Carbon Trading and Its Role in Shaping Indonesia’s Environmental Resilience to Climate Change
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Sunny Ummul Firdaus and Fausta Nanda Sava Arkananta
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In Indonesia, considerable environmental issues originate from industrial and agricultural activity, peatland fires, and deforestation. The government of Indonesia is legally required to adopt efforts to address these challenges. One feasible alternative under discussion is the formation of a carbon market, whereby firms are issued permits to release particular amounts of greenhouse gases. This notion has attracted support from both the European Union (EU) and numerous Asian nations. This paper investigates the function and importance of carbon emission trading systems in attaining carbon reduction targets. Leveraging global data envelope analysis (DEA), it formulates performance indicators for energy consumption and carbon emissions via a two-stage procedure. Furthermore, the study assesses the policy effect of carbon trading by developing counterfactual trajectories using the synthetic control technique. The study presents the notion of carbon markets and analyzes its potential to become a vital aspect of Indonesia’s climate mitigation plans. It indicates that carbon markets contain the ability to dramatically boost carbon and energy-carbon performance, mostly owing to technical restrictions and stakeholder participation.
