Joint Crediting in Indonesia: Supporting Low-Carbon Energy Development Through Optimization of Energy Service Companies

By Songyee Jung

Abstract:

This paper suggests energy service companies (ESCOs), an experienced industry that offers a variety of energy efficiency (EE) solutions to different types of buildings that can dramatically reduce a large amount of greenhouse gases (GHGs), present a good opportunity to more effectively use the Joint Credit Mechanism (JCM), which was developed by the Japanese to appropriately evaluate GHG emission reductions. The JCM is a framework to lower GHG emissions by mobilizing technologies, markets, finance, and contributions for the sustainable development of developing countries. This is a newly established bilateral mechanism which operates as non-tradable credit type that can transition to a tradable credit type mechanism once both parties involved reach an agreement. Once mitigated GHG emissions credits are approved, they can be applied as part of their internationally pledged GHG mitigation targets. This paper uses quantitative data from the previous JCM projects in Indonesia along with a local Indonesian Energy Service Company’s energy grade audit. The analysis also examines the Indonesia’s current energy policy, environmental strategy, and contributions to achieving to low carbon development. Carbon market mechanisms are key to drivers for investment in clean technology and curbing emissions to meet the 21st Conference of the Parties (COP 21) Paris agreement. The JCM could be a catalyst for the new carbon market mechanisms and become an international carbon offset scheme if more countries adopt JCMs. International institutions should scale-up actions in developing countries, because market mechanisms at the bilateral and regional levels are becoming more important. To strengthen the growth of the JCM between Japan and Indonesia, the Joint Committee must continue to develop the rules and guidelines necessary for its implementation, and approve proposed new project methodologies that are efficient. The government must actively establish effective policies, regulations, and incentives for low-emission growth, and Multilateral Development Banks (MDBs) must increase their role in financing the low-carbon development projects.

About the Author:

Songyee Jung is a master's student in the International Development Studies program at the Elliott School of International Affairs, George Washington University, concentrating in energy, the environment, and development. She is currently the Program Associate at the Asian Development Bank, North American Representative Office in Washington, D.C. She specializes in low-carbon development and renewable energy projects in emerging markets. She has extensive experience in working with energy services companies, major international organizations, government agencies, and think tanks. She has field experience in South Korea, India, and Indonesia. Ms. Jung holds a Bachelor's degree in international affairs from the University of Texas at Austin.

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