Author:
IBC Team
14 August 2024
Carbon trading in Indonesia has so far been implemented in private manner and/or between coal-fired power generation companies. It was not until recently, in September 2023, that the Indonesian Stock Exchange (PT. Bursa Efek Indonesia), IDXCarbon, was launched. During the launch, 16 companies participated in IDXCarbon with half of the buyers being banking institutions, and as of October 12, 2023, IDXCarbon has recorded transactions of 459.970 ton CO2 equivalent, which is significantly higher than Malaysia’s Carbon Exchange performance of 166.500 ton CO2 equivalent transaction from its establishment in March 2023 until October 2023.
Grounded in a robust legal framework, IDXCarbon derives its mandate from the Law No 4 of 2023 on Financial Sector Development and Reinforcement, OJK Regulation No.14/2023 on Carbon Trading through Carbon Exchange, and Circular Letter OJK No 12/04/2023 on Procedures for Carbon Exchange, which in accordance to that, IDXCarbon provides 4 (four) trading mechanisms, namely Auction, Regular Trading, Negotiated Trading, and Marketplace.
Four Available Trading Mechanism on IDXCarbon
Through the platform, IDXCarbon offers a comprehensive mechanism to carbon trading. The first mechanism is auction. Similar to the general mechanism of auction, prospective buyers engage in this auction by submitting purchase requests, detailing both the volume they seek and the price they are willing to offer. Through Regulators/Project Developers, the bidded carbon units are then offered to the highest bidders. The second mechanism, regular trading, operates via a continuous auction framework where all parties, at any given time, can submit their buy-and-sell offers. The third mechanism, negotiated trading, is offered by the IDXCarbon for trades that have been pre-negotiated outside the system. The fourth mechanism, marketplace, is a dedicated space where Emission Mitigation Project Owners can offer their carbon units at a predetermined price, granting them greater control over their sales strategy.
The existence of a carbon market provides an opportunity for companies to raise finance through carbon trading within the market. To support this, IDXCarbon has developed their own requirements for company participation into the market.
Requirements & Procedures to Become a User of IDXCarbon
Elements |
Company registration: 1. The company must be legally registered in Indonesia and have a valid business license. 2. The company must have a Taxpayer Identification Number (NPWP) and a Business Registration Number (NIB). 3. The company must provide a copy of its Articles of Association and/or Bylaws. 4. The company must provide a copy of its Company Establishment Deed and any Company Name Change Deed (if applicable). |
Financial requirements: 1. The company must submit its Financial Reports for the Last 1 Year of the Latest Accounting Books. 2. The company must have a bank account in Indonesia (connected to BI-FAST and BI-RTGS systems) that will be used for transactions on IDX Carbon. |
User Registration: 1. The company must appoint two user users of the Carbon Market Service who will represent the company on the platform. 2. The appointed user users must complete training related to the Carbon Market organized by PBK (training schedule will be provided after the applicant fills out the registration request through the link https://bit.ly/DaftarIDXCarbon). 3. The appointed user users must have an email address using the Company's domain name. 4. Pay the registration fee as a Carbon Exchange Service User (Free until September 2024) |
Supporting documents: 1. The company must provide a duly stamped and signed Statement Letter from the Prospective IDXCarbon Service User. 2. The appointed user must provide a copy of a valid identification card, a color passport photo, and an Employee Certification of the Carbon Market Service User. 3. The company must submit a completed User Registration Form for the Carbon Market Service. |
Supporting documents for foreigners (to be implemented in the future): 1. The appointed users must provide a Legal Entity Identifier (LEI). |
1. Submit applications by filling in the form and another attachment needed. 2. IDXCarbon may request additional documents. 3. IDXCarbon may ask prospective Users to open a securities account at the Securities Exchange Member. 4. No later than the 5th trading day after the entire review process is completed, IDXCarbon will give confirmation (approval or rejection) to prospective Carbon Exchange Service Users. |
Following the table presented, it is evident that the registration process for companies intending to participate in the IDXCarbon market is comprehensive and detailed, aimed to ensure that only legitimate entities with serious commitments are given access to the platform. The requirements, ranging from company registration to financial prerequisites and user representatives registration, emphasize both the transparency and professionalism expected from participating businesses. Nevertheless, it is also crucial to note that, as of present, only Indonesian Legal Entities are eligible to become users of the Carbon Market Service (IDXCarbon). Provisions for foreign companies may be introduced in the future, but the current prerequisites underscore IDXCarbon’s current focus on enhancing the domestic market.
