PROGRESS REPORTPARTNERSHIP FOR MARKET READINESS –INDONESIA

As of 30 Sep 2019

• Donor : World Bank , Partnership for Market Readiness• Grant : USD 3,000,000• Time Frame (Plan) : 2016-2020 • Sector : Energy (Power Generation Sector and Energy–Intensive Industries)

• Government IP : Coordinating Minister for Economic Affairs: PIC –Mr.MonttyGirianna: Coordinator –Mr.DidaGardera

• Partners : Ministry of Energy, Ministry of Industry, Ministry of Environment & Forestry, : Fiscal Policy Agency (MoF), National Planning Agency (Bappenas)

• Private Sectors : National Electricity Company (PLN), Indonesia Cement Association , : Indonesia Fertilizer Association, etc.

Project Details

The Government of Indonesia is considering market-based instruments (MBI) options for the purpose of cost-effective delivery of real, additional, and permanent emission reductions. The mandate for market establishment before 2024 -has been set in GR 46/2017.

National Emission Reduction TargetIndonesia actively pursues efforts in combating the adverse effects of climate change. Indonesia ratified the Paris Agreement, and through its NDC, has set an unconditional emission reduction target of 29% and a conditional reduction target up to 41% of the business as usual scenario, by 2030. At national level, Indonesia has several relevant policies and regulations which mandate actions related to or leading to emission reductions.

Promoting Non-Party Stakeholders ParticipationThe government budget is considered insufficient in achieving the NDC and other climate change policy targets. Carbon market-based instruments could increase the involvement of Non-Party Stakeholders in national efforts to achieve the NDC target.Therefore, it is crucial to create an environment to leverage private and public participation in scaling up of mitigation actions.

Project Background

Project Objective and Components

1. Emission profile for power sector and energy-intensive industries

2. MACC for power sector and energy-intensive industries3. MRV systems and guidelines for power sector and

cement and fertilizer industries4. Online reporting system for GHG emission for power

generations (APPLE-GATRIK) 5. MRV pilot implementation in power sector, cement, and

fertilizer industries6. Pilot implementation for Indonesia certified emission

reduction (ICER) scheme

Summary of Results

7. Four drafts regulation for MRV implementation for power sector and cement industries

8. One draft regulation for voluntary MBI pilot implementation

9. Assessment of MBI options for Indonesia.10. MRV training workshops for power sector and energy-

intensive industries11. Capacity building workshops for market-based

instruments12. Series of activities for communication, engagement and

awareness raising13. Communication materials, including briefing papers,

technical notes, policy briefs, etc.14. A website (www.pmr-indonesia.org) for extensive

outreach to wider public audience

Summary of Results

Read

iness

Stat

us an

d Gap

sBe

fore

and A

fter P

MRPr

ogra

m

13 out of 15 market readiness aspects (>90 persen) have been strengthened and increased under PMR.

Carbon market readiness is assessed according to the category given by the OECD in its report Market Readiness: Building Blocks For Market Approaches (2010).

Scope and Coverage of ICER defined and agreed.Recommendation on Scope and Coverage for Emission Trading (cap and trade) defined.

2 Emission Baseline National and sectoral level emission baseline (Third National Communication, 2017) Emission Baselines for power sector and 8 industry sub-sectors developed in 2018

Guidelines for MRV in cement industries (2016) MRV guidelines for power sector developed, and MRV guidelines for cement and fertilizer developed and/or improved.

Guideline for GHG emission calculation in fertilizer industry (2016)

MRV guidelines for ICER and three draft methodologies for calculation on emission reduction for mitigation action developed.2017 emission data in power, cement and fertilizer were reported and verified.

4 Registry n/a National Registry System (SRN) developed in MoEF and SRN as the registry of ICER mechanism agreed.

5 Transaction Log n/a Transaction log features in SRN for ICER credits transfer and tracking defined.

6 Potential dan Mitigation Cost Potential and mitigation cost in several sectors (DNPI, 2010).

Potential and mitigation cost in power sector and 8 industry sub-sectors developed in 2018

7 MBI Cost and Benefit AnalysisAnalysis of economic impacts and reducing emissions for carbon taxes for fossil fuels (Ministry of Finance, 2009).

Analysis of economic impacts and emission reductions for emission trading permits (cap and trade), trade in energy efficiency certificates, carbon taxes (cap and tax), and carbon credit mechanisms.

8 Revenue/Cost Sharing n/a Analysis of the economic impact of revenue recycling for the emission permit trading system.Development and Piloting of ICER Draft mechanism on voluntary emission permit trading scheme.

10 Responsible Party(ies) MoEF as the responsible institution at national level

Ministry of Energy and Ministry of Industry as responsible parties/sectors for emission data collection (bottom-up) for power and industry sectors.

11 Emission License/Permit and Carbon Credit n/a MoEF as the responsible institution for ICER credit issuance.

Ministry of Energy and Ministry of Industry as responsible parties/sectors for the verification of emission data/reporting at instalation level.Independent third party will be appointed as the verificator for ICER using relevant national and ISO standards.

14 Regulating trading n/a n/a

15 Stakeholder involvement n/a Numerous market-based instruments discussions and capacity building events with key stakeholders including private sectors is conducted.

INST

ITUTIO

NAL R

EADI

NESS

No. Readiness Element Before PMR Program After PMR Program in Dec 2019

1TE

CHNI

CAL R

EADI

NESS

MBI Scope and Coverage n/a

3 MRV System

9 MBI Pilot Development of Nisantara Carbon Scheme (DNPI, 2012).

12 Verification of Emissions and Emission Reduction

MoEF as the responsible institution at national level

13 Compliance n/a n/a

POLIC

Y REA

DINE

SS

Indonesia categorized as ETS under consideration(World Bank and ICAP, 2019)

1. Alignment with National Agenda and Priorities.2. Promoting Dialogue:

• Inter-Agency Dialogue and Coordination Mechanism• Strengthening the Engagement• Promoting a Flexible Approach

3. Strengthening the Leadership4. Effective Program Support

Lessons Learned

Moving Forward

Findings and Moving ForwardsFrom MBI Analysis Study

There is a significant emission reduction potential with relatively low abatement costs in the power sector and the energy-intensive industry.

The Government is in process in of developing sectoral emission restrictions/benchmark (cap) for targeted sectors.

Limiting GHG emissions and carbon market-based instruments can drive an increase in GDP. The Indonesia Certified Emission Reduction carbon credit mechanism as a form of appreciation for

mitigation actions, Indonesia's technical readiness is sufficient to implement a carbon credit mechanism and an emission

permit trading system in the energy sector. GR 46/2017 on Environment Economic Instruments can be used as a basis for the development of policy

and institutional framework Voluntary testing of market-based instruments will be conducted to enhance policy and institutional

readiness

1. Commitment to Implement the NDC Implementation Strategies and the Low Carbon Development Initiative

2. Institutionalising the Results.3. Promoting Capacity Building Program and Continuous Learning4. Continuous Stakeholder Engagement

Sustaining the Results

oShifting to Low Carbon Development Pathway in Energy Sector is gaining momentum

oGoIhas indicated that putting a price on carbon is a promising tool to cost-effectively

oCarbon Market is the next “big-thing” in Indonesia.

oPMR has successfully engaged stakeholders at national and local level,

oPMR has created a national policy exercise platform

oPMR funds is proven to be a worthy investment.

Closing Remarks

TERIMA KASIH