Carbon 101 1695275284

Carbon 101
by Mandala Consulting
Carbon 101
Objective
Provide basic overview on carbon and how each
component contributes to carbon emissions. At the
same time, giving full picture of the dynamic and
complexity of global and Indonesian carbon sector.
Carbon 101 - Contents
1. What is carbon and how does it impact climate change?
2. What are the components of greenhouse gases?
3. How much carbon do we emit?
4. How do we measure carbon emissions?
5. How do we reduce carbon emissions and how does carbon pricing work?
6. How do we know all of these can be trusted?
7. Where does our government regulation stands regarding carbon and

what are their impacts to carbon reduction businesses?
8. How attractive is the carbon market in Indonesia financially?
9. Who are the key stakeholders in Indonesia?
10. What are the top issues of carbon trading in Indonesia?



The intensity increment of Greenhouse Gases in the atmosphere is the main cause of
climate change effect such as an increase in natural disasters occurrence
Greenhouse Gases (GHG):

Gases in the atmosphere that trap heat. Five main GHG that dominates the atmosphere are carbon dioxide, methane, nitrous oxide,
water vapor and ozone.
Carbon Footprint:
the total amount of GHG emitted by individual, organization, or product either directly or indirectly into the atmosphere as a result of
human activities. Total GHG is calculated by adding the emissions from every stage of a product or services’ lifetime:
Material Production Manufacturing Use End-of-life
The science behind: Heat Trap
Heat from the sun comes through the atmosphere and then
emitted back as infrared radiation. Greenhouse effect is when
the heat tries to leave earth, but some of it gets trapped by
chemicals like water vapor, carbon dioxide, and methane in
the atmosphere.
GHG refers to gases that trap heat in the atmosphere. The

increase of GHG quantity in the atmosphere means an
increase in trapped heat that correspond to rise of global
temperature.
Illustration source: https://www.nrdc.org/stories/greenhouse-effect-101



Carbon Dioxide, Methane, and Nitrous Oxide accounted to 93% of total Global
Greenhouse Emission
Throughout a product’s lifecycle various GHGs are emitted, each with a greater or lesser ability to trap heat in
the atmosphere:
Industrial Gasses
Greenhouse CO2 CH4 N2O HFC, PFC, SF6 , NF3

Gases Hydrofluorocarbon, Perfluorocarbon,
Carbon Dioxide Methane Nitrous Oxide Sulfur hexafluoride, Nitrogen trifluoride
Emissions characteristic
HFC: Refrigeration, air-condition,

Agriculture aerosols, and foams
Combustion of
Leak from natural (fertilizers), fuel
Main fossil fuels (coal, PFC: electronic industry to produce
gas systems and combustion,
emitting natural gas, and oil), semiconductors
the raising of wastewater
activity cement production,
livestock management, and SF6: electronic utilities
land use change
industrial processes
NF3: high-tech industries
1.5 - 200 years,

Atmosphere 10,000 - 50,000 years,
lifetime 300 - 1,000 years 12 years 114 years 3,200 years, and
100 years (respectively)
Heat-trapping
ability 28 times stronger 265 times stronger PFC : 6,630 times stronger than CO2
1 (low)
(warming impact of 1 tonne of than CO2 than CO2 SF6 : 23,500 times stronger than CO2
CO2 over a 100 year timescale)
Differences between GHGs are accounted for by the global warming potential of each gas and the carbon footprint is measured in units of carbon dioxide equivalents (CO2e)
Carbon Dioxide, Methane, and Nitrous Oxide accounts to significant amount out
of the total Global Greenhouse Emission
Emissions contribution to Global Greenhouse (GHG) Emission refer to Appendix 1

Greenhouse
Gases CO2 CH4 N2O
Proportion from
total GHG
emission in 2019
72% 16% 5%
94% are from:

Top
generating
1.
2.
Electricity and heat
Transportation
98% are from: 96% are from:
1. Agriculture 1. Agriculture
sectors 3. Manufacturing and
2. Fugitive Emissions* 2. Industry
across all Construction
3. Waste 3. Waste
sectors 4. Buildings
5. Industry
Each of these sectors emitted more Agriculture sector emitted 60% of

than 97% of CO2 compare to CH4 out of total GHG emitted
other GHG within each of these within this sector. Agriculture sector emitted 40% of
Highlights sectors: N2O out of total GHG emitted
● Electricity and heat While Fugitive Emissions and within this sector
● Transportation Waste sectors each emitted 91%
● Manufacturing and of CH4 out of total GHG emitted
Construction within each of these sectors.
* Fugitive emissions: unintended and undesirable releases (leakage or discharge) of gases or vapors from pressure containing
equipment, primarily associated with industrial activities
Appendix 1: Emissions contribution to Global Greenhouse Emission
Total Global Total CO2 Total CH4 Total N2O

