OECD-CEFIM-IEA Focus Group Discussion: Approaches to Emission Trading System (ETS) schemes in the power sector, 23 November 2021, Paris

1. Directorate of Human Resources Management
Experience from the Emission
Trading System (ETS) Trial
FGD: Approaches to Emission Trading System (ETS)
Schemes in The Power Sector”
November 23rd, 2021

2. 2
EXECUTIVE SUMMARY
1
2
3
4
5
The Indonesian government aims to reduce emissions by 29 percent by 2030 and to achieve net zero
emissions (NZE) by 2060 or sooner; carbon pricing is one of the strategic pillars for meeting the NDC and
NZE targets.
PLN is establishing an internal framework to ensure the smooth implementation of the emission trading
system (ETS) and compliance with the carbon tax regulations
The cap on the intensity of greenhouse gas emissions is one of the key factors that will determine the
impact of carbon pricing.
PLN has successfully implemented a carbon trading trial for the first time in Indonesia, which became a
reference for the first phase implementation of the carbon tax in April 2022.
According to our preliminary simulation, the cap is set to the same value as the trial cap, the emission
trading portion balances with the tax portion. A 5% stricter cap would significantly reduce the share of
emission trading to around 6%.

3. 3
PLN has successfully piloted carbon emissions trading at 26 of
its coal power plants
Part of carbon trading trial by
Ministry of Energy and Mineral
Resource (MEMR)
26 PLN coal power plants
From March to August 2021
CO2
emissions
cap
Scope
Goal
0.918 tons CO2/MWh for coal plants
>400MW
1,013 tons CO2/MWh for 100-400
MW coal plants
1,094 tons CO2 for 100-400 MW
mine mouth coal plants
Emission allowance
Excess emissions Unused allowance
Cash (~$2 / tCO2)
Cash
Emissions
offsets
PLN carbon credits
 International standard/ program e.g.
Verified Carbon Standard (VCS)
 Verified by MEMR through
Pembukuan Penurunan Emisi (PPE
/ Emission Reduction Bookkeeping)

4. 4
Background
 The first carbon credit project was in 2002,
when PLN contributed to a carbon market
demonstration initiated by the World Economic
Forum
 PLN develops carbon credit projects under both
the compliance and voluntary mechanism:
‒ Compliance market: Clean Development
Mechanism (CDM)
‒ Voluntary market: Verified Carbon Standard
(VCS).
 As much as 7.9 million tons CO2e of carbon
credits have been issued
PLN has issued ~8 MtCO2e carbon credits through hydropower
and geothermal projects
Remaining credits can be used to offset emissions from coal-fired power plants
https://bit.ly/3FVVQ5k
PLN carbon credits have been issued via VCS and CDM from 3 hydropower
(~350 MW), 2 geothermal (80 MW), and 1 upcoming solar project (145 MW)
~1.5
MtCO2e / yr
reduced
~2 TWh / yr
generated
For more info:
Mechanism
VCS
VCS
VCS
CDM
CDM
TBD
Current status
VCUs issued
VCUs issued
VCUs issued
CERs issued
CERs issued
Initial project assessment
underway
Project title
Lau Renun Hydropower (82 MW)
Musi Hydropower (210 MW)
Sipansihaporas Hydropower (50 MW)
Lahendong Geothermal (20 MW)
Kamojang Geothermal Unit 4 (60 MW)
Cirata Floating Solar PV (145 MW)
100+ jobs
created

5. 5
Recognition from MEMR
The 2021’s Subroto Award on Energy Efficiency
PLN was honored with nine awards under the
category of Emission Reduction and Carbon
Trading in the Power Generation Sector.
Category PLN plants
Coal plants > 400 MW - Seller 1st place – Tanjung Jati B 4
Coal plants 100-400 MW - Seller 1st place – Banten 2 Labuan
2nd place – Suralaya 2
3rd place - Paiton 2
Coal plants > 400 MW - Buyer 1st place – Adipala
2nd place – Suralaya 8
Coal plants 100-400 MW - Buyer 1st place – Pelabuhan Ratu 2
2nd place – Tanjung Awar-awar 2
3rd place – Lontar 1

6. 6
PLN internal system to support ETS
In 2021, PLN established the BOD
Directive regarding Strategic Policy Of
Climate Change
The policy has been aligned with related
international policies and national
regulations.
PLN developed the business process
model for the execution of emission
trading trial between power plants,
including the settlement of accounting
codes for both income and expenses
related to carbon pricing
Implementing internal regulations and
detailed SOPs are underway, including
SOP on emission trading scheme
Strategic Policy Exercise during the ETS trial
The emission offsets mechanism between
coal power plants and emission reduction
producers was set & trialed
Cash
Emission
Reduction
The policy making involved participation
of internal and external stakeholders such
as government and investors

7. 7
The impact of cap on the carbon pricing
mechanism
3
4
A 5% stricter cap would significantly reduce the share of
emission trading to around 6%.
Emission trading can be implemented most effectively if the cap
refers to the value established during the trial phase.
Trading and tax portions
under 4 cap scenarios:
1
MEMR set a cap for the ETS trial based on the weighted
average of coal plants' GHG emission intensity.
2
The cap for the first phase of the carbon tax implementation will
be set in early 2022
50,2%
49,8%
ETS trial cap
6,2%
93,8%
5% stricter
0,1%
99,9%
10% stricter cap
100%
15% stricter cap%
Trading
portion
Tax
portion

8. Thank you!