The Carbon Exchange Policy in Supporting the Green Banking Concept: An Indonesian Perspective

Abstract

This paper aims to analyze the success of applying the Carbon Exchange policy in supporting the green banking concept in Indonesia. The Indonesian Carbon Exchange is a commitment of the government to fight against climate change by ratified the Paris Agreement and legalized Financial Service Authority Regulation (FSAR) No. 14 of 2023 on Carbon Trade through Carbon Exchange, where the results of carbon trade will be reinvested for projects to decrease emissions. This research employed in-depth socio-legal method. Research results showed that based on these six banks’ sustainability report of 2022, they have allocated funding to the Sustainable Business Activity Category sector which significantly increased from 2020 to 2022 as the banks’ contribution to support the green banking concept. Thus, it is certain that the Carbon Exchange policy has an effective role in increasing the portfolio of banks’ sustainable funding in the year 2023 as banks buy carbon units from companies that work in the Sustainable Business Activity Category sector. Based on the six green banking indicators of six banks, it was shown that carbon emission and paperwork or paperless aspects experienced an increase in 2022. Therefore, banks made efforts by buying carbon units from Carbon Exchange. Unfortunately, the green banking concept in Indonesia is yet to be measured precisely because it is still in the early stages of implementation. Therefore, support and collaboration from government, banking industry and society is an essential effort to accelerate Carbon Exchange policy.