This document discusses Indonesia's plans to implement an emission cap and trade system in the power sector. Key points include: - Indonesia has committed to reducing emissions by 29-41% by 2030 under the Paris Agreement and plans to use carbon pricing mechanisms like carbon taxes and trading to help meet this goal. - The Directorate General of Electricity is conducting an emission trading system trial in 2021-2024 before implementing a mandatory program in 2025. The trial focuses on power plants and uses a cap-and-trade approach. - Simulation results from the 2021 trial showed over 42,000 tons of CO2 transferred between power plants and 4,500 tons offset through international carbon credits. - Indonesia also plans to

1. Directorate General ofElectricity
Ministryof Energy and Mineral Resources
RepublicofIndonesia
INDONESIA’S EMISSION CAP AND TRADE IN POWER SECTOR
1
Focus Group Discussion(FGD)Approachesto EmissionTrading System(ETS) Schemes
in The Power Sector
Directorat of Electricity Engineering and Environment
Bayu Nugroho
Jakarta, November 23th,2021

2. 2
INDONESIA'S COMMITMENT TO REDUCING EMISSIONS
Net Zero Emission (NZE) Principal President’s Instruction
Enhancement utilization of
New Renewable Energy (NRE)
01 UNFCCC - COP21, DECEMBER 2015
Reducing GHG emissions by 29% (self-
effort) or 41% (with international
assistance) by 2030 according to NDC
Reducing fossil energy
• Carbon tax & trading
• Co-firing of CFPP with NRE
• Retirement of CFPP
02
LEADERS SUMMIT ON CLIMATE,APRIL 2021
Attracting investmentin the energy transition
through the development of biofuels, lithium
battery industry, andelectric vehicles.
Electric vehicles
03
Enhancement of electricity
consumption in household and
industry
04
Utilization of Carbon Capture
and Storage (CCS).
05
PRESIDENTRI STATE’S SPEECHON
AUGUST 16, 2021
Energy transition towards NREand the
acceleration of a green technology-based
economy, will be an importantchange in our
economy.

3. 3
EMISSION TRADING SYSTEM (ETS) TRIAL IN POWER SECTOR
According to article 52 Government Regulation No. 46/2017
on Economic Instrument of Environment, emission trading
must be implemented maximum in Nov, 2024. For preparing
the mandatory ETS in 2024, starting this year Directorate
General of Electricity conducting ETS trial (voluntary
scheme). ETS trial will be accordance with Presidential
Regulation on Carbon Pricing implementation to achieve NDC
target and controlling emission carbon in National
Development.
Voluntary
(2021-2024)
Mandatory
2025
UNIT A
Surplus
Deficit
UNIT B
Trading
Sale Purchase
Offset
Emission Trading System trial on power plants will be implemented through Cap &
Trade andOffset
Cap : The upper limit of GHGemissions allowedset by the Government
Trade : Activities for selling and buying the allowances to meet the GHG emissions
allowed
Offset : Reductions in GHG emissions in one place that can be used to compensate for
emissions elsewhere
Cap
Objectives of ETS trial are:
IncreasingGHGemissionreductionto achieve NDC target
Implementingof capemissionin CFPP
Strengthening Measurement, Reporting and Verification in
Inventory GHGemission
Raising awareness in implementation of carbon pricing,
especially in capandtrade, andoffset
GHG emission cap in CoalFired PowerPlant (CFPP)
 CFPP capacities distribution according to the MEMR Regulation No 9/2020 on
the Efficiency ofthe Electricity Supply of PT PLN (Persero).
The cap value based on the 2019 weighted average GHG emission intensity in
each CFPPgroups and consideringthe emissionquota status.

