Indonesia Issues New Rules for Carbon Trading

Indonesia’s Financial Services Authority – Otoritas Jasa Keuangan (OJK) – has issued new rules to govern the trading of carbon credits through carbon exchanges. The rules are part of OJK’s efforts to support the government in reducing GHG emissions, in line with the country’s commitments under the Paris Agreement, OJK said in a statement . Indonesia has committed to cutting its emissions by more than 30% by 2030 and to achieve net zero emissions by 2060. A framework for carbon trading in exchanges under the OJK’s supervision was included in financial sector reform legislation passed in December. The new rules define carbon credits traded through carbon exchanges as securities, requiring them to be registered in a national registry system. Similarly, market operators must be licensed as carbon market operators to carry out business activities as carbon exchanges and to develop carbon credit-based products. Carbon exchange operators must have paid-up capital of at least IDR 100 billion (US$ 6.5 million), are prohibited from borrowing, and must ensure their board members pass a fit and proper test. The exchange operator must be an Indonesian-based entity, but 20% of its voting shares can be owned directly or indirectly by an overseas firm. The rules set out how OJK will supervise carbon trading, including through supervision of market operators, market infrastructure, and market participants. The rules also cover supervision of transactions and settlement, trading governance, risk management, consumer protection, and other activities related to carbon trading. Licensed carbon exchanges will be allowed to facilitate cross-border trade. OJK has previously said Indonesia would launch its first carbon exchange in late September 2023. 

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