Bank Indonesia Policy Mix

• • • • . • • Carbon Pricing Policy CO2 CARBON PRICING POLICY UNDER DISCUSSION Aims to reduce national GHG emissions. Become a policy intervention to overcome "market failure". The practice of "polluters-pay- principle" Encouraging a low-emissions business and business ecosystem. Can be an alternative source of financing for sustainable development programs. Government, currently, is preparing Regulation on Carbon Pricing. Implementation of international carbon trading will consider the discussion of Article 6 Paris Agreement at COP 26 1 Carbon Pricing Instruments Trading Instruments a. Emission Trading System/ ETS: an entity that emits more buys an emission permit than one that emits less (cap and trade) b. Emission Offset (Crediting Mechanism): Entities undertaking emission reduction activities can sell their carbon credits to entities requiring carbon credits. 2 Non-Trade Instruments a. Carbon tax: imposed on carbon content or carbon emitting activity. b. Result Based Payment: payments are made for the results of emission reductions. Emission Trading System First Period B Er s Jaros Entity A and Entity B have the same allocation at the beginning of the period. Emission Offset ITH End of Period Emission Allocation Certificate Emission Obtained A has an allocation surplus that can be sold to B B Initial Emission Final Emission Emission Reduction Certificate Emission Obtained C Trade Mechanisms Carbon Tax Result-Based Payment Non Trade Mechanisms No carbon credits transfer B Batas Alas Emsi jemison capi B is a business entity that is subject to a cap C is a business entity that is not subject to a cap Carbon content on goods Emitting activity Source: Ministry of Finance 106

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