Indonesia and Japan Sign Bilateral Agreement for Carbon Trading

Source: Kementerian Lingkungan Hidup dan Kehutanan

Indonesia and Japan signed a Mutual Recognition Arrangement (MRA) for bilateral carbon trading, which officially took effect on October 28, 2024, and was announced during COP29 in Azerbaijan. It marks a significant step forward in addressing climate change through collaborative international action.

The MRA establishes a framework for Indonesia and Japan to trade carbon credits, with Indonesia primarily responsible for issuing credits while Japan acts as a purchaser. The agreement also ensures both countries adhere to the same standards for monitoring, reporting, and verifying emissions reductions. This approach aims to make carbon trading more transparent and efficient while supporting the climate goals of both nations.

“Based on this MRA, we want to formulate and develop concrete projects for GHG reduction in Indonesia. With this experience, both countries can contribute to global GHG reduction,” said Yutaka Matsuzawa, Japan’s Vice Minister for Global Environmental Affairs.

Hashim S. Djojohadikusumo, Indonesia’s special Presidential envoy, reaffirmed: “The Indonesian government is ready to execute any agreement signed in the MRA.”

Source: Instagram/@alue_dohong

What is the Mutual Recognition Arrangement (MRA)?

A Mutual Recognition Agreement (MRA) is an agreement between countries to recognize each other's standards and certifications for specific products, services, or qualifications. In the context of carbon trading, MRAs enable smoother cross-border transactions by ensuring that carbon credits or emissions reductions recognized in one country are accepted by the other.

Indonesia and Japan's recent MRA focuses on carbon trading, allowing both nations to recognize each other's carbon credits and emissions reduction efforts. This agreement facilitates the exchange of carbon credits between the two countries, supporting their climate goals and encouraging investment in sustainable projects. By streamlining the carbon trading process, the MRA helps both nations enhance their contributions to global carbon reduction targets, fostering a more efficient and collaborative approach to tackling climate change.

At its core, the MRA is a formal agreement that allows Indonesia and Japan to recognize each other’s systems for calculating and verifying carbon credits. It includes: 

• Shared standards for measuring emissions reductions.

• A common system for monitoring and verifying those reductions.

• Processes to certify carbon credits for trade between the two countries.

Source: Instagram/@alue_dohong

Enhancing Carbon Trading Between Indonesia and Japan Through Mutual Recognition Scheme

The mutual recognition scheme will simplify the development of carbon projects and the trading of carbon credits between Indonesia and Japan. This framework is expected to attract greater interest from Japanese investors in Indonesia's carbon market. Additionally, international investors may consider investing through Japan or collaborating with Japanese sponsors to take advantage of this streamlined mechanism.

Since 2013, Indonesia and Japan have collaborated through the Joint Crediting Mechanism (JCM) to implement mitigation projects in Indonesia. Prior to the Mutual Recognition Arrangement (MRA), carbon credits generated from JCM projects in Indonesia were not fully recorded in Indonesia's National Registry System. With the implementation of the MRA, all JCM mitigation projects in Indonesia must now be registered in the National Registry System and utilize the SPEI system.

The success of this agreement will depend on its implementation. Both countries must ensure transparency and integrity in their carbon trading activities while finding ways to scale their efforts. This collaboration is a powerful reminder that climate action is a shared responsibility that thrives on partnerships and collective determination.

Source: Instagram/@alue_dohong

Advancing Natural Climate Solutions

The Mutual Recognition Arrangement (MRA) between Indonesia and Japan signifies a transformative opportunity for Indonesia to enhance its carbon reduction efforts and establish itself as a global leader in sustainability.  With carbon trading as a mechanism to channel funding into impactful projects, the agreement creates momentum for innovative, nature-based solutions.

At CarbonEthics, we recognize the critical role of carbon projects in driving meaningful climate action. Our Nature-Based Carbon Projects leverage Indonesia’s vast natural assets to deliver verified carbon credits. These projects not only contribute to global greenhouse gas (GHG) reductions but also provide co-benefits like biodiversity conservation, coastal protection, and community empowerment.

Learn more about our project > https://www.carbonethics.co/tree-planting