Greenhouse emission emission % of CH4 from emissions
% of GGE % of CO2 from % of N2O from
Emission (GGE) component out component out Total GGE component out
Sectors contribution in Total GGE Total GGE
contribution in of Total Global of Total Global within sectors of Total Global
2019 within sector within sectors
2019 GHE GHE GHE
(measured in CO2 equivalents (measured in CO2 equivalents (measured in CO2 equivalents
(in billion of tonnes unit)
and in billion of tonnes unit) and in billion of tonnes unit) and in billion of tonnes unit)
Electricity and heat 15.83 31% 15.76 99.6% - - - -
Transportation 8.43 17% 8.22 97.5% - - - -
Manufacturing and
6.30 12% 6.25 99.2% - - - -
construction
Agriculture 5.79 11% - - 3.49 60% 2.3 40%
Fugitive emissions* 3.40 7% 0.28 8% 3.11 91.5% 0.006 0.2%
Buildings 3.07 6% 2.79 90.9% - - - -
Industry 3.06 6% 1.61 53% 0.009 0.3% 0.26 8%
Land-use change
1.64 3% 1.36 83% 0.19 11% 0.09 5%
and forestry
Waste 1.63 3% - - 1.49 91.4% 0.14 9%
Aviation and
1.31 3% - - - - - -
shipping
Other fuel
0.60 1% 0.59 98.0% 0.01 2% 0.002 0.3%
combustion
Total 51.06 36.86 72% 8.30 16% 2.80 5%
Table is processed from source: https://ourworldindata.org/emissions-by-sector Energy Sectors



Energy, Agriculture, Forestry and Land-Use Change were the biggest emitters,
emitted a total of 46.4 billion tonnes or 91% of total global GHG in 2019
Energy Agriculture, Forestry, Industry Waste
Sectors
and Land-Use Change
Emission
Share out
of total 76% 15% 6% 3%
GHG
Usage in Industry Livestock &

25% ( 12.9 ) Manure
Usage in Building 5% ( 2.3 )
18% ( 9.3 )
Agricultural Soils
Transport 3% ( 1.7 )
17% ( 8.6 ) Crop Burning
3% ( 1.4 )
Unallocated
Emission Fuel
Deforestation Landfills
Combustion Cement
Breakdown* 8% ( 4.1 )
2% ( 0.9 )
3% ( 1.8 )
2% ( 1.0 )
(measured in CO2 equivalents
and in billion of tonnes) Emissions from Cropland
Energy 1% ( 0.6 )
Wastewater
Production Chemicals 1% ( 0.7 )
6% ( 3.1 ) 3% ( 1.3 )
Agriculture & Rice Cultivation

* using 2019 total GHG with percentage Fishing 1% ( 0.5 )
allocation based on 2016 proportion 2% ( 0.9 ) Illustrations are processed from source: https://ourworldindata.org/emissions-by-sector
Carbon emissions from other perspective: viewing it from their type of consumption*
* the figures here are for United States in 2020
Food Household Personal Transportation
Accounts to 10-30% of a household’s

carbon footprint
16% of the total GHG emissions was
Production accounts for 68% of food or emitted 0.9 billion metric tonne of CO2e
emissions and transportation accounts for
5% For each kWh of electricity generated,
84% of emitted lifetime (roughly 29,937
an average of 0.37 kg of CO2e is kg CO2e) of an internal combustion
Meat products exhibit higher carbon released at the power plant engine come from the use phase
footprint per calorie than vegetable due to
less efficient conversion of plant to animal 9.4% of the total GHG emissions was
energy, methane release from manure residential electricity use or emitted average emits 0.22 kg of CO2 per km
management, and enteric fermentation in 561.1 mmt CO2e
animals average emits 0.25 kg of CO2e per
passenger km. Total commercial aircraft
Space heating and cooling are GHG emissions was 92.1 mmt CO2e*
Cattle, sheep, and goats contributed 175 *emissions vary according to aircraft type, trip length,
typically projected to make up to 43%
million metric tonnes (mmt) of CO2e from occupancy rates, and passenger and cargo weight
enteric methane emissions. of energy consumption in household
emitted 34.2 mmt CO2e, or 2% of
Eliminating food transportation per transportation emissions
household for one year could save the GHG
equivalent of driving 1,609 km.
Information source: https://css.umich.edu/publications/factsheets/sustainability-indicators/carbon-footprint-factsheet
Carbon visuals will make quantifying carbon footprints volume easier, such as to offset
1x of filling up gas tank of a car require sequestering 566 m2 of forests for 1 year
Average carbon footprint per person is approximately 12 tonnes of CO2 per year
What does a tonne of CO2 looks like? What does 50 liters of gasoline consumed looks like?
Equivalent to:
Expressing CO2 in terms of activities 117 kg of CO2e released
Equivalent to GHG emissions from:
● 4,023 km driven by an average gasoline passenger vehicle or 484 km driven by an average gasoline passenger vehicle
● 120,000 smartphone charges or
Equivalent to CO2 emissions from:
● 500 litres of diesel consumed
59 kg of coal burned
Equivalent to GHG emissions avoided by:
41 kg of waste recycled instead of landfilled or
4.4 incandescent lamps switched to LEDs
Equivalent to carbon sequestered by:
1.9 tree seedlings grown for 10 years or
566 m2 of forests sequestering CO2 for one year
Information source: https://www.edenseven.co.uk/
Rule of thumb
● CO2 offsetting rate varies from 21.8 to 31.5 kg CO2 per tree ● There are approximately 300 to 500 trees per hectare
● To compensate 1 tonne of CO2 31 to 46 trees are required ● 1 hectare of forest: 500 trees x 24 kg CO2/tree = 12 tonnes
● 1,000 kWh of electricity emits 400 kg of CO2 CO2 offsets/hectare
● 1,000 kWh of natural gas emits 181 kg of CO2
● 1 liter of fuel oil emits approximately 2.7 kg of CO2
Information source: https://www.encon.eu/
Although Indonesia has moderate yearly GHG emission, per capita emissions is
considerably lower compare to other countries especially in Asia
Comparative Study Rationale
Advanced in terms Slightly lower Lower annual CO2 Lower annual CO2 Significantly lower Significantly lower
of carbon trading annual CO2 emissions emissions annual CO2 annual CO2
market and emissions emissions emissions
regulation
2020 annual CO2e emissions

