Tuesday, July 16, 2024

The Financial Services Authority issued regulation on carbon trading

Reading Time: 2 minutes
Imanuddin Razak




The Financial Services Authority (OJK) has issued regulations governing carbon trading through the Carbon Exchange on Thursday, September 7, 2023. These regulations are outlined in OJK Regulation No. 14 of 2023 concerning Carbon Trading through Carbon Exchange.

In addition to provisions for carbon trading on the Carbon Exchange, which covers aspects ranging from trading procedures, operations, internal controls, to licensing requirements and procedures, OJK also released Circular Letter No. 12/SEOJK.04/2023 (“Circular Letter”).

Key provisions

The 10 key provisions contained in the Circular Letter are as follows:

  1. Scope of carbon units traded on the Carbon Exchange, specifying the types of carbon units eligible for trading on the exchange.
  2. Capital requirements for Carbon Exchange operators, outlining capital requirements and documentation details for proof of capital for these operators.
  3. Shareholder requirements for Carbon Exchange operators, setting integrity and financial eligibility requirements for prospective shareholders.
  4. Requirements for directors and board members of Carbon Exchange operators, detailing integrity, competence, and financial reputation criteria for directors and board members.
  5. Assessment of the competence and suitability of shareholders, directors, and board members, granting OJK authority to assess the competence and suitability of prospective shareholders, directors, and board members of Carbon Exchange operators.
  6. Operational and internal control obligations, mandating Carbon Exchange operators to provide systems and facilities to support carbon unit trading and monitoring, as well as internal controls.
  7. Procedures for applying for Carbon Exchange operator licenses, specifying the mechanisms and document requirements for license applications.
  8. Regulations and articles of association for Carbon Exchange operators, establishing requirements and procedures for submitting and approving requests for amendments to the regulations and articles of association of Carbon Exchange operators.
  9. Work plans and annual budgets for Carbon Exchange operators, governing the realization, modifications, and submission of work plans and annual budgets for Carbon Exchange operators.
  10. Reports from Carbon Exchange operators, determining the types of reports and deadlines for their submission.

With the legal foundation for carbon trading requirements and procedures now in place through the Carbon Exchange, it is expected to serve as a legal framework and guide for anyone seeking business licenses to operate as Carbon Exchange operators.

This framework includes guidance related to documentation requirements for business licensing, the application process for business licenses as Carbon Exchange operators, and the operational aspects of Carbon Exchange business activities.

For a copy of the regulation click here.

Imanuddin Razak






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The regulation covers aspects such as the types of carbon units traded, which can be in the form of carbon units or securities, licensing requirements and procedures for carbon exchange.
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