Carbon capture storage in Indonesia

Definition
Carbon capture and storage is the process of capturing and storing carbon dioxide
(“CO2”) before it is released into the atmosphere. The technology can capture up to 90%
of CO2 released by burning fossil fuels in electricity generation and industrial processes
such as cement production.1
There are three steps to the Carbon capture and storage process:
 Capturing the CO2 for storage
The CO2 is separated from other gases produced in industrial processes, such as
those at coal and natural-gas-fired power generation plants or steel or cement
factories.
 Transport
The CO2 is then compressed and transported via pipelines, road transport or ships
to a site for storage.
 Storage
Finally, the CO2 is injected into rock formations deep underground for permanent
storage.2

Indonesian Regulation
Carbon capture and storage is mentioned in Article 1(5) of Ministry of Energy and
Mineral Resources Regulation Number 22 of 2019 concerning Guidelines for
Implementing Greenhouse Gas Inventory and Mitigation in the Energy Sector (“Ministry
of Energy and Minerals Regulation No. 22/2019”) as the process of geologically
placing CO2 areas that utilize natural geological barriers to isolate CO 2 from the
atmosphere.
Carbon capture and storage is included within the activity to mitigate greenhouse gas
emission in the energy sector 3 that requires evaluation and approval of the Directorate

1
https://www.nationalgrid.com/stories/energy-explained/what-is-ccs-how-does-it-work
2
https://www.nationalgrid.com/stories/energy-explained/what-is-ccs-how-does-it-work
3
Article 13(2) of Ministry of Energy and Minerals Regulation No. 22/2019
of Engineering and Environment in the Directorate General of Oil and Gas and
Directorate of Engineering and Environment Directorate General of Electricity. 4
Furthermore, carbon capture and storage is mentioned in the definition of actions to
mitigate climate change which in include activities to reduce greenhouse gas emission,
increase absorption of CO2 and/or storage/strengthening carbon stocks in Article 1(7) of
Presidential Regulation Number 98 of 2021 concerning the Implementation of Carbon
Economic Value to Achieve National Contribution Targets and Greenhouse Gas
Emission Control in National Development (“Presidential Regulation No. 98/2021”).
The climate change mitigation action plan includes inventory of greenhouse gases that
cover activities including the monitoring, collection and calculation of information and
data relating to carbon capture and storage and the source of carbon emission. 5 The
calculation of carbon capture and storage is conducted based on the Intergovernmental
Panel on Climate Change (“IPCC”).6
The inventory of greenhouse gases is conducted by the following institutions and
parties:
1. Ministry of Environmental Protection and Management for the national inventory of
greenhouse gases;
2. Ministries that govern each economic sectors for the inventory of greenhouse gases
on a sectoral level;
3. Governors for the inventory of greenhouse gases on a provincial level;
4. Regents/mayors for the inventory of greenhouse gases on a district/city level; and
5. Business entities for the inventory of greenhouse gases in their respective business
location.7
While currently there is no existing regulation that specifically govern the guidelines and
technicalities of carbon capture and storage practices, the Ministry of Energy and
Mineral Resources is in the process of drafting a ministerial regulation regarding the
Implementation of Carbon Capture and Storage/Carbon Capture, Utilization and
Storage as part of a goal to achieve Net Zero Emission in 2060 according to the

