Indonesia launched its national ETS for coal-fired power plants in February 2023, following the revision of the NDC target to an unconditional 31.9% reduction by 2030 relative to Business as Usual (BAU) scenario and a conditional 43.2% reduction by 2030 subject to availability of international support for finance, technology transfer and development and capacity building. Indonesia also aims to cap CO₂ emissions from the power sector to 290 million tonnes per year by 2030. The newly launched ETS is a critical tool for assisting Indonesia in meeting these targets.

The first phase will cover two years until the end of 2024, and the second and third phases, which will last three years each, will begin in 2025 and 2028, respectively. The ETS will be expanded in the second and third phases to include oil and gas-fired power plants, coal-fired power plants that are not connected to the PLN's grid, as well as other industrial sectors.

The ETS is a mandatory intensity-based ETS, similar to China's national ETS, and will eventually evolve into a hybrid "cap-tax-and-trade" system, with facilities that fail to meet their obligations under the system subject to the tax. The carbon tax has now been postponed until 2025.

Indonesia has been working on a domestic ETS since it passed the "Government Regulation on Environmental Economic Instruments" in 2017, which mandates the implementation of an emissions and/or waste permit trading system by 2024. In mid-2018, guidelines for monitoring, reporting, and verification (MRV) in the power sector were released. The Presidential Regulation No. 98 of October 2021 extends the 2017 regulation on environmental economic instruments and lays the groundwork for the upcoming ETS. An implementing regulation of Regulation 98, namely Ministry of Environment and Forestry (MOEF) Regulation No. 21 on the Procedures for the Implementation of Carbon Economic Value was released in October 2022, providing further arrangements regarding, among other things, the procedure to conduct carbon trading activities, the implementation of a national carbon registry (SRN PPI), verification procedures and regulations for carbon trading.

A brief summary of basic details of the Indonesia ETS is given below.