Questioning The Carbon Market Mechanism
For the first time, along 26 editions of United Nations Climate Change Conference (COP), coal is shortlisted as one of carbon emission source. The Glasgow climate negotiation stage is wrapped by a green agreement through the Glasgow Climate Pact. It is hailed as one of promising act document, because of the completion of the international rules to govern carbon-emissions trading. Specifically, which was outlined in Article 6 of the 2015 Paris Agreement. A step forward to complete the Paris rulebook, in which the commitments of parties under the Paris Accord can be implemented wholly and effectively. Some experts believe the deal could potentially unlock funds to finance various projects aimed at curbing climate crisis.
Responding those global climates fiscal, the Indonesian government had been taking a momentum on carbon trading policy through Presidential Regulation (Perpres) №98/2021. It oversees carbon economic value, which serves as Indonesia’s carbon-pricing scheme fundamental. This initiative also one of the measures to achieve on the Nationally Determined Contribution (NDC) and net-zero emission targets. On the other side, the house of representative also stipulated the Harmonized Tax Law (HPP) on act 7 of 2021. It introduces the Indonesian carbon tax with an initial price floor of IDR 30,000 (USD 2.12) per ton of carbon dioxide equivalent (CO2e). And Indonesia Stock Exchange (IDX) is touted to handle the domestic carbon implementation in which followed by market pricing mechanism. Sounds promising, isn’t it?
However, environmental activists are concerned that the focus on the carbon market mechanism is alleged on (extra) carbon exploitation. The carbon-trading scheme agreed at COP26 could potentially be exploited by the global fossil fuel industry to emit more carbon in exchange for emission-reduction efforts elsewhere. It is fostering the fiction that others can be paid to cut greenhouse gases (GHGs) instead, it undermines effort to do so. Most climate scientist agree the net-zero carbon emissions target is dangerously misleading. Ostensibly, promoting decarbonization, it actually allows carbon emission to continue rising. For further, offsetting carbon mechanism allows countries and companies to continue emitting GHGs instead of cutting them. Buying offsets lets them claim their emissions have been cancelled. Thus, offset markets have slowed climate action in the rich North, responsible for two-thirds of cumulative global emissions.
In fact, many carbon credits sold as offsets do not additionally remove carbon as claimed. For instance, JP Morgan, Disney and Black-Rock have all paid millions to protect forests not even under threat. A CEO agreed its offset, buying into a Tanzania forestry program, is “cheating.” The Economist echoed those fact by touting carbon offsets as “cheap cheats”, by ramping up the supply of offsets, prices were kept low. Furthermore, the implicit premise is that market-based approaches always work best to address problems, in this case, to reduce GHG emissions. However, they do not distinguish between luxury emissions and those due to the poor’s livelihoods. Meanwhile, the world’s wealthiest 1 percent produces twice the total carbon emissions of the poorest 50 percent!
By reflecting on a whole of paragraphs, we need to put an eye on this issue. Do not let those promising fiscal regulation would become merely carbon accountancy without a real reduction of carbon emissions.