1.
Carbon market policies in forest-rich countries
Lesson learnt from Peru and Indonesia
Bimo Dwisatrio & Sandy Nofyanza
December 20, 2022 - Hanoi, Viet Nam

2.
In this presentation
1. The commitment of two countries
2. Carbon market architecture
3. How does forestry sector/REDD+ fit into the mix?

3.
National commitment to REDD+
Indonesia
• 2021-2030 Updated National REDD+ strategy,
implemented alongside:
• 2030 FoLU Net Sink target
• NZE in 2060 or sooner
• Updated NDC
• Updated NDC target: 31.89% (unconditional) -
43.20% ER (cond) by 2030
• FoLU sectors accounted for 17.4%-25.4% ER
• Ministerial regulations on technical
implementation of REDD+ is in place
• Regulatory framework for carbon trading is in
place – pending roadmap on carbon market
Peru
• 2015 National Climate Change strategy and
REDD+ strategy promote:
• “the use of intl and national market
mechanism for reduction, capture and
increase carbon sinks”
• the establishment of markets and valuing
forest ecosystem services through [PES
mechanisms]”
• NDC target: 30% ER by 2030
• Regulatory framework is in place

4.
Peruvian carbon market (1/2)
Peru Carbon Footprint mechanism (Huella de Carbono Perú)
Not explicitly an ETS/carbon market, but:
• Recognize the contribution of public & private organizations to the 2030 NDC
• Promote independent MR of GHG emissions in public & private organizations
• Aligning ER actions between public & private
• Promote the financing of GHG ER projects
• Improve the quality of data from the National GHG Inventory

5.
Peruvian carbon market (2/2)
Private sector will get an official recognition of climate effort if they…
• calculate their emissions,
• independently verify them,
• reduce them/offset their remaining emissions
Organizations can purchase emission reduction units (URE, unidades de
reducción de emisiones) to obtain a four-star Peru Carbon Footprint official
certification
There is also an “implicit” tax on carbon – fuel excise tax – covering about 27.6%
emission in Peru (OECD 2022)

6.
Slow, but emerging regulation (Indonesia)
• PP (Government Regulation) No. 46/2017 on
Environmental Economic Instrument
• PerPres (Presidential Regulation) No. 98/2021 on
Carbon Economic Value
• PermenLHK (Ministerial Regulation) No. 21/2022
on Protocol to Implement Carbon Economic Value
from the Forestry Sector

7.
Carbon trading scheme: Indonesia (1/2)
Emission
surplus
Emission
deficit
Carbon tax
SIE: tradable emission permit
SPE: emission reduction certificate/offset
Can also work as a (carbon) tax
reduction scheme
Caveat: Cap-and-tax allows carbon emission above the cap

8.
Carbon trading scheme: Indonesia (2/2)
2021
• Regulatory framework
establishment
• Carbon price set at minimum
USD 2 per tCO2e
• Pilot at select power plants
2022
• First national trial (delayed) in
power sector (coal plant)
• MRV and NRS preparation
• Technical regulation at MoEF
• Regular evaluation of carbon
price
2025
• First national trial (probable)
• Start of economy-wide
implementation (phase-in of
all economic sector)
Timeline
The cap is set by MEMR
The carbon market is set by MoEF

9.
Folding REDD+/forestry sector into the mix
[INA] Trading & non-trading instrument
ETS & offset carbon tax & RBPs
[PER] Offset, Peru Carbon Footprint mechanism & RBPs
• A first step toward ETS, managed by MINAM
• Offset credit can be purchased from REDD+ projects in Peru
From JREDD+; funds managed by BPDLH
From REDD+ project, JREDD+;
funds managed by PROFONANPE
Carbon exchange REDD+ projects
as carbon credit supplier

10.
Notable differences (and similarity)
Indonesia Peru
Environmental related funding/revenue raised
(including from JREDD+) is centrally managed &
distributed by BPDLH.
Two new bills in the parliament aim to reduce
PROFONANPE’s authority in managing REDD+ funds.
This is to increase private investment in carbon market.
International carbon trading/offset is allowed
only after sectoral NDC target is achieved and upon
ministerial authorization.
More emphasis on increasing private sector
investment in REDD+, while working on how to link
activities on the ground (by NGO/private) with NDC
target.
REDD+ project/ERCs must set aside 10-20% “offset
buffer” to minimize the risk of (not) achieving 2030
NDC target.
MINAM encourage REDD+ projects to allocate a
percentage of the UREs toward Peru’s NDC

11.
Concluding remarks
• The regulations are emerging at a slow pace, nevertheless it’s a welcoming development
• Both has the same feature (offset, RBP)
• Indonesia is developing a carbon tax in addition to the pricing, while Peru has fuel
excise tax already in place
• Carbon market in Peru and Indonesia is more or less developing at the same rate
• But one is more centralized (Indonesia) and the other is more inclined to invite private
sector involvement (Peru)
• Forestry sector has important role:
• Supplier of carbon credit in a smaller RBP project/program
• Supplier of carbon credit in the (soon) economy-wide carbon market

12.
cifor.org | worldagroforestry.org | globallandscapesforum.org | resilientlandscapes.org
The Center for International Forestry Research (CIFOR) and World Agroforestry (ICRAF) envision a more equitable world where forestry and
landscapes enhance the environment and well-being for all. CIFOR–ICRAF are CGIAR Research Centers.
https://www.cifor-icraf.org/gcs
Thank you