Carbon Trading In Indonesia: OJK Regulation On Carbon Exchange

Introduction

Over the past two years, the Government of Indonesia (GoI) has gradually been developing a regulatory framework on carbon pricing and trading through Presidential Regulation No. 98 of 2021 on the Implementation of Carbon Pricing (PR 98/2021) and Ministry of Environment and Forestry (MOEF) Regulation No. 21 of 2022 on the Guidelines for the Implementation of Carbon Pricing (MOEF 21/2022). Earlier this year, the GoI also issued Law No. 4 of 2023 on the Development and Strengthening of the Financial Sector (Law 4/2023) which governs, among others issues, the implementation of Indonesia's domestic carbon market.

Law 4/2023 provides that carbon trading through a "carbon exchange" shall be considered a financial transaction in the capital market sector. Accordingly, the Indonesian Financial Services Authority (Otoritas Jasa Keuangan or OJK) has the authority to oversee and supervise Indonesia's domestic carbon market. Pursuant to this mandate, on 2