4. ETS TRIAL IN ENERGY EFFICIENCY SOEBROTO AWARDS (PSBE)
GHG Em ission Re porting
Apple - Gatrik
APPLE-GATRIK
Unit of Power Plant
Trading pe riod
Trial
Judging Period
Category C of PSBE
Trading
Offset of
NRE
Emission Balance
Subroto Awards
Note:
• Trading is carried out between the power plant participating in the
trial. Trade-able emissions from surplus generating units are capped at
70%.
• Surplus generating units (sellers) are required to have made EE / NRE
efforts sinceatleast2015 to beableto sell tradeableemissions.
• Offsets are determined from the mitigation action of NRE power plant.
With a potential demand of 30%
Potential
demand 30%
Tradeable
Emission 70%
Either NREpower plantsor
fossil fuel powerplants
1. Participants report GHG emissions
in 2020 through APPLE-Gatrik
2. Participants confirm their
participation to the Directorate
General of Electricity.
3. Participants can trade or offset
after confirming their participation
and sending it to the Directorate
General of Electricity
4. Trial implementation period in
March - August 2021 (reporting,
transaction,judging stages)
5. Trading is carried out not in same
power generationunit
4

5. 5
PSBE OFFSET
1. Offset can apply to unit of power plant with a positive initial carbon balance as well as to unit of power plant with a
negativeinitial carbon balance;
2. Offsets from renewable energy mitigation actions that have carbon credit certificates from mechanisms such as ICER,
CDM, VCS/VERRA, Plan Vivo, JCM, Gold Standard and others, with a Commercial Operation Date (COD) in 2011 or later.
3. Unit of power plant needs to submit a certificate of cancellation from the above mechanism in accordance with the
number of carboncredits (tons of CO2);
4. Mitigation actions that do not yet have a carbon credit certificate can be registered in the Emission Reduction Book (PPE)
with the following conditions:
a. units of power plant COD in 2011or later
b. mitigationactions included Wind Power Plant,Hydro power plant, Solar power plant (on-grid and off-grid)andEnergy
efficient public street lighting (PJUHE)
c. emission reduction is the result of emission reduction achievement in 2020
d. verification and validation by the Ministry of Energy and Mineral Resources (MEMR)
e. PPE will be issued by the MEMR for PSBE2021
f. PPE that has been used for offsetsin the PSBEcannot be used for other purposes (e.g. traded in other mechanisms).

6. 6
ETS TRIAL (VOLUNTARY SCHEME) CONDUCTED THROUGH SUBROTO AWARD
IN ENERGY EFFICIENCY CATEGORY C
CANDIDATEPARTICIPANTSOFETS TRIAL PARTICIPANTS THROUGHPSBE IN 2021
From 84 candidate participants, there are 39 units of
CFPP that have confirmed their participation, but there
is 1 unit of CFPP that withdrew and there are 32 units
of CFPP that have submitted documents to the
PSBE committee.

7. 7
RESUME OF ETS TRIAL THROUGH SUBROTO AWARDS IN 2021
42,455.42 ton CO2
Carbon Transfer
The average of CarbonPrice is USD2/ton CO2
From28 transactions amongCFPP
TRADING AND
OFFSET
4,500 ton CO2
From VCS/VERRA project retirement with
Carbon Price 3 EUR/tonCO2
VCS/VERRAProjects fromHydropower Plant Renun,
Sipansihaporas andMusi.
22.248,1 ton CO2
IndonesianCertificates is issuedby MEMR through
PPE mechanismfrommany renewable projects,
either on-gridor off-grid
The Average of Carbon Price is IDR 4,000/tonCO2
Indonesian Certificates
IDR 1.54 Billions
The Cost of ETS Trial
InternationalCarbon Credits
IDR 1.227 Billions spend in trading and IDR 236
millions spend in offset

8. 8
CARBON TAX – ACCORDING to LAW NO. 7 OF 2021
2021
2022
until
2024
2025
for further
Developing on
carbon trading
mechanism
Carbon tax
implementation
based on cap (cap
and tax) for Coal
Fired Power Plant
(CFPP)
Emission Trading
System will be
implemented in full
s cale (mandatory)
and carbon tax will
be extended to
other s ectors with
taking into account
sector readiness with
considering economic
condition,
stakeholders
readiness , impact
and/or scale
Implementationof Carbon Tax
01 Carbon tax implementation is carried out by taking into
account the carbon tax roadmap set by the Government
and/or the carbon market roadmap.
02 The subject of the carbon tax is an individual or entity
that buys containing carbon and/or engages in activities
that produce carbon emissions.
03 Carbon tax revenues can be allocated for climate change
and regulated by or based on a Government Regulation
after being agreed by the Indonesian Parliament in the
preparation ofthe Draft State Budget.
04 The carbon tax is set at a minimum of IDR 30.00 per kg
CO2e.
05 Implemented in April 1, 2022 for coal-fired power plant
with a cap & tax scheme.
Cap and Tax
Cap
Tax
Before After

