Universitas Gadjah Mada
Faculty of Economics and Business

The carbon market has become one of the primary mechanisms for reducing greenhouse gas emissions and supporting the transition to a green economy. Poppy Ismalina, M.Ec.Dev., Ph.D., lecturer at the Department of Economics, Faculty of Economics and Business (FEB) UGM, identified five critical aspects that must be considered to ensure the sustainability and development of the carbon market. One key element is the establishment of clear regulations to create an enabling environment for businesses and investors.

"Transparent and reliable regulations are needed to instill confidence in those who want to invest or participate in the carbon market," Poppy said during the Research Day event at the FEB UGM Learning Center Building on Friday (December 13, 2024).

Poppy emphasized that other essential elements in developing the carbon market include providing incentives for participation. Offering grants, low-interest loans, and guarantees to mitigate financial risks effectively encourages involvement. In addition, technical assistance is needed to help stakeholders better understand the process.

Another effort involves public recognition in the context of moral pressure, peer reputation, and global public opinion. Such recognition plays a critical role in building trust and encouraging broader participation. In addition, the implementation of clear standards and methodologies is crucial. Establishing consistent formats and content across mitigation activities through project-specific and standardized approaches is essential.

"Robust measurement, reporting, and verification are important to ensure integrity and transparency," she said.

Earlier, Poppy mentioned that the carbon market can be a financial tool to support industrial development goals. Not only that, but it also promotes opportunities for decarbonization and sustainable financing.

"This program can ensure growth and create middle-class job opportunities. A proper carbon market can facilitate cost-effective decarbonization of the economy and industry," Poppy explained.

In her Indonesia Carbon Markets: Market-Driven Solutions for Climate Mitigation, Poppy explained that the carbon market is not just about reducing emissions. It also creates new business opportunities to grow, innovate, and contribute to sustainable development.

Poppy emphasized that the carbon market offers several strategic opportunities for companies, including emissions reductions, cost savings, revenue growth, market differentiation, and access to sustainable financing.

"Achieving net zero is not only an obligation that supports sustainability but also a competitive advantage in the global marketplace," Poppy added.

However, Poppy acknowledged several challenges in implementing the carbon market. These include unclear regulations, limited credit facilities for low-carbon initiatives, and uncertainty about implementing carbon taxes.

"Therefore, the availability of technology to accurately measure carbon absorption, as well as institutional support and partnerships with other agencies, are needed to make the process more effective," she concluded.

Reporter: Shofi Hawa Anjani
Editor: Kurnia Ekaptiningrum

Sustainable Development Goals