4
Article 17 of Ministry of Energy and Minerals Regulation No. 22/2019
5
Article 10 of Presidential Regulation No. 98/2021
6
Article 10(6) of Presidential Regulation No. 98/2021
7
Article 11(2) of Presidential Regulation No. 98/2021
ministry’s press release number 46.Pers/04/SJI/2022 dated January 28, 2022. To
prepare to the draft for the ministerial regulation, the Directorate General of Oil and Gas
has formed a Team for Drafting Regulations for the Implementation of carbon capture
and storage/carbon capture, utilization and storage activities by involving stakeholders
such as Special Task Force for Upstream Oil and Gas Business Activities (Satuan Kerja
Khusus Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi “SKK Migas”), Aceh Oil
and Gas Management Agency (Badan Pengelola Migas Aceh “BPMA”), Center of
Excellence for Carbon Capture and Storage and Carbon Capture, Utilization and
Storage Indonesia Institute of Technology (“CoE CCS/CCUS ITB”), Center for
Research and Development of Oil and Gas Technology (Badan Layanan Umum Pusat
Penelitian dan Pengembangan Teknologi Minyak dan Gas Bumi “Lemigas”), Ministry of
Energy and Mineral Resources, Indonesian Petroleum Association (“IPA”), Pertamina,
British Petroleum (“BP”), Medco, Repsol, Inpex, ENI, ExxonMobil, Conoco Phillips and
Aceh provincial government-owned enterprise PT Pembangunan Aceh (“PEMA”).8
"This team has been working intensively since mid-2021 to prepare the draft ministerial
regulation on carbon capture and storage/carbon capture, utilization and storage, which
includes technical aspects such as CO2 capture, transportation, injection, storage and
Measurement, Reporting, Verification (“MRV”); economic and monetization aspects as
well as legal aspects to encourage the development of carbon capture and
storage/carbon capture, utilization and storage in Indonesia," said the Director General
of Oil and Gas of the Ministry of Energy and Mineral Resources Tutuka Ariadji. 9
Currently, the draft of the ministerial regulation on the Implementation of Carbon
Capture and Storage/Carbon Capture, Utilization and Storage is already submitted to
the Legal Bureau of the Ministry of Energy and Mineral Resources following discussions
with countries that have a more advanced carbon capture and storage practice
according to the Director General of Oil and Gas of the Ministry of Energy and Mineral
Resources.10

8
https://www.esdm.go.id/en/media-center/news-archives/ccs-ccus-teknologi-tingkatkan-produksi-migas-
sekaligus-kurangi-emisi
9
https://www.esdm.go.id/en/media-center/news-archives/ccs-ccus-teknologi-tingkatkan-produksi-migas-
sekaligus-kurangi-emisi
10
https://migas.esdm.go.id/post/read/jaring-perspektif-pengembangan-ccs-ccus-kementerian-esdm-
diskusi-dengan-negara-mitra
Incentives
Presidential Regulation No. 98/2021 also provide incentives in the form of result-based
payment as incentives or payments given to ministries/institutions, regional
governments and business entities that participate in the effort to reduce emission of
greenhouse gases.11 Logically speaking, carbon capture and storage is one of the
methods to reduce greenhouse gas emission by capturing, separating CO 2 from other
gases produced in industrial processes, including those at coal and natural-gas-fired
power generation plants or steel or cement factories and storing CO 2 before it is
released into the atmosphere. 12 Hence, parties that implement carbon capture and
storage will receive the result-based payment.
The result-based payment will be given following the verification of effort to reduce
emission of greenhouse gases.13

Levies
Levies on carbon are state levies, both central and regional, charged on goods and/or
services that have potential and/or carbon content and/or businesses and/or activities
that have potential for carbon emissions and/or emits carbon that can have a negative
impact on the environment and/or the performance of actions to mitigate climate
change.14 Levies on carbon includes taxes, excise, customs and other state levies. 15
Carbon tax is implemented in Article 13 in Chapter VI of Law Number 7 of 2021
regarding the Harmonization of Tax Regulations (“Law No. 7/2021”). Individuals and
legal entities are subjected to carbon taxes when purchasing goods that contain carbon
and/or conducting activities that results in carbon emission at certain quantity at the end
of the calendar year.16

11
Article 55(1) of Presidential Regulation No. 98/2021
12
https://www.nationalgrid.com/stories/energy-explained/what-is-ccs-how-does-it-work
13
Article 55(2) of Presidential Regulation No. 98/2021
14
Article 1(24) of Presidential Regulation No. 98/2021
15
Article 58 of Presidential Regulation No. 98/2021
16
Article 13, Chapter VI of Law No. 7/2021
The existence of levies on carbon in Indonesia should dissuade ministries/institutions,
regional governments and business entities from emitting excess of into CO 2 into the
atmosphere and incentive the implementation of carbon capture and storage.