). The SRN PPI facilitates carbon trading in the form of GHG Emissions Reduction Certificates (Surat Pengurangan Emisi GRK – SPE-GRK). For details on SPE-GRK, please visit LINK.
      • PR 14/2024 has not yet specifically addressed carbon credits for cross-border CCS. However, it is reasonable to anticipate that carbon credits from cross-border CCS activities are subject to the foreign cooperation mechanism referred to in Regulation of Minister of Environment and Forestry Affairs No. 21 of 2022 on the Guidelines for the Implementation of Carbon Pricing (MOEFA Regulation 21/2022). For more information on MOEFA Regulation 21/2022, please visit LINK.

Our team will continuously and closely monitor and update you on any developments or progress regarding CCS activities. If you need more comprehensive information about this newsletter or further analysis of CCS activities, please contact us at info@wplaws.com or reach out to any of our lawyers in this newsletter.