Sustainable economy: Prabowo, who will be inaugurated on Oct 20, has pledged to boost growth to 8% during his five-year term, from 5% now, including through investment in green projects. — AFP
JAKARTA: President-elect Prabowo Subianto plans to launch a green economy fund by selling carbon emission credits from projects such as rainforest preservation, aiming to raise US$65bil by 2028, an adviser told Reuters.
A new regulator for carbon emission rules will be established to oversee efforts to reach Indonesia’s emissions targets under the Paris agreement, said Ferry Latuhihin, one of Prabowo’s advisers on climate policies.
The regulator will then form a “special mission vehicle” that will manage a green fund and operate carbon-offsetting projects, he said in an interview.
The projects would include forest preservation, reforestation and peatland and mangrove replanting to generate carbon credits that can be sold internationally, Latuhihin said.
The target is to grow the vehicle to reach one quadrillion rupiah or US$65bil by 2028, he said.
“We need to utilise our comparative advantage, which is the nature,” Latuhihin said.
The scale of the proposed fund, which has not previously been reported, has the potential to help one of the world’s top 10 emitters and home to the world’s third-largest tropical rainforest meet its goal of net carbon neutrality by 2060.
Still, it faces big challenges including competition in global carbon markets and ensuring projects are seen as credible.
Christina Ng, managing director of the Energy Shift Institute, a think tank focused on Asia’s energy transition, said Indonesia’s vast natural ecosystem offered scope for major carbon offset projects, but the targets were highly ambitious from financial and operational perspectives.
Prabowo, who will be inaugurated on Oct 20, has pledged to boost economic growth to 8% during his five-year term, from 5% now, including through investment in green projects.
Latuhihin said the offset projects would create massive job opportunities and could help reach the growth target.
The incoming government will provide seed capital, which is still being determined, but it expected the fund would grow by selling carbon credits locally and overseas and pay dividends to the government once it became profitable, he pointed out.
Pooling funds in a such an entity would allow Indonesia to run large-scale green projects without using the government’s budget, Latuhihin said.
He said international standards on verification will be followed, and technology will be deployed to confirm how much carbon dioxide (CO2) each project removes from the atmosphere.
Ng said nature-based carbon credits typically trade between US$5 and US$50 per tonne of CO2 equivalent, but the price averaged below US$10 per tonne last year.
Even at US$50 per tonne, raising US$10bil annually – still short of what is needed to reach the planned fund’s target over the next four years – would require selling 200 million tonnes of carbon credits.
That is just shy of a total 239-million-tonne carbon credit issuance the entire global voluntary market recorded at its peak in 2021, Ng said, underscoring the challenge of meeting the fund’s target.
At US$10 per tonne, the same volumes would only raise US$2bil annually, making the US$65bil target even further out of reach. — The Jakarta Post/ANN
