Strategy to Achieve Indonesia’s Nationally Determined Contribution Target by Developing a Sustainable Carbon Market

Climate change has become a global concern, and as a reaction to global climate change, 196 parties, including Indonesia, have adopted the Paris Agreement to the United Nations Framework Convention on Climate Change, a legally enforceable international convention on climate change. The carbon market is expected to help Indonesia meet its Nationally Determined Contribution (“NDC”) target in alignment with the requirements of the Paris Agreement. IDXCarbon, the first licensed carbon market in Indonesia, was launched on September 26, 2023. During the launch, the President of the Republic of Indonesia stated that the potential of the carbon market can reach a value of IDR 3000 trillion or more. The carbon emissions in Indonesia require urgent attention and prompt action from the regulator, given that Indonesia is ranked as the 7th largest emitter globally. For many years, air pollution in Jakarta, the capital city of Indonesia, has been classified as unhealthy. IDXCarbon is expected to contribute to the reduction of greenhouse gas (GHG) emissions in Indonesia. Nearly a year after its launch, the carbon trading volume in IDXCarbon remains relatively small. The business issue in this study is how to develop a sustainable carbon market in Indonesia, which will ultimately support Indonesia in achieving its NDC target. This paper focuses on: i) analyzing regulations regarding carbon market ecosystem, including its background, ii) identifying IDXCarbon’s existing products, iii) analyzing strengths, weaknesses, opportunities, and threats (SWOT) of IDXCarbon, (iv) identifying IDXCarbon’s main stakeholders’ concerns, v) identifying business practices of carbon market and comparison with carbon market in several countries, and analyzing vi) political, economic, sociocultural, technological, legal, environmental (or ecological) (PESTLE) related to carbon market analysis. Finally, this study develops SWOT Matrix and provides improvement suggestions and proposed actions for consideration of IDXCarbon to develop a sustainable carbon market. The necessary improvement suggestions and proposed actions are treated as the business solution. By executing the implementation plan, the author believes IDXCarbon will become a sustainable carbon market that can help Indonesia meet its NDC target.