Putting a price on carbon will help to reduce investment gap

Putting a price on carbon will help to reduce investment gap

Carbon pricing is recognized around the world as an effective policy tool to facilitate sustainable energy transition. The external cost of carbon emissions such as health damage, climate impacts and social costs paid by society should be shifted towards the producers and consumers responsible for producing pollution-causing goods by directly setting a price on carbon emissions.

There are two main mechanisms for carbon pricing – emission trading schemes (cap and trade) and carbon taxation. Indonesia is currently in the process of developing a domestic Emissions Trading System (ETS) for the power and industry sectors. 

NEXSTEP analysis recommends carbon pricing as a mechanism for limiting emissions and levelling the playing field for low-carbon technologies, as modelled across several ambitious scenarios. For instance, this scenario considers a carbon price of US$30/tCO2-e.