Indonesia Starts Fund for Carbon Trading to Meet Emission Goals

(Bloomberg) -- Indonesia plans to develop a market for carbon trading under a new agency formed to fund efforts to meet greenhouse gas emission reduction target under the Paris climate pact.

The Environment Fund Agency will have an initial capital of 2.1 trillion rupiah ($148 million) and will be supervised by the finance ministry, Environment and Forestry Minister Siti Nurbaya Bakar told reporters in Jakarta on Wednesday.

Indonesia is committed to lower carbon emissions by 29% on its own and 41% with international support by 2030 as a signatory to the Paris agreement, a global pact to throttle carbon dioxide emissions that drive climate change. Southeast Asia’s largest economy requires an estimated 1,065 trillion rupiah to fund efforts to manage and protect the environment in the four years through 2020, according to Bakar.

The agency will also fund various carbon reduction programs of ministries and seek multiple sources of financing, Finance Minister Sri Mulyani Indrawati said. The agency can potentially manage as much as 800 trillion rupiah in the future, she said.

Here are the highlights of the agency’s mandate:

  • Funding for the agency can come from public and private sectors and from bilateral, multilateral agreements, as well as philanthropic pledges
  • The agency is expected to be an institution that can provide financing for environmental programs, not only in the form of budget but also equity or guarantee
  • Fund also expected to provide small grants to people as well as make investments in managing community forests, transforming abandoned mines to be eco-tourism sites and also to manage land and forest fires
  • Government sets aside 109.7 trillion rupiah of funds for climate-related matters in 2018 state budget

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