Overview

Description

Indonesia’s Economic Value of Carbon, or Nilai Ekonomi Karbon (NEK), Trading Scheme is a mandatory, intensity-based, baseline-and-credit ETS for the power sector launched in early 2023. In its first phase spanning from 2023 to 2024, it exclusively targets coal-fired power plants connected to the Perusahaan Listrik Negara (PLN) grid with a capacity of 25 MW or more99 installations in 2023 and 146 in 2024. Phase 2, which commenced in 2025, extended coverage to captive CFPPs not connected to the PLN grid and to gas-fired, gas-engine, and combined-cycle power plants. By 2025, 563 installations were covered, representing the majority of the country's regulated power generation capacity. Covered entities receive intensity targets known as Persetujuan Teknis Batas Atas Emisi (PTBAE), which determine the number of allowances allocated per MWh of electricity generated. Entities must surrender allowances for all covered emissions; allocation is based on PTBAE benchmarks, prior-year emissions intensity, and prior-year average emissions. Additionally, entities have the option to purchase allowances via auctions. Presidential Regulation No. 110/2025 established the national legal framework for a domestic carbon pricing system comprising an ETS, a carbon levy functioning as a compliance backstop, and a results-based payment mechanism tied to Article 6 of the Paris Agreement. The Indonesian Carbon Exchange (IDXCarbon), launched at the Indonesia Stock Exchange in September 2023 under the supervision of the Financial Services Authority (OJK), operates the secondary market for allowances and offset credits. In 2025, OJK and the Ministry of Environment operationalized IDXCarbon as the national carbon exchange, with participation from more than 130 entities and transactions totaling approximately 0.6 MtCO2e.

Recent Developments

In 2025, Phase 2 of the NEK came into force, expanding coverage from 146 coal-fired power plants to 563 installations by adding captive CFPPs not connected to the PLN grid and gas-fired, gas-engine, and combined-cycle power plants. Presidential Regulation No. 110/2025 established the overarching national carbon pricing framework, incorporating the ETS, a carbon levy as a compliance backstop, and a results-based payment mechanism aligned with Article 6 of the Paris Agreement. Allowance allocation for 2025 was postponed due to associated regulatory revisions; as of January 2026, no allowances had been issued and no trading had occurred, though covered installations remained subject to reporting obligations.

Coverage

Initially, coal-fired power generation facilities with a production capacity exceeding 100 MW are included. However, smaller coal and fossil fuel plants may be incorporated at a later point. The Ministry of Environment and Forestry (MoEF) has indicated that the government plans to implement emission caps for four additional sectors in the future: forestry, industrial processes and product use, agriculture, and waste management.

Pricing and Allocation Approaches

Not Specified

Compliance Approaches

Not Specified

Relation to Other Compliance CPIs

The Economic Value of Carbon NEK Trading Scheme is not linked with any other system.

Covered Sectors

Electricity and heat