Country GHG Emissions Biggest Emitter Per Capita Emissions NDC Targets in 2030 GDP Dominating GDP Sector
Agriculture (56%)
1.5 Bil tonnes Manufacturing (20%) 5.4 tonnes Reduce by 29% from 2030 USD 1.2 Tril Manufacturing (19.3%)
business as usual
Manufacturing (25%)
5.3 Bil tonnes Electricity (24%) 16.0 tonnes Reduce 50% - 52% from USD 23.3 Tril Services (77.6%)
2005
Electricity (34%)
1.1 Bil tonnes Manufacturing (28%) 8.4 tonnes Removal of 46% from USD 4.9 Tril Services (71.4%)
2013
Manufacturing (27%)
681.2 Mil tonnes Electricity (25%) 8.2 tonnes Reduce 40% from 1990 USD 4.3 Tril Services (62.9%)
Electricity (42%)
613.5 Mil tonnes Manufacturing (22%) 11.8 tonnes Reduce 40% from 2018 USD 1.8 Tril Services (57.0%)
Manufacturing (35%) Reduce 15.8% from

458.1 Mil tonnes Electricity (32%) 4.7 tonnes USD 336.1 Bil Services (41.2%)
business as usual
Electricity (31%)
367.8 Mil tonnes Agriculture (30%) 11.4 tonnes Reduce 45% from 2005 USD 373 Bil Services (51.6%)


Three scopes of greenhouse gas protocol accounting method: Scope 1 emissions are
directly owned or controlled by a company, while scope 2 and 3 emissions are indirect
Scoping is a mechanism that classify various types of emissions generated within a company’s operations and throughout its value chain
Scope 1 Scope 2 Scope 3
Burn Buy Beyond
Indirect emissions associated with
Indirect emissions from purchased everything else that support company
Emissions originating directly from activities.
Definition sources owned or controlled by an entity
energy (company consumed energy
that were generated off site) Note: unless you own physical assets, the majority of
your emissions will be scope 3
8 upstream categories: purchased goods and

services, capital goods, fuel and energy-related
activities, transportation and distribution,
operational waste, business travel, employee
commuting, leased assets
Example
Emissions from combustion of fossil
7 downstream categories: investments, franchises,
fuels in vehicles, fuel to power Electricity, steam, heat and cooling leased assets, end-of-life treatment of sold
equipment in buildings, and industrial products, use of sold products, processing of sold
processes products, transportation and distribution
Company Upstream Upstream + Downstream

Company + Upstream: Occur in the early stages of the supply chain that includes Downstream: Occur in close to the point
activities such as extraction of raw materials, production of components, manufacturing, and of consumption that includes activities
transportation of goods or resources. Associated with the suppliers, producers, and such as distribution, retail, consumer use,
manufacturers involved in the initial stages of the product's creation. and disposal or recycling of the product.
Emissions are as a result of energy
consumption, transportation, or other
activities associated with the product's use
or disposal and are more directly
attributed to the end-user or consumer.
Example of how Apple report their carbon footprint in terms of scoping and
typical GHG emissions by sector
Scope 1 Scope 2 Scope 3
76%
Apple’s 25.1 million MT of CO2e Product
manufacturing
Carbon 3%
0% Business < 1% 5% 14%
< 1%
Footprint
travel & Material Product
Emissions employee Product
Direct recovery use
from commute transport
emissions electricity
Corporate emissions Product life cycle emissions
Energy
Consumer
Discretionary Typically every company within sector has different
Materials
Utilities
composition GHG emissions by scope. Most sectors have
Industries significant Scope 3 Downstream GHG emissions, except for
Consumer
Staples Communication Services and Health Care sectors.
Information
Technology
Financials
Communication
Services
Health Care
Real Estate
0% 20% 40% 60% 80% 100%

Scope 1 Scope 2 Scope 3 Downstream Scope 3 Upstream
Illustration sources: https://plana.earth/academy/what-are-scope-1-2-3-emissions and https://www.allianzgi.com/en/insights/outlook-and-commentary/net-zero



There are two main tools of carbon reduction solution: technology base and
nature base
Technology Base Nature-Based Solutions
Strategy to remove CO2 using natural processes and natural

Innovative methods that are designed to remove CO2 habitats to sequester GHG from the atmosphere and store it
from the atmosphere or remove it from emission sources. in vegetation, soils, and others. There could be an
involvement of technology in the nature-based solutions.
Examples: Examples:
Energy Efficiency Improvements: implementing Renewable Energy Transition: changing from fossil
energy efficient technologies fuels base to renewable energy sources (solar, wind,
hydroelectric and geothermal power)
Low Carbon Transportation: encourage cycling,
walking and electric vehicles Carbon Offsetting: investing in carbon offset projects
that remove CO2 from the atmosphere, example:
Carbon Capture Storage: capturing carbon from reforestation, afforestation or carbon farming initiatives
power plant and storing it underground to prevent
GHG release in the atmosphere Sustainable Agriculture: adopting farming practices
that improve soil health and reduce greenhouse
Green Building Design: constructing emissions
energy-efficient building
Waste Reduction and Recycling: the aim is to

