This policy established a mandatory, intensity-based emissions trading system (ETS) for the power generation sector in Indonesia. This policy is part of Indonesia's strategy to reduce greenhouse gas emissions and achieve net zero. The new system will cover facilities with a production capacity of more than 100 MW, though smaller coal and fossil fuel plants may also be included at a later point. The system will initially cover 99 coal-fired power plants that account for 81.4% of the country’s national power generation capacity. Based on the carbon trading roadmap of the power generation subsector that has been prepared, the implementation of carbon trading has the potential to reduce greenhouse gas emissions by more than 36 million tons of CO2e by 2030.

The ETS will be implemented in three phases. The first phase will run from 2023 to 2024 and only cover coal-fired power plants. In the second (2025-2027) and third (2028-2030) phases, the government plans to expand the coverage of the ETS to oil and gas-fired power plants and other coal-fired power plants not connected to PLN’s grid. The new ETS will eventually work as a hybrid “cap-tax-and-trade” system by 2025.