Market Based
Mechanism inIndonesia, a JCM
case study
Dicky Edwin Hindarto
Head of Indonesia JCM Secretariat

Indonesia NDC: Emission Reduction Target
Indonesia National Determined Contribution (NDC) proposal : “In 2010, the Government ofIndonesia pledged to reduce emissions by 26% (41% withinternational support) against the business as usual scenario by 2020“Sector

GHG
Emissionlevel 2010*(MTon CO2e)

GHG Emission
Level 2030
BaU

CM1

CM2

GHG Emission Reduction

AnnualAverage
GrowthBAU

MTon CO2e%Total BAU

CM1CM2CM1CM2(20102030)

AnnualAverage
Growth20002012

Energy*

453.2

1669

1355

1271

314

398

11%

14%

6.7%

4.5%

Waste

88296

285

270

1126

0.38%

1%

6.3%

4.00%

IPPU

36

69.6

66.85

66.35

2.75

3.25

0.10%

0.11%

3.4%

0.10%

Agriculture

110.5

119.6

110.4

115.9

9

4

0.32%

0.13%

0.4%

1.30%

Forestry**

647

714

217

64497

650

17.2%

23%

0.5%

2.70%

TOTAL

1334

2869

2034

1787

834

1081

29%

38%

3.9%

3.20%

*Including Fugitive**Including Peat Fire

CM1 = Counter Measure (Unconditional Mitigation Scenarios)
CM2 = Counter Measure (Conditional Mitigation Scenarios)Market Based Mechanism’s Role in Climate
Change Mitigation
According to the PARIS AGREEMENT, there is no “market” as a term in stating market based
mechanism-it can only be reffered as “mechanism”
The Definition of Market Based Mechanism: A set of Policies which Governs and Regulates themarket readiness, the market regulations, market prices, or other economic variable which
incentivise the user to reduce its carbon emission

CreditingMarket BasedMechanism

Cap and TradeCarbon TaxA carbon credit is a financial instrument that allows theholder, to emit one ton of carbon dioxide.

a government regulatory program designed to limit, or cap,
the total level of specific chemical by-products resulting
from private business activity.
A fee - to make users of carbon fuels pay for the climate
damage caused by releasing carbon dioxide into theatmosphereMarket Based Mechanism Map

According to Indonesia INDC in 2015, Indonesia is one of the 97-countries which are “marketfriendly” or A country who has a plan to implement market based mechanism toachieve its emission reduction targetMarket Based Mechanism is proven to be one of the most COST EFFECTIVE
mechanism in achieving emission carbon target in comparison with the convensionalone.

Market Based Mechanism Implementation inIndonesia•••••

Stands for Clean Development Mechanism
202 projects in total,
Project registered in UNFCCC : 147 projects.
Total project that already registered its carbon emission reduction : 46 projects.
Total carbon credit registered: 22.076.416 ton CO2.

CDMVCS•••••••••

Stands for Verified Carbon Standard
13 projects in total.
Total carbon credit registered : 14.135.243 ton CO2.
VCS projects in Indonesia is widely used for REDD+ implementation and aforestation.

Stands for Joint Carbon Mechanism
A bilateral cooperation between two countries, i.e., Government of Japan and the hostcountry.
In Indonesia, there are 28 projects, and 2 projects are already registered the carbon credits.
Total investment for the project in 150 Mio USD.
Total carbon credit registered :40 ton CO2JCM

Approaches to Integrate Market BasedMechanism to Achieve its NDC Target
Put a Price on a Carbon : Calculation upon emission reduction cost for each of the mitigation
activities is required; The results can be used as starting point of the policy maker in
implementing a market mechanism based regulation.

The Results of Cost Analysis
1.

For low carbon emission reduction cost, especially inachieving the unconditional target of 29% carbonemission reduction.

Further Actions Required•••

Regulations and policies are set.
Requires support and intensive guidance by
the government.
The expenses are covered using
government allocation budget or private
sectors support.

2.

For middle carbon emission reduction cost, especiallyin achieving the unconditional target of 29% carbon
emission reduction.

••Carbon Tax Implementation.
Implementation carbon market mechanism,through trading and/or crediting.

3.

For high carbon emission reduction cost, which are
categorised into conditional emission reduction target•Utilse grants which does not belong to nonmarket scheme,
Utilise the international carbon market
scheme or International Transfer Mitigation
Outcome (ITMO).

