JAKARTA, Sept 13 (Askume) – Indonesia’s newly elected President Prabowo Subianto plans to launch a green economy fund by selling carbon emissions credits from projects such as rainforest conservation, aiming to raise $650 million by 2028, advisers told Askume.
Ferry Ratuhihin, one of Prabowo’s climate policy advisers, said a new carbon emissions regulator would be set up to oversee Indonesia’s efforts to meet emissions targets under the Paris Agreement.
He said in an interview that the regulator would then create a “special task vehicle” to manage the green fund and carry out carbon offset projects. Ratuhihin said the projects would include forest conservation, reforestation, peatland and mangrove replanting to generate carbon credits that can be sold internationally.
The target is to increase the value of such vehicles to 1,000 trillion rupees ($65 billion) by 2028, he said.
“We need to exploit our inherent comparative advantages,” Ratuhihin said.
The size of the proposed fund, which has not been previously disclosed, has the potential to help Brazil, which is one of the world’s top 10 emitters and home to the world’s third-largest tropical rainforest, achieve its goal of becoming net carbon neutral by 2060.
Still, it faces significant challenges, including competing in global carbon markets and ensuring the project’s reliability.
Indonesia’s vast natural ecosystems provide scope for major carbon offset programs, but from a financial and operational perspective, these targets are too ambitious, said Christina Wu, managing director of the Energy Transfer Institute, a think tank focused on Asia’s energy transition.
Prabowo, who will be sworn in on Oct. 20, has promised to boost economic growth from the current 5% to 8% during his five-year term, including by investing in green projects.
Ratu Shishin said the offset scheme would create massive employment opportunities and help achieve development goals.
He said the incoming government would provide the initial capital, with the exact amount still being determined, but the fund is expected to grow by selling carbon credits locally and overseas, with dividends to be paid to the government when it makes a profit.
Concentrating funds in such an entity would allow Indonesia to undertake large green programmes without using up the government budget, Ratushin said.
He said international standards will be followed for verification and technology will be used to confirm how much carbon dioxide (CO2) each project removes from the atmosphere.
Funding targets are challenging
Nature-based carbon credits typically trade for between $5 and $50 per tonne of carbon dioxide equivalent, but the average price last year was less than $10 per tonne, Ng said.
Even at $50 a tonne, raising $10 billion a year — still short of the fund’s planned target over the next four years — would require selling 200 million tonnes of carbon credits. That was slightly less than the 239 million tonnes of carbon credits issued at the peak of the entire global voluntary market in 2021, highlighting the challenges of achieving the fund’s goals, Ng said.
At a price of US$10 per tonne, the same amount would raise only US$2 billion per year, a far cry from the US$65 billion target.
“Given the competitive landscape of the global carbon market, where Brazil and other countries in Southeast Asia also offer nature-based credits, institutions must demonstrate that their credits meet the highest standards,” he said, adding that Indonesia’s track record was marred by governance problems.
The rate of deforestation in Indonesia has declined in recent years, although forest fires still occur, often started by farmers clearing land for plantations.
Ratu Shishin said the incoming government would hold road shows to promote overseas projects and hoped to work with major international banks to sell carbon credits in markets with higher carbon prices.
(1 USD = Rs. 15,41,20,000)
