The carbon economy stems from the Paris Agreement, which requires each country to prepare, report, and update their NDC (emission reduction targets) and conduct a global stocktake every five years to assess collective progress. The policy instruments are varied (from carbon taxes to emission trading) with the aim of signaling prices on emissions to make investment and operational decisions lower in carbon. The latest report from the World Bank notes that 75 carbon pricing instruments are operational globally, with revenues in 2023 reaching US$104 billion, although the price levels are still inadequate for the 1.5–2°C pathway.
In Indonesia, the framework for Carbon Economic Value (NEK) is regulated through sectoral environmental and fiscal regulations. On the environmental side, Permen LHK 21/2022 establishes the NEK procedures (covering emission trading, offsets, emission limits, and data management) as instruments to achieve NDC targets. On the fiscal side, Law No. 7/2021 (HPP) introduces carbon taxes as part of tax reform. Gradual implementation and cross-policy integration are key, starting from the readiness of emission data to the design of a credible carbon market.
For businesses and local governments, the practical implications lie in reliable emission measurement, determining instrument strategies (tax vs trading vs offsets), and transparent public communication to avoid the risk of greenwashing. The opportunities include energy efficiency, access to green financing, and supply chain competitiveness that increasingly requires a low emission footprint.
References:
- UNFCCC – Key aspects of the Paris Agreement: https://unfccc.int/most-requested/key-aspects-of-the-paris-agreement
- UNFCCC – The Paris Agreement (overview): https://unfccc.int/process-and-meetings/the-paris-agreement
- UNFCCC – NDCs (Article 4 paragraph 2): https://unfccc.int/process-and-meetings/the-paris-agreement/nationally-determined-contributions-ndcs
- World Bank – State and Trends of Carbon Pricing 2024 (executive summary PDF): https://openknowledge.worldbank.org/server/api/core/bitstreams/253e6cdd-9631-4db2-8cc5-1d013956de15/content
- World Bank – Press release (carbon pricing revenues hit $104B): https://www.worldbank.org/en/news/press-release/2024/05/21/global-carbon-pricing-revenues-top-a-record-100-billion
- Kementerian LHK – Permen LHK No. 21 Tahun 2022 (Implementation Procedures for NEK): https://jdih.menlhk.go.id/kiosk/files/2022pmlhk021_menlhk_10252022143318.pdf
- DJP – Law No. 7 of 2021 (Tax Regulation Harmonization) PDF: https://pajak.go.id/sites/default/files/2021-12/Salinan%20UU%20Nomor%207%20Tahun%202021.pdf