IndonesiaCarbon MarketWhite PaperDecember 2024INDONESIA CARBONpwcTRADE ASSOCIATIONwww.pwc.com/idForewordThe Paris Agreement,endorsed by 196 nations in 2016,aimsto keep global temperature rise well below 2C,ideally limitingit to 1.5C.Despite global efforts,we are lagging behind as ourcurrent actions could lead to a potential temperature rise of2.7C by the end of the century.In a worst-case scenario,wheregreenhouse gas emissions continue to increase without significantmitigation,the temperature could rise by as much as 4C or more,according to the Intergovernmental Panel on Climate ChangeSixth Assessment Report(IPCC AR6).As the world increasinglyrecognizes the urgent need to address climate change,the roleof carbon markets in mitigating greenhouse gas emissions hasgained significant attention.Indonesia,with its vast tropical forestsand rich biodiversity,stands at a pivotal juncture in contributingto global climate solutions.The development of a robust carbonmarket in Indonesia not only promises to enhance the country'senvironmental stewardship but also offers substantial economicYuliana Sudjonnoopportunities and social co-benefits.PartnerThis whitepaper explores how the carbon market can help addressthis financial challenge.Initiated by Presidential Regulation No.98 of 2021,Indonesia's carbon market framework,which includesPwC Indonesiacarbon taxes and carbon offset credits,is a critical step forward.Currently,carbon pricing is too low to generate sufficient demandfor credits,necessitating adjustments.However,Indonesia's vastrainforests and extensive land area present significant opportunitiesfor forestry projects,with an estimated annual emission reductionpotential of 247 million tonnes of CO2-equivalent.By 2030,Indonesia could generate up to 1,283 million tonnes of carboncredits each year.To harness this potential,Indonesia needs to develop aninternationally recognised Monitoring,Reporting and Verification(MRV)framework,clarify regulations for international trading,adjustcarbon tax pricing,enhance transparency within the SRN-PPl,and provide clear guidance on accounting and tax treatments forcarbon credits.Leveraging technology to improve governanceis also essential.This whitepaper offers key insights andrecommendations crucial for advancing and sustaining Indonesia'scarbon market.PwC,in partnership with the Indonesia Carbon Trade Association(IDCTA),is committed to exploring and maximising the potentialof Indonesia's carbon market,supporting the country's NDCcommitments and economic growth through stakeholderengagement and infrastructure development.We hope you find our findings both enlightening and thought-provoking,and we wish you a pleasant read.Page 2 Indonesia Carbon Market White Paper