reduce methane and potent GHG from landfills
Alternative to Nature Base Solution: Coastal Blue Carbon where absorptions of CO2 from the atmosphere
and storing it within saltwater ecosystems gain traction as it generates higher amount of carbon
Salt Marshes Mangroves Seagrass Meadows
Soils and vegetation in coastal ecosystems store between 10 and 24 billion metric tonnes of carbon, in addition
every year they add between 30 to 70 million metric tons to their soils
Coastal plants and trees capture carbon dioxide through

photosynthesis. While a portion of this carbon is released
back into the atmosphere as methane and carbon
dioxide, some gets stored in the soil, and a portion is
transported to ocean sediments. These submerged soils
and sediments serve as effective long-term carbon sinks.
On land, decomposition happens right away, releasing
carbon dioxide in the process. In flooded areas with low
oxygen levels, decomposition occurs at a slower pace,
allowing for greater carbon retention.
Illustration and information source: www.climate.gov
● Coastal blue-carbon ecosystems are gaining attention as a valuable solution for reducing atmospheric carbon dioxide due to their
remarkable carbon sequestration potential relative to their size.
● Seagrass is able to capture and store approximately 220 grams of carbon per square meter per year from the atmosphere in its soils -
which exceeds the carbon storage rate of tropical rainforest by more than 3x per square meter, surpasses the rate in temperate forests by
over 7x, and exceeds the storage rate in grasslands by more than 10x.
Appendix 2: Global Carbon Storage Potential of Coastal Ecosystems in millions of
tonnes of carbon per year and global locations of key blue-carbon ecosystems
Global Carbon Storage Potential of Coastal Ecosystems
The estimates vary from approximately 0.15 million tonnes

per year (lightest green) in regions like Greenland, west part
of South America, and around Antarctica, to 11 million
tonnes per year (dark blue) in areas like Australia, Indonesia,
and the United States.
Illustration source: www.climate.gov
Global Locations
The carbon storage capacity of coastal ecosystems have its own weakness despite the benefits: when these ecosystems are disrupted or drained, they have the
potential to release significant amounts of CO2 back into the atmosphere. However, when protected or restored, they can serve as a valuable tool for offsetting CO2
emissions, particularly for island nations and developing countries with relatively lower greenhouse gas emissions. Additionally, these ecosystems offer various other
benefits such as wildlife habitat and hurricane protection. Consequently, strategies aimed at safeguarding and revitalizing coastal blue-carbon ecosystems are expected
to play an increasingly important role in international climate policies in the years ahead.
Illustration and information source: www.climate.gov
Carbon market offers the opportunity to trade three types of carbon:
Reduction, Offset, and Removal
Reduction Offset Removal
A reduction emissions effort from An effort to avoid an increase of Refers to absorption or suppression
status quo, then these emissions emissions that are release to the removal of carbon from the
reduction could be sold in the carbon atmosphere. Nature-Based Solution atmosphere using technology or
market. Example: a factory previously example: forest conservation. other methods. The aim is solely to
had 1,000 of CO2e emissions, then this absorb or eliminate carbon from the
factory utilized solar panels that result atmosphere. Nature-Based Solution
in a decrease of emissions to 800 of example: reforestation of deforested
CO2e emissions. The reduction of 200 areas.
CO2e emissions could be sold in the
carbon credit market. This type of
carbon credit has the cheapest price
per ton. Other Nature-Based Solution
example: palm oil companies use
other environmentally friendly
method other than burning to clear
up the land for plantation.
Compliance offsetting is legally required and enforceable by regulations, while
voluntary offsetting is optional and driven by choice
Compliance Offsetting Voluntary Offsetting

● Regulations implemented by governments or regulatory
bodies that require certain entities or industries to offset ● Initiatives by individuals, organizations, or businesses on a
their emissions voluntary basis to offset their carbon emissions
● A part of a climate change mitigation strategy or a specific ● Proactive step taken by entities although they are not
regulatory requirement for specific sectors legally obligated to reduce their emissions
● Ensures that entities are accountable for their emissions and ● Might be in the form of investing in offset projects and
incentivizes emission reduction efforts. supporting sustainable development initiatives
● Carbon tax, cap and trade, and carbon credit mechanism are ● Carbon credit mechanism is the offset scheme
the offset schemes
Carbon Pricing: an approach to reducing GHG emissions by assigning monetary value to carbon dioxide (CO2) emissions
Carbon Tax Cap and Trade Carbon Credit Mechanism
Tax imposed on the carbon content of fossil Sets a limit on emissions for industries and Involve the creation and trading of carbon
fuels or other emissions sources, setting a power plants. These entities must buy credits or offsets. Projects that reduce
price per tonne of CO2 or equivalent allowances to emit a certain amount of emissions, example: renewable energy or
emissions. It is applied at the point of carbon greenhouse gases. If they exceed their reforestation initiatives, can generate these
emission, increasing the cost of allowances, they must purchase more from credits and can be sold to entities looking to
carbon-intensive activities and creating an others with surplus allowances. offset their emissions.
economic incentive to reduce emissions.
Cap and Trade sets a limit on emissions and allows allowances trading, while carbon
credit mechanisms focus on generate and trading credits based on emissions removals
Cap and Trade Carbon Credit Mechanism
Incentivize emission reduction projects by

