Indonesia carbon pricing and trading regime for power generation

The Indonesian Government has recently issued further implementing regulations on carbon pricing & trading for the power generation sector - Ministry of Energy and Mineral Resources Regulation No. 16 of 2022 (MEMR 16/2022) and MEMR Decree No. 14.K/TL.04/MEM.L/2023 on Emissions Cap for coal-fired power plants connected to PLN's network (CFPP Emissions Cap).

MEMR 16/2022 follows the issuance of framework regulations on carbon pricing and trading - Presidential Regulation No. 98 of 2021 on the Implementation of Carbon Pricing (PR 98/2021 and Ministry of Environment and Forestry Regulation No. 21 of 2022 on the Guidelines for the Implementation of Carbon Pricing  (MOEF 21/2022 - which were both summarized in our previous article on this topic.

In this article, we summarise the scope of coverage and mechanics of MEMR 16/2022 which is the first sectoral regulation implemented following the issuance of the framework regulations.

In brief, MEMR 16/2022 addresses the following aspects:

1. Determination of emissions cap and emissions baseline
2. Pathway to carbon pricing in the power generation sector
3. Determination of the tradable emissions cap for business actors (PTBAE-PU)
4. PTBAE-PU and Carbon Credits Trading Period
5. Monitoring, Reporting and Verification (MRV) requirements

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Authors: Frédéric Draps, Partner; Anggara Narendraputra, Associate; Dan Trevanion, Associate; Rachelia Jumanti, Trainee Associate