•Joint Crediting Mechanism (JCM)

The Joint Crediting Mechanism as a G-to-G scheme which encourages private sector
organizations to invest in Low Carbon Development activities in Indonesia throughincentive from the Government of Japan.
JCM Cooperation between Government Indonesia and Japan was signed in 2013
Indonesia JCM Secretariat was established in 2014
In 2016, the first JCM credit was issued in Indonesia and in the world
JCM cooperation is not only conducted by Japan and Indonesia, but also with other 17
developing countries.
7Basic Concept of JCM

The Objective of JCM
Facillitate diffusion of leading low carbon technologies, products, systems, services, and infrastructure as well as
implementation of mitigation actions, and contributing to sustainable development of developing countries.
Evaluate contributions to GHG emission reductions/removals from developed countries in a quantitative manner,
through mitigation actions implemented in developing countries and use those emission reductions or removals
to achieve emission reduction targets of the developed countries.
Contribute to the ultimate objective of the UNFCCC by facilitating global actions for emission reductions orremovals

The JCM Cooperation Scheme

Institutions Related with JCM

IndonesianMinistries

Japanese PrivateSectors

95 companies are involved inJCM projects and FS

2 BUMNBUMNIndonesianRegionalGovernment
Indonesia PrivateSectors
JapanMinistries

Third Party
Entity34 private companies

11 institutions

Feasibility Study
Feasibility Studies Conducted (2010-2016)
2016
2015
2014
2013

2012
2011
2010
05101520

Forestry and REDD-plus

Renewable Energy

Energy Efficiency

Agriculture

Transportation

Construction

Mining/Metal Production

Waste Handling and Disposal

Solvent Use

Fugitive emissions

Carbon Capture and Storage and SNG

Low-Carbon City

25

*Per 2016, 109 feasibility studies have been conducted;

30

Financing Scheme
Model Project

Demonstration Project

Subsidized by MOE Investment by Participants

50%

Up to more than 50%

50%

Total investment is discussed and negotiated with
METI

Total Cost of the installation

ADB Trust Fund – JFJCM

Subsidized by METI Investment by Participants

JCM Credits

MRVADB
MOEJ

Contribution* OCR: Ordinary Capita lResources, ADF:
Asian Development Fund

JFJCM
(Trust Fund)
OCR/ADF*
Other financial
institutions
and funds

Grant

Additional costs withadoption of advanced
low-carbon
technologies

Loan/
Grant etc.
Cofinancing

Mitigation throughconventional
technologies

Loan/Grant etc.

(Selection frompipeline projects)
ProjectGHG
Emission
Reduction

Total Investment of JCM Implementation inIndonesia

1Grant forFeasibility Study

10 mio US$

2Total investmentof Projects
Implementation

150 Mio US$

37 Mio US$ of Governmentof Japan Subsidy
Study and Partnership with several
institutions in Japan and Indonesia

113 Mio US$ of Project
Participants investment

JCM Projects in Indonesia

26 ModelProjects

3 Demonstration
Projects

12are ongoingprojects

1 are ongoingprojects

14 projects
arecompleted

2 projects arecompleted

7 projects are registered (2 ofwhich are already conduted
its credit sharing mechanism)

1 Projects
LULUCF

JCM Projects in Indonesia
JCM Implemented Projects (from 109 Feasibility Studies)
Demonstration Project
Energy Saving by Optimum Operation at Oil Refinery

Emission Reduction
3.400 tCO2/year
58.000 tCO2/year

Utility Facility Operation Optimization Technology
The low carbonization of mobile communication’s BTS by the introduction of TRIBRID system
163 tCO2/year
in Indonesia
Model Project
Energy saving by introduction of high122.000
Power generation by waste heatefficiency once-through boiler system 428 tCO2/year
recovery in cement industry
tCO2/year
in a film factory
Energy saving through introduction ofIntroduction of high efficiency onceregenerative burners to the aluminum
856 tCO2/year through boiler and RO pure water
380 tCO2/year
holding furnace of the automotive
system in golf ball factorycomponents manufacturer
1,277
Jakabaring Sports City Megasolar
Installation of Solar Power System and549 tCO2/year
Storage Battery to Commercial Facility
Power Plant ProjecttCO2/year
Introduction of High efficient Old
Introduction of high-efficiency looms in
1,317
Corrugated Cartons Process at Paper
14,884 tCO2/year
weaving milltCO2/year
Factory
Introduction of 1MW Solar Power
2,394tCO2/year
System in North Sulawesi