Set an overall limit on GHG emissions with a goal
generating tradable carbon credits; the focus is on
Objective to achieve a specific emission reduction target by
promoting specific projects or actions that result
allocating or trading emission allowances.
in verifiable emissions reductions or removals.
Allocate a fixed number of emission allowances to Generate tradable carbon credits through specific
covered entities and sectors. These allowances projects or activities that reduce or remove
Emission Allowances represent the right to emit a specific amount of greenhouse gas emissions. Each credit represents a
greenhouse gases. quantified emission reduction or removal
Create a market for trading emission allowances Create a market for trading carbon credits. Entities
among entities. Entities with excess allowances or individuals can purchase credits generated by
Market Dynamics can sell them to those needing additional emission reduction projects to offset their own
allowances. emissions.
More flexible and can support projects in various

Typically focus on larger industrial sectors or
Coverage and Scope entities that are major emitters
sectors, such as renewable energy, energy
efficiency, afforestation, or methane capture.
Often implemented as mandatory compliance Usually operate under voluntary frameworks, but
Regulatory Nature mechanisms under government regulations can be integrated into regulatory
Provides a market-based approach, allowing Incentivize the development of emission

Advantages flexibility and cost-effectiveness in achieving reduction projects and support sustainable
emission reductions development initiatives
Carbon offsetting is a strategy to mitigate the impact of GHG emissions and reduce
carbon footprint
Definition: Carbon Offset

the action of compensating for carbon dioxide emissions arising from industrial or human activity, by participating in programs or
investing in projects designed to make equivalent reductions of carbon dioxide in the atmosphere.
Carbon offset projects are vetted and verified to ensure that they are additional, meaning that the emission reductions or removals
achieved would not have occurred without the support of the offset funding. Verification is typically done by independent third-party
organizations to maintain transparency and credibility.
3 Pillars of Carbon Offset Market
Seller Market Clearing + Marketplace Buyer
Company A is Measurement, Registration and Verification Company B has

developing carbon Company A’s carbon projects are emissions to be
reduction projects independently verified and registered with a reduce and
recognized voluntary carbon offset program. purchase carbon
The program issues carbon credits that can credits. Company B
be traded on the carbon market approach a retailer,
broker or carbon
registry to buy
carbon credit.
Brief overview of carbon offset market
Project Design Financing Validation and Carbon Credit Carbon Credit

Verification Issuance Market
- Project Feasibility - Securing investors - Project Design - Once it has been - Could be sold via
Study (including and funds for the Document audited by fully validated and carbon exchange,
profit (loss) and project third party auditor verified by the carbon broker, or
operational cost) - Detail on who is - Registry process: registry, carbon credit directly to company.
- Project Design going to fund where they will visit can be sold in the
Document (example: offtaking, the site or forest to market.
- Baseline and where a company validate the carbon
additionality study invest in carbon project.
- Land tenure study project development)
- Etc and using what kind
of funds (example:
ESG fund)
Two main important stakeholders to ensure the existence of carbon offset
market are Project Developers and Registrator
Third Party Auditors 1 Finance carbon credit projects

Registration and Certification
Independent emissions assessors
before projects are registered and of Carbon Offset Programs
regularly assesses project Setting carbon credit quality standards,
emissions reduction after certification, issue carbon credits.
2 Validation and verification payment
2 registration. For Forestry in 5 Utilize registry to track certified carbon
Indonesia: MUTU and TUV. For credit projects and credit issuance. In
Industry there are plenty: ID Indonesia it is done by SRN. 3 Registration and credit issuance fee
Survey, Sucofindo, etc.
6
3 4 List issued carbon credits for a fee
Project Developers and Land Owners* Carbon Credit Buyers

Develop carbon offsets projects and Buy carbon credits to offset personal or 5 Accreditation or annual fee
might sells carbon credits to buyers. companies’ emissions. Example:
Example: governments, NGOs, and companies regulated by cap-and-trade
companies regulation, companies that buy credit Account registration fees to transfer
7 voluntarily, governments
6 and retire credits
* can be two different parties (PD can invest to LO or PD)
Buyers finance continued operation

4 to offset projects. Options: engaging
7 7 directly with project developers or
1
through third parties
Investors Carbon Exchanges Carbon Brokers / Retailers

Financing of credit projects. Example: Carbon credit marketplace where Offer range of credits and services that
companies, financial institutions, and verified credits are listed, bought can reduce time required if engage
other institutions and sold directly with project developers
: capital flow : key in sales of carbon offset
Source: https://paiaconsulting.com.sg/carbon-offsets-and-credits-explained/ and edited through expert consultation



Carbon Offsetting Standards: sets of guidelines and frameworks that establish criteria
for the development, implementation, and verification of carbon offset projects
Carbon Offset Standards purpose is to guarantee the trustworthiness, openness, and ecological soundness of these projects while also
establishing a shared methodology and terminology for measuring, reporting, and verifying the reduction or removal of emissions.
Standards for certifying carbon emissions reduction firms: A voluntary climate change mitigation framework by UN:
● Commonly adapted voluntary offset standards

● Referred to as Clean Development Mechanism (CDM) that allows
● Offers robust quantifying and verifying GHG emission reductions
emission reduction projects in developing countries to earn
framework
certified emission reductions (CERs).
● Projects aiming for these standards must adhere to specific
● It encompasses activities related to conservation, sustainable
criteria related to project design, monitoring, reporting, and
management of forests, and enhancement of forest carbon stocks.
third-party verification
● Reducing Emissions from Deforestation and Forest Degradation
(REDD+), framework developed under UNFCCC to address
deforestation and degradation.
It is recommended for individuals and organizations to choose projects that comply with acknowledged standards and have been independently
verified by third-party auditors to ensures the reliability and efficacy of the offsetting process while maintaining its integrity.
VCS has the biggest market share among the other standards with the most
registered projects that are mainly in the developing countries
746 Million credits 184 Million credits 66 Million credits 63 Million credits
Market Volume
70.4% share 17.4% share 6.2% share 6.0% share
Name of credits Verified Carbon Verified Emission Climate Reserve Emission

