Indonesia’s carbon market is facing a significant challenge. At a time when the global transition toward a low-carbon economy is gaining momentum, carbon prices traded in Indonesia remain extremely low, ranging between USD 2 and USD 4 per ton of carbon dioxide equivalent (CO₂e). This value is even lower than the price of a bottle of mineral water in many places. Such conditions raise questions about the effectiveness of the national carbon market in encouraging emission reductions and green investment.
Through the establishment of IDX Carbon, the government and the Indonesia Stock Exchange have sought to provide a transparent and integrated carbon trading infrastructure as part of Indonesia’s commitment to reducing greenhouse gas emissions. The carbon exchange is expected to serve as an economic instrument that encourages businesses to lower emissions while supporting sustainable development objectives.
However, the current low carbon price indicates that market mechanisms have not yet generated a sufficiently strong economic signal. In environmental economics, carbon prices are expected to reflect the social cost of carbon emissions, thereby encouraging companies to invest in cleaner and more efficient technologies. When carbon prices remain too low, incentives to transition toward low-emission production processes become limited.
This situation also presents challenges for the development of emission-reduction projects in Indonesia. Project developers require adequate carbon prices to ensure that investments in conservation, renewable energy, energy efficiency, and other mitigation activities remain economically viable. Prices that remain too low risk reducing the attractiveness of investment in these sectors.
At the same time, Indonesia possesses substantial potential within the carbon market. The country’s commitment to reducing emissions has been outlined in its Enhanced Nationally Determined Contribution (ENDC), which targets emission reductions of 31.89 percent independently and up to 43.20 percent with international support by 2030. Indonesia’s extensive natural resources, particularly in forestry and energy, provide significant opportunities for the country to become an important participant in the global carbon market.
For this reason, strengthening the national carbon market requires not only a reliable trading infrastructure but also supporting policies that can increase demand, enhance market integrity, and establish carbon prices that better reflect the economic value of emission reductions. Such measures would allow the carbon market to function as an effective instrument for supporting the transition toward a low-carbon economy while strengthening Indonesia’s competitiveness amid global economic transformation.
Ultimately, the success of a carbon market should not be measured solely by transaction volumes but also by its ability to influence economic behavior and encourage sustainable investment. The greatest challenge facing IDX Carbon today is ensuring that carbon prices provide a sufficiently strong signal to support economic transformation toward a greener and lower-emission future.
Sources: Jernih.co – IDX Carbon at a Crossroads: Carbon Prices Cheaper Than a Bottle of Mineral Water