9. 9
IMPLEMENTATION OF CAP AND TAX MECHANISM IN CAP AND TRADE
Entities emitting emission above the cap are required to
purchase an emission permit (EP) from the entity under the cap
or purchase an emission reduction certificate (ERC/carbon
offset).
If entity cannot purchase emission permit (EP) or
emission reduction certificate (ERC/carbon offset) to
compensate entire its emission above the cap, the
remaining emissions will be chargedwith carbon tax.
Cap
A B A
Carbon Tax
EP/ERC
Cap and Trade
EP/ERC
C
Cap and tax
Trading
EP/ERC
EP/ERC
EP/ERC
Trading
EP/ERC
Surplus
Defisit

10. 10
SIMULATION OF CAP & TRADE and CAP & TAX
Surplus/Deficit = Emission quota allocation– CO2 Emissi
= (Cap x GEP) – CO2 Emission
= ((0.918 x 6.100.000)) – 5.800.000
= - 200.200 tCO2 (deficit)
Unit of Coal Fired PowerPlant (CFPP)
Capacity = 800 MW
EmissionCap = 0,918
Gross Electricity Production (GEP)= 6.100.000 MWh
CO2 Emission = 5.800.000 tCO2
Unit of CFPP havedeficit 200.200 tCO2
In order to meet the cap, the unit should pay approximately USD 400.400, (if unit
doing trading andcapwith the carbonprice andcarbontax for 2 USD/tonCO2
Unit of CFPP
If the unit of power plants only conducts trading & offset
activities of 100,200 tCO2, then there is still a remaining
emission deficit of 100,000 tCO2, which will be charged
with carbontax.
Carbon Tax
100.000 tCO2
100.200 tCO2
Cap
Trading & Offset
Deficit
200.200
tCO
2
Ilustration

11. THANK YOU
11

12. 12
CARBON PRICE REFERENCES
Governmentprovideinformationon rangeof carbonprice based on manyreferencesasfollows
Activities Approach Minimum Price Maximum Price References
Trading between CFPP Mitigation Costin CFPP - USD 4.69/tCO2
Based on PLN Circular Letterfor co-firing
in CFPP,biomass IDR 900/kg with NCV
4,200 kcal/kg
Carbon price in
other countries
USD 2/tCO2 USD 8.5/tCO2 ETSChina
USD 5/tCO2 USD 7/tCO2 ETSRGGI- USA
Carbon price for emission tradingbetween CFPPin a range ofUSD 2 - 8.5 per ton CO2
Offset CFPP– RE
power plants
Mitigationcost in
RE power plants
- USD 20/tCO2 Power Sector MACC in Indonesia
Voluntarycarbon
pricingfor RE
power plants
USD 0.2/tCO2 USD 3.9/tCO2
Carbon price on Hydro Power Plant (min
price) and Solar Power Plant (max price)
on VCS/VERRA
Min incentive
expected
USD 0.8/tCO2 USD 2.4/tCO2 5 – 15% from LCOE Solar Power Plant
Mitigationcost of
CCS/CCUS
USD 40/tCO2 USD 60/tCO2
Nicholas Institute for Environmental Policy
Solutions– Duke University
1. Carbon Price for CFPP – RE power plant in a range ofUSD 0.2 - 20 per ton CO2 (w/o CCS/CCUS)
2. Carbon Price for CFPP – RE power plant in a range ofUSD 40 – 60 per ton CO2 (w CCS/CCUS)