(in 1 tCO2e) Units Reductions Tonnes Reduction Tonnes
1,792 registered projects 1,313 registered projects

Geographical in 82 countries in 80 countries 26 projects in the US 156 projects in the US
scope (dominant in developing (mainly purchased by
countries) buyers in Europe)
Covers industrial
Covers agriculture
Covers most processes, land use,
and forestry,
Covers all project project classes land use change
Sectoral scope classes excluding project
energy, waste, and
and forestry,
non-CO2 GHG
level REDD+ carbon capture,
abatement
waste
Information source: https://vcmprimer.org/chapter-7-what-is-the-role-of-carbon-standards-in-the-voluntary-carbon-market/

Although scandal within Carbon Offsetting Projects has caused some doubts from people,
big corporations remain active in carbon offset procurement as a corporate responsibility
Researchers’ studies Further investigation by journalists

Analysis on projects by comparing estimates made by the
Two groups of researchers offsetting projects with results obtained from scientist
Analyzed ⅔ of 87 Verra-approved active projects

Has issued more than 1 billion carbon credits (several were left out because there was not enough information available to be 94% of the credits produced by the projects
and approves ¾ of all voluntary offsets. fairly assessed)
should not have been approved
Rapidly growing $2 billion voluntary offset
projects The studies found only 8 out of 29
Credits from 21 projects had no climate benefit
Verra-approved projects* showed evidence of
Rainforest protection programs makes up to meaningful deforestation reductions
40% of the approved credits * where further analysis was possible 7 projects had between 52% - 98% fewer than
claimed using Verra’s system
Based on investigation at least 90% of Verra’s rainforest University of Cambridge team Only 1 had 80% more impact
carbon do not results in real emission reductions
94.9 m In 32 projects*, the baseline scenarios of forest

carbon credits claimed
loss are overstated by about 400%. Out of
these 3 projects in Madagascar have achieved
Out of 40 Verra projects, several had stopped excellent results and altered the figures. If
some deforestation, although the areas were these 3 projects are not included, the average
extremely small. inflation is about 950%.
5.5 m
real emissions reductions Only 4 projects were responsible for ¾ of the * where it was possible to compare Verra’s claims with the
total forest that was protected. scientists study finding
Each credit is equal to one metric tonne of CO2 equivalent
Illustration source: The Guardian analysis



Carbon Trading Regulations in Indonesia
Ministry of Environment and Forestry Ministry of Environment and Forestry

Regulation No. P71 / 2017 Presidential Regulation No. 98 / 2021 Regulation No. 21 / 2022
Regulate the implementation of national Economic Value of Carbon is defined as the Regulate the needs to provide a buffer from
registry system (SRN) for controlling climate value of each unit of GHG emissions certificate of GHG emission reduction by 30%
change. generated from human activities and economic minimum:
activities.
Implementation is carried out within 3 stages: 0 - 5% to offset domestic GHG emission
Governance of economic value of carbon is
1. Registration
regulated, including transparency structure, Minimum of 10% until 20% to offset foreign GHG
2. Technical validation
monitoring and evaluation, and financing. emission obligated by Nationally Determined
3. Verification of actions and resources
Contribution (NDC)
Detailed regulation on specific sectors and

When validation result is successful, SRN will Minimum of 20% to offset foreign non-NDC GHG
sub-sectors will be regulated by respective
allocate a registration number emission
ministries
Ministry of Energy and Mineral Resources Ministry of Environment and Forestry

Law No. 4 / 2023
Regulation No. 16 / 2022 Regulation No. 7 / 2023
According to Article 24 of the law, both Regulate procedures for carbon exchange in
Regulate procedures for implementing carbon
domestic and foreign carbon trading can be forestry sector.
economic value in the power generation
conducted through a carbon exchange
sub-sector Carbon exchange for Production Forest,
mechanism. However, carbon exchanges can
Protected Forest, and Peat and Mangrove
only be operated by market operators who
Carbon economy implementation of power within Forest can only be conducted by Forest
have obtained business licenses from the
generation sub-sector includes regulation on Utilization Business Permit (PBPH) holders,
Financial Services Authority (OJK). It is also
baseline GHG Emission for every type of Social Forestry Management Approval, or
required that the carbon exchange center is
power generator (set by Minister of Energy management rights. Other Protected Forest
located within Indonesia. Further regulations
and Mineral Resources) and NDC target among Block require Minister approval. Peat and
regarding carbon trading through carbon
others. Electric steam power plant is the first Mangrove outside of Forest area and
exchanges will be established by the OJK
one to be implemented (between 2023 - 2024) Conservation Forest require either Governor,
through its regulations.
Regent/Mayor, or Minister approval
Indonesia’s Carbon Credit Market as regulated by Presidential Regulation 98 / 2021
Mechanism Procedures Indonesia’s National Revenue
Carbon Exchange Indonesia’s Fund

Non-Tax Revenue
Carbon Trade Domestic or International Management
(PNBP)
through BPDLH
Direct (domestic only)
Emission Trading Company’s Upper