JCM Projects in Indonesia
Emission ReductionJCM Implemented Projects (from 109 Feasibility Studies)
Model Project
Reducing GHG emission at textile
566
Energy saving for industrial wastewater
546 tCO2/year
factories by upgrading to air-saving
tCO2/year treatment system for rubber industry
loomInstallation of Gas Co-generation
20,43910MW Mini Hydro Power Plant Project
42,700 tCO2/year
System for Automobile ManufacturingtCO2/year in North Sumatra
Plant
925
Energy Saving for Shopping Mall withIntroduction of LED Lighting to Sales
2,617 tCO2/year
High Efficiency Centrifugal Chiller
tCO2/year Stores
Energy saving for air-conditioning
utility system in the airport terminal byEnergy Saving for Industrial Park with
900585 tCO2/year
Smart LED Street Lighting System
tCO2/year introducing high-efficiency operating
systemRoof Top Self Consumption Solar
Power Generation Project for Food
Ingredients and Aroma Ingredients
Factory, Indonesia

Gas Cogeneration
Introduction of Gas Cogeneration
System :469
System by absorption type refrigerating 6,883.34tCO2/year
tCO2/year
system and PV System in Large
Solar Power
Shopping Mall in Indonesia
Generation: 112.4
tCO2/year

JCM Projects in Indonesia
JCM Implemented Projects (from 109 Feasibility Studies)
REDD+ Model Project

Emission Reduction

REDD+ Model Project in Boalemo district

100.000
tCO2/year

Registered Project
Energy saving for air-conditioning and process cooling by Introducing Highefficiency Centrifugal Chiller
Project of Introducing High Efficiency Refrigerators to a Food Industry Cold
Storage in Indonesia (credit issued)
Project of Introducing High Efficient Refrigerator to a Frozen Food Processing
Plant in Indonesia (credit issued)
Energy saving for textile factory facility cooling by high efficiency centrifugal
chiller
Energy saving for air-conditioning and process cooling at textile factory
Energy Savings at Convenience StoresEnergy saving by double bundle-type heat pump

114 tCO2/year
29 tCO2/year
11 tCO2/year

118 tCO2/year
117 tCO2/year

372 tCO2/year
166 tCO2/yearCredit Sharing Scheme
Indonesia

Governmentof Indonesia
portionIndonesia’s ProjectParticipant Portion

Japan’s Project
Participant Portion
JapanGovernmentof JapanPortion

 Government of Japan andIndonesia will have theircontribution in reducing emission
 Indonesia side = Government ofIndonesia+Indonesia’s ProjectParticipant
 Japan side= Government ofJapan+Japan’s Project Participant

How does the credit sharing work?
1. Government of Indonesia will have their share from the emission reduction
2. The project participants will discuss on how the emission reduction will be sharedbased. This could be based on their total investment of the project.

Example of JCM Project(1)8 MW cogeneration system at PT.
Toyota Motor Indonesia.
This cogeneration system is able todeliver 30% of the total factory electricity
demand and also replaces the needs ofthe utilization of two boilers.

About 3.4 ton of steam per hour isgenerated through the system. Inaddition, the system also produces hot
water which can be used for the factorymanufacturing production such as forthe painting process, humidity
requirements, and pretreatment in themanufacturing.
Total expected emission reduction is20,310 tCO2/year.

Example of JCM Project (2)“Implementation of Energy Saving
Procedure for Old Corrugated Cartons(OCC) at Paper Factory”(PT. Fajar Surya Wisesa-Bekasi).
This project enables to reduce energy
consumption up to 10% reduction byintroducing a high efficient OCC line.
OCC process is a process to prepare
clean raw materials containing
dissolved paper fibres by mixing usedcorrugated board into water fordefiberization and removing foreign
substances.
Total expected carbon emission
reduction is 14,800 ton CO2/year.

Example of JCM Projects (3)32 MW Waste Heat Recovery Power
Generation at Cement Factory.
4 factories units at PT Semen Indonesia
in Tuban are able to capture its fluegases emission which is a hot 400
degree celcius air to be used as boiler
to generate electricity.
This system enables to reduce
electricity consumption up to 25% of
the total electricity required in thefactory.
Total expected carbon emission
reduction is 122,000 ton CO2/year.

Thank you! Terima kasih!
Our website: http://jcm.ekon.go.id
Contact us at secretariat@jcmindonesia.com
Sekretariat JCM Indonesia
Gedung Kementerian Koordinator Bidang Perekonomian Lt.2
Jl. Medan Merdeka Barat 7, Jakarta 10110