News & Announcements

Following the issuance of Regulation No. 14 of 2023 on Carbon Trading through Carbon Exchange (click here for our take on the regulation), the Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) officially appointed the Indonesia Stock Exchange (IDX) as Indonesia’s Carbon Exchange Operator under OJK Decision No. 77/D.04/2023 (“IDXCarbon”). Within days after obtaining the Carbon Exchange Operator license, the IDXCarbon issued several technical implementing regulations to further regulate the implementation of carbon trading, including carbon unit registration and carbon trading mechanisms, fees, and supervisory function.

This time, we will update you on the IDXCarbon’s regulations concerning (A) carbon unit registration, (B) carbon trading mechanisms, and (C) registration requirements and responsibilities of Carbon Exchange Users (Pengguna Jasa Bursa Karbon – “PJBK”).

For your ease of reference, please note the following abbreviations and expressions as they appear frequently in this newsletter:

1. PTBAE-PU: Emission Ceiling Technical Approval for Businesses (Persetujuan Teknis Batas Atas Emisi bagi Pelaku Usaha), namely, the emission quota or the maximum Greenhouse Gas emissions that a business entity can release.
2. PJBK: Carbon Exchange User (Pengguna Jasa Bursa Karbon )
3. SPE-GRK: Greenhouse Gas Emission Reduction Certificate (Sertifikat Pengurangan Emisi Gas Rumah Kaca), namely a certificate given to a business entity after it has completed the Measurement, Reporting, and Verification process for its emission reduction program.
4. Emission Trader (pelaku usaha pedagang emisi): a business entity with PTBAE-PU allocation.
5. Non-Emission Trader (pelaku usaha non-pedagang emisi): a business entity without PTBAE-PU allocation.
6. Relevant Ministry: any relevant Indonesian sectoral ministry authorized to carry out auctions of PTBAE-PU in the Auction Market.
7. SRN-PPI: National Registry System on Climate Change Control (Sistem Registri Nasional Pengendalian Perubahan Iklim).

1. Carbon Unit Registration
   Eligible Carbon Units

   The OJK and the IDXCarbon limit the types of carbon units that can be traded on the IDXCarbon to: (i) PTBAE-PU and (ii) SPE-GRK, both of which must meet the following requirements:

   1. registered with the SRN-PPI or with the Relevant Ministry’s registry linked to the SRN-PPI.
   2. registered, validated, and verified by an agency accredited by an international registration system.

   However, the IDXCarbon is also permitted to facilitate the trading of international carbon units, even if they are not registered with the SRN-PPI, provided it submits a registration request to the OJK.

   Registration of PTBAE-PU and SPE-GRK

   Registration of PTBAE-PU and SPE-GRK with the IDXCarbon can be done by (i) a PJBK, (ii) a potential PJBK that has submitted an application for registration with the IDXCarbon, or (iii) the Relevant Ministry.

   The registration phases for each PTBAE-PU and SPE-GRK, is as follows:

   1. PTBAE-PU:
      (i)  Pre-registration Phase: applicable only to the Relevant Ministry intending to trade PTBAE-PU via the Auction Market (please see Section B below for details of the Auction Market).
      (ii) Registration Phase: applicable to Emission Traders intending to trade PTBAE-PU via the Carbon Exchange Operator. Once registered, the carbon units will be credited to the Emission Trader’s account.
   2. SPE-GRK: A project owner submits its application to the IDXCarbon. Once registered, the carbon units will be credited to the project owner’s account.
2. Trading Mechanisms
   The type of market in which trading takes place depends on the following:
   1. the type of PJBK eligible to carry out the transaction in the relevant market; and
   2. the type of carbon units tradeable in the relevant market.

   The trading volume of carbon units on the IDXCarbon is 1 lot (i.e., 1 ton of carbon dioxide equivalent (CO2e)) and any multiples thereof.

   The IDXCarbon establishes 4 different markets for carbon unit trading: (a) Regular Markets; (b) Negotiated Markets; (c) Non-regular Markets; and (d) Auction Markets.

   1. Regular and Negotiated Markets:
      
      1. Similar to the trading system of the Stock Exchange, the Regular Market employs the so-called ‘continuous auction’ system, where bid and offer instructions are matched by the IDXCarbon’s system based on a time and price priority scheme.
         On the other hand, the Negotiated Market allows sellers and purchasers to directly negotiate and subsequently settle their transactions via the IDXCarbon.
      2. Similar to the pricing policy applicable on the Stock Exchange, carbon units in the Regular Market must be priced at a minimum of IDR 200 per carbon unit, subject to a fraction price and the so-called ‘auto rejection’ rule. In contrast, there is no price restriction in the Negotiated Market but the price must not be less than IDR 1 per carbon unit.
   2. Non-Regular Markets
      
      1. The Non-Regular Market allows a project owner (as the seller) to offer its SPE-GRK directly to an Emission Trader or a Non-Emission Trader.
      2. A PJBK that has submitted an offer through the Non-Regular Market can transfer its SPE-GRK to be traded on the Regular Market by informing the IDXCarbon.
   3. Auction Markets
      
      1. The Relevant Ministry, as the seller, will sell PTBAE-PU to Emission Traders through an auction.
      2. A project owner, as the seller, will sell SPE-GRK to Emission Traders or Non-Emission Traders. If SPE-GRK is not sold until the auction period ends, the SPE-GRK will be subsequently traded on the Regular Market.
      3. The minimum price is IDR 1 per carbon unit.
      4. The auction winner is determined according to a price and time priority scheme, by referring to the final price of PTBAE-PU or SPE-GRK (as the case may be).
         
3. PJBK Registration Requirements and Responsibilities
   The PJBK can be an Indonesian or foreign entity and may be a project owner, an Emission Trader, or a Non-Emission Trader.

   There are certain statutory requirements to become a PJBK, which include the following:

   1. having at least 2 representatives responsible for conducting the carbon trading on behalf of the PJBK, all of whom must have attended a training organized by the IDXCarbon;
   2. having a company email address with the company’s name as its domain;
   3. having a bank account that is connected to BI-FAST and BI-RTGS;
   4. pay a registration fee of IDR 5 million; and
   5. (only applicable to a foreign entity) obtaining a legal entity identifier that is registered with the Regulatory Oversight Committee.

   Each PJBK is responsible for, among other things:

   1. supervising all transactions and settlements carried out with other PJBKs on the IDXCarbon.
   2. ensuring that all registered and non-registered carbon units are not (a) traded and transferred (dipindahbukukan) outside of the IDXCarbon and (b) surrendered and retired using procedures other than those of the IDXCarbon.

   If a company intends to discontinue its status as a PJBK, it must notify the IDXCarbon in writing of such intention at least 1 month in advance.

If you have further inquiries about this newsletter, please reach out to us at info@wplaws.com or any of our lawyers.