Sector Upper Limit (PT BAE)
Limit (PT BAE PU)
Mechanisms and procedures Indonesia’s
Fee
Certification
Verified Emission
Emission Offsets Baseline (sector & juris)
Reduction
1. International sources to
Result-based payments RBP guidelines central government
2. International sources to
provincial governments Non-Tax Revenue
3. National to subnational (PNBP)
Benefit sharing mechanism governments
4. Province to cities/regencies,
private, individuals
Carbon Tax
To be determine Tax Revenue Ministry of Finance
(by Ministry of Finance)
Other mechanisms as Non-Tax Revenue

Case by case basis
authorized by the Minister (PNBP)
Illustration source: https://lens.monash.edu/



Indonesia need to increase its total supply of carbon available in the market to
meet its NDC reduction requirement
Overall Carbon Market Size
GHG NDC Reduction Requirement Mandala market estimation in $
Average annual GHG reduction requirement Average annual market of $4.1 billion*
of 593.1 million metric tonnes (mmt) Total of $33.2 billion between 2023 - 2030
* assuming carbon credit price of $10 per ton
Total of 4.7 billion metric tonnes between 2023 - 2030
Ministry of Environment and Forestry estimated the
market between 2022 - 2026 to be $25 billion, our
estimation for the same period is $18.3 billion.
Total Annual Supply Estimation of Nature-Base Carbon Offset from Forestry
Carbon potential based on Indonesia’s Forest Area

Assumptions of trees per hectare
300 trees 500 trees
1. Forest Area eligible for conversion 103.1 mmt 171.9 mmt
2. Production Forest* 134.6 mmt 224.3 mmt
Total Supply 237.7 mmt 396.2 mmt
*assuming 30% area for carbon market purposes


Key Stakeholders in Indonesia (1/2)
Government
Stakeholders
Ministry of Environment and Badan Pengelola Dana Otoritas Jasa Keuangan

Forestry Lingkungan Hidup (BPDLH) (OJK)
OJK has been designated to oversee

Responsible for formulating and
A non-echelon public service agency Indonesia's carbon trading platform.
implementing policies, regulations, and
programs related to environmental (BLU) operating under the authority and While the OJK's current responsibilities
conservation, including the management of accountability of the Minister of Finance revolve around regulating and
carbon emissions and climate change of the Republic of Indonesia. BPDLH supervising the financial services sector,
Description mitigation efforts. The ministry oversees the serves as an environmental funding their capability to effectively oversee
development and implementation of mechanism that channels and carbon finance as a new financial
strategies for reducing greenhouse gas distributes funds to support Indonesia's instrument or commodity to trade is
emissions, promoting sustainable forest vision of environmental preservation, unclear. To ensure international investors,
management, and supporting initiatives preventing pollution and degradation. OJK will collaborate with experts on
related to carbon trading and offsetting. carbon trading.
Consolidate diverse funding sources to be utilized

Establish frameworks and mechanisms for Setting up legal framework governing the
across various sectors (forestry, energy, mineral
Interest carbon footprint management, monitoring, resources, carbon trading, environmental services, establishment and functioning of carbon
reporting, and verification. industry, transport, agriculture, marine, and fisheries) trading, specifically carbon exchange
Latest Currently developing Indonesian carbon

n/a
Carbon Exchange will be launch by OJK in
Development regulation for international market September 2023
Key Stakeholders in Indonesia (2/2)
Marketplace Project Developers
Stakeholders
Fairatmos: An Indonesian climate tech

startup in December 2022 secured a $4.5 Project Katingan: The project claim it annually generates 7.5 million triple gold certified
million seed funding round, co-led by carbon credits, or equivalent to removing 2,000,000 cars from the road each year. The
Go-Ventures and Kreasi Terbarukan TBS, project utilizes carbon revenues to support the restoration and protection of natural
with participation from Vertex Ventures forests.
Southeast Asia and India. The startup
offers several products to support climate Rimba Raya: Location of the project is Central Kalimantan where it conserve peat swamp
action for individuals and organizations. forest (REDD+). They claim the projects avoid 130 million tonnes of CO2e
Description ICDX: A prominent commodity exchange CarbonX: focuses on investing in and developing a diverse array of projects that can be
in Indonesia that offers comprehensive economically viable through carbon finance. CarbonX seeks to revolutionize the market
services. They facilitate multilateral and collaborate on climate actions, fostering a collective effort towards a more
commodity and derivative trading. sustainable future.
Committed to establishing a carbon
trading market that adheres to
Forest Carbon: focus on restoring wetland forests. The project is located in Sumatra
regulations and standards. ICDX aim to
called Sumatra Merang Peatland Project. So far it raised more than 5 million Euro of
sell carbon outside of OJK’s carbon
investment and support restoration of more than 22,000 hectares of forest.
market. ICDX do not have carbon supply
or stock.


Top 3 Issues of Carbon Trading Market in Indonesia (1/2)
1. Lack of Understanding in Nature Based Carbon Potential for 2. Partnership between Indonesia’s standard (SRN) and international
Project Developer / Land Owners certification have not been established
Stakeholders in Indonesia focus on land acquisition with the aim for Cooperation between the Government of Indonesia (lead by Ministry
utilizing them for carbon projects of Environment and Forestry) and Verra needs to be established
Evidence Reference Evidence Reference
Minister of Environment ● SRN is Indonesia’s local Minister of Environment

