Social Contributions Key to High-Quality Carbon Credits, A Key Takeaway from Warkop Karbon Indonesia
Updated: Jul 2
Jakarta, May 29, 2023 - CarbonEthics, in collaboration with the Alumni Association of the United Kingdom (IABA) and the Indonesia Commodity and Derivatives Exchange (ICDX), successfully organized the first Warkop Karbon Indonesia. The event aimed to gather comprehensive insights from various stakeholders in the carbon market in Indonesia, including government representatives, businesses, and civil society organizations. The focus was on the latest developments in carbon policies and the potential for multi-stakeholder collaboration.
The key takeaways from Warkop Karbon Indonesia highlight the Indonesian government's commitment to developing the carbon market through collaboration and incorporating social cost and contribution. Additionally, all stakeholders agree on the significance of including social cost and contribution, which encompasses aspects such as marginal social revenue and marginal social cost. Furthermore, Indonesia expects carbon trading architecture built and a roadmap for several important sectors of NDC to enable carbon trading, which will serve as the foundation for both domestic and international carbon trade. This roadmap is intended to provide a clear framework for stakeholders to navigate and drive the effectiveness and sustainability of the carbon market.
In his opening remarks, Mr. Alue Dohong, the Vice Minister of Environment and Forestry, expressed, “I sincerely appreciate the enthusiasm of the younger generation in creating constructive discussions that promote the development of our the carbon market in our nation through this Warkop Karbon Indonesia.” Aside from that, He emphasized the importance of collaboration among multiple stakeholders in building a carbon trading architecture to bridge existing knowledge gaps. This would be further elaborated through the roadmap of carbon trading, which is currently being finalized by the Ministry of Environment and Forestry (MoEF), as guided by Ministerial Regulation No. 21 of 2022.
Mrs. Laksmi Dhewanti, Director General of Climate Change Control at the Ministry of Environment and Forestry, added several key points focusing on the Carbon Economic Value (NEK) policy outlined in Presidential Regulation No. 98 of 2021, which serves as a reference for achieving Indonesia’s climate mitigation targets as part of Nationally Determined Contributions (NDCs). MoEF collaborates with partners such as the Financial Services Authority (OJK) to promote accountable, transparent, and inclusive carbon trading through exchange schemes. Mrs. Laksmi Dhewanti further appreciated the collaborative efforts of the Warkop Karbon Indonesia in driving climate change adaptation and mitigation innovations, as exemplified by MoEF’s establishment of a future carbon consultation center.
Warkop Karbon Indonesia consisted of two sessions, each with a distinct focus. The first session focused on the social contributions of carbon projects and conservation as a reference for generating high-quality carbon credits. The second session examined the vision of a holistic, integrity-driven, and transparent carbon market trade. Both sessions aimed to strengthen Indonesia's carbon market's effectiveness and sustainability by fostering mutual understanding among all stakeholders to kick-start the market.
Session I, moderated by Ahmad Hidayat from CarbonEthics, successfully discussed several important topics. This session emphasized the significance of calculating carbon projects' social contributions or impacts on communities as long-term drivers. This aspect must be reflected in the price of carbon, which, in reality, incurs substantial costs beyond a mere USD 5 if the goal is to promote the fulfillment of social safeguarding mechanisms. This aligns with the effort to enhance benefits sharing, which currently needs to catch up to the transaction costs of monitoring, reporting, and verification (MRV).
Mr. Alue Dohong stated during this first session, "The key to carbon sequestration lies within the community - building a strong sense of belonging is important. The social dimension should be recognized as a vital element in achieving high carbon quality."
The first session also identified several potential areas for collaboration, including: 1) the development of social contribution standards by experts from the government, private sector, and think tanks such as Carbon Policy Lab by CarbonEthics; 2) the establishment of a social marginal cost model equivalent to revenue, reflecting the actual price; 3) creating projects in the Forestry, Land Use, and Agriculture (FOLU) sectors and manufacturing more socially responsive with incentives from regulators; and 4) generating numerous case studies on the social return on investment of carbon projects by project developers. Overall, the existing collaborations indicate the participants' agreement that social contributions from carbon projects are crucial and should serve as indicators/criteria for high-quality carbon credits.
Session II, moderated by Zulfal Faradis from ICDX, addressed several vital points, including strengthening domestic and international carbon trading infrastructure closely tied to the authorization aspects of credits obtained from the National Registry System (SRN PPI). This will become clearer once regulations and the national carbon market trade roadmap can be issued as soon as possible. However, it is essential to recognize that the transition process from the Kyoto Protocol to the Paris Agreement requires time and careful adjustments, necessitating the Ministry of Environment and Forestry's cautious formulation of regulations.
The second session also identified several potential areas for collaboration, including 1) accelerating the carbon trading roadmap through public consultation, 2) ensuring that the SRN can reduce the MRV costs of carbon projects in Indonesia when integration occurs seamlessly, with easy and affordable verifiers; 3) private sector commitments to ensuring the supply of high-quality carbon projects, mainly blue carbon from coastal areas; and 4) promoting the transformation of marketplaces focused on the Voluntary Carbon Market and connected to the compliance-oriented SRN system to ensure control. All these initiatives indicate a commitment to building a balanced infrastructure for carbon trading among stakeholders.
To conclude the Warkop Karbon Indonesia, Ms. Innandya Kusumawardhani, Co-Founder & Chief Operating Officer from CarbonEthics, emphasized the importance of taking concrete actions based on the notes compiled during the discussions. These actions should translate into tangible outcomes for the Indonesian carbon market. It can also be inferred that this event supported efforts to bridge the knowledge gap among the government, private sector, and civil society, enabling Indonesia to fully seize the rapid momentum of the carbon market development to maximize its benefits.
This event was also attended by other distinguished guests including Mr. Wahyu Marjaka, Director of Sectoral and Regional Resource Mobilization at the Ministry of Environment and Forestry; Ms. Endah Tri Kurniawaty, Director of Fundraising and Development at the Indonesian Environment Fund (BPDLH); and Mr. Andreas A. Hutahaean from the Coordinating Ministry for Maritime Affairs and Investment. Additionally, representatives from the Fiscal Policy Agency of the Ministry of Finance, the Directorate of Inland Water and Mangrove Rehabilitation at the MoEF, the World Bank, civil society organizations, and project developers or businesses interested in carbon issues were also attended the event. This high-level discussion forum occurred on May 29th, 2023, at the Hermitage Hotel, Menteng, Jakarta.