● Many developers does not
understand that receiving forest and Forestry Regulation certification and Forestry Regulation
concession or owning land does No. 7 / 2023 Article 5 No. P. 71 / 2017
not necessarily means carbon ● SRN recognize 48
potential can be sold in the Types of forest to source methodologies for SRN is a system
carbon market carbon trading market from emissions reduction, while management and web
forestry: Verra recognize 48 project based data and information
● The status of the forest need to 1. Fixed Production Forest Area, methodologies, 53 project provision about action and
have “threatened” status - Converse Production Forest resources for adaptation
meaning designation of the
modules, 5 project tools,
Area, Protected Forest Area and 5 Jurisdictional and and climate change
Moderate forest converse to production with PBPH, Social Forestry Different mitigation in Indonesia.
risk many forest, therefore the delta for the standards Nested REDD+ modules
Management Approval, or
carbon project is established and tools
carbon Management Rights between SRN implementation
projects 2. Other protected forest areas Indonesia includes:
● Many project developers 3. Peatlands and mangrove ● The less methodologies 1. Registration
benefit acquired land or forest within and without Forest Area and might build a perception 2. Technical data validation
could not be concession prior to the release 4. Conservation Forest Area International 3. Action and resources
of Perizinan Berusaha
that Indonesia’s SRN is not
realized Pemanfaatan Hutan (PBPH) or
5. Customary Forest Certification credible and comparable to verification
6. Forest Rights
other approval requirement international standards
7. State Forest that are not
from Minister, Governor, or Forest Area
Regent/Mayor
● Obtaining land or forest

concession is considered to be
cheaper, but note on the
threatened status that is needed
for recognition of carbon
potential that can be sold
Top 3 Issues of Carbon Trading Market in Indonesia (2/2)
3. Many carbon players investment plan outside of generator sector are put in limbo
Currently Indonesian Government is still developing the regulation for international market carbon trading
Evidence Reference
● Domestic and international Minister of Energy

carbon market are on hold Regulation No. 16 / 2022
currently in Indonesia. attachment 2
● For domestic the procedures on GHG Upper Limit Calculation for Technical Approval (TA) within Power Plant
implementing carbon economic sector:
value in the power generation
sub-sector has been established
however for other sub-sectors
TA for TA for Power Plant GHG Limit Previous Year
they are still under
Business (PTBAE) (ton CO2e/MWh) Average GHG
The unclear development.
Stakeholders Emission
= x
and lack of GHG limit Previous Year Average GHG (ton CO2e)
regulation (PTBAE-PU) Emission Intensity
(ton CO2e/MWh)
regarding
international
trade
Thank you
Author:
Scan to read
Kevin Samsi other insights.
Lead Consultant
Contact: kevin@mandalaconsulting.id

Carbon 101 1695275284

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Carbon 101

2. What are the components of greenhouse gases?

3. How much carbon do we emit?

4. How do we measure carbon emissions?

6. How do we know all of these can be trusted?

7. Where does our government regulation stands regarding carbon and

8. How attractive is the carbon market in Indonesia ﬁnancially?

9. Who are the key stakeholders in Indonesia?

10. What are the top issues of carbon trading in Indonesia?

2. What are the components of greenhouse gases?

3. How much carbon do we emit?

4. How do we measure carbon emissions?

6. How do we know all of these can be trusted?

7. Where does our government regulation stands regarding carbon and

8. How attractive is the carbon market in Indonesia ﬁnancially?

9. Who are the key stakeholders in Indonesia?

10. What are the top issues of carbon trading in Indonesia?

Greenhouse Gases (GHG):

Material Production Manufacturing Use End-of-life

The science behind: Heat Trap

GHG refers to gases that trap heat in the atmosphere. The

Illustration source: https://www.nrdc.org/stories/greenhouse-effect-101

2. What are the components of greenhouse gases?

3. How much carbon do we emit?

4. How do we measure carbon emissions?

6. How do we know all of these can be trusted?

7. Where does our government regulation stands regarding carbon and

8. How attractive is the carbon market in Indonesia ﬁnancially?

9. Who are the key stakeholders in Indonesia?

10. What are the top issues of carbon trading in Indonesia?

Greenhouse CO2 CH4 N2O HFC, PFC, SF6 , NF3

HFC: Refrigeration, air-condition,

1.5 - 200 years,

Emissions contribution to Global Greenhouse (GHG) Emission refer to Appendix 1

94% are from:

Each of these sectors emitted more Agriculture sector emitted 60% of

Total Global Total CO2 Total CH4 Total N2O

Electricity and heat 15.83 31% 15.76 99.6% - - - -

Transportation 8.43 17% 8.22 97.5% - - - -

Agriculture 5.79 11% - - 3.49 60% 2.3 40%

Fugitive emissions* 3.40 7% 0.28 8% 3.11 91.5% 0.006 0.2%

Buildings 3.07 6% 2.79 90.9% - - - -

Industry 3.06 6% 1.61 53% 0.009 0.3% 0.26 8%

Waste 1.63 3% - - 1.49 91.4% 0.14 9%

Total 51.06 36.86 72% 8.30 16% 2.80 5%

Table is processed from source: https://ourworldindata.org/emissions-by-sector Energy Sectors

2. What are the components of greenhouse gases?

3. How much carbon do we emit?

4. How do we measure carbon emissions?

6. How do we know all of these can be trusted?

7. Where does our government regulation stands regarding carbon and

8. How attractive is the carbon market in Indonesia ﬁnancially?

9. Who are the key stakeholders in Indonesia?

10. What are the top issues of carbon trading in Indonesia?

Usage in Industry Livestock &

Agriculture & Rice Cultivation

Food Household Personal Transportation

Accounts to 10-30% of a household’s

Comparative Study Rationale

2020 annual CO2e emissions

Manufacturing (35%) Reduce 15.8% from

2. What are the components of greenhouse gases?