Written by: Daniel Alusinsing, SH., M.Kn.
Climate change becomes environmental matters that threats our humankind, specifically to human’s activity on earth. The matters do not elude from attention of international community, in this case Republic of Indonesia government, in which they always attempt to conduct many efforts in order to cope with the climate change. One of the efforts is the implementation of Carbon Capture Storage activities (CCS). The application of CCS technology on energy industry is one of the technologies that has a main function to absorb carbon emission produced by a system, in which the CCS technology is expected to support mitigation of climate change risks as consequence of energy production. The implementation to the technology hence is regulated by a specific regulation, Presidential Regulation Number 14 of 2024 concerning Establishment of Carbon Capture Storage Activity (Perpres 14/2004).
One of challenges faced in the application of CCS is a capital and investment requirement that are huge; therefore, this technology can be applied optimally, in which the technology must be imported from other foreign countries. In a study developed by Economic Research Institute for ASEAN and East Asia (ERIA) in 2022, it is stated that development cost to the technology model established in Central of Java, Indonesia is approximately US$60 – US$70 per CO2 ton and 70% from the cost is addressed to capturing CO2. The Indonesia government sees this matter as a challenge in CCS’ implementation, hence the government make an initiative to push business owner to develop CCS Hub. The hub is built by collective business owners that have a close distance of downstream business as collective emitter in order to lower transportation cost in a reservoir area of carbon storage. As the result, the emitters can share the transportation cost jointly.
In one hand, our firm argues that it has been proper solution from the idea of CCS development conducted by the government; therefore, the cost can be shared jointly by the business owners (emitters) that have be part of the hub. Nevertheless, the Hub still requires investment and capital from external parties to strengthen CCS technology development to be optimal. There are some alternative schemes that could be applied, one of the schemes is the issuance of security that has conception of environment or can be called as green bond. The bond is issued by the hub could be an interested destination for Indonesia’s citizen because people care to the environment in the midst of climate change trend that is worsen every year. The provision of green bond itself has been regulated on Financial Authority Service Regulation Number 60/POJK.04/207 concerning Issuance and Requirements of Sustainable Environmental Security (Green Bond). The article 3 and 4 from the regulation stated that the bond has a main purpose to protect, relieve and/or develop the quality of environment’s function, while the purpose of CCS Hub’s establishment has matched the mentioned purpose, that is an adaptation to the climate change by storing and capturing CO2.
In the other hand, investment to CCS Hub also could be conducted by giving an opportunity to foreign investors in a company through a joint venture. The scheme is possible for foreign investor in investing their capital and developing the CCS Hub by procuring CCS technology itself, where the technology can be imported from their origin country. The venture is expected to develop CCS Hub collectively by both local and foreign investors in the future. As the result, the model contributes to Indonesia. We can also refer this scheme to the venture developed by ENI and SNAM in 2022, while they have captured CO2 more than 25,000 tons from a plant in Casalborsetti (Ravenna) in the first phase.
Based on the above phenomenon regarding with the CCS’ establishment in Indonesia, specifically to the investment and financing matters faced by the operator of CCS, our team would argue that the issuance of green bond or establishing joint venture in conjunction with the CCS technology becoming one of the solution can be taken by the business owner that would like to manage the business. APLF as law firm in Indonesia could be your choice to consult and give your trust to handle CCS projects, in which we have competences and experience in handling the both solutions.
Legal Reference:
1. Presidential Regulation Number 14 of 2024 concerning Establishment of Carbon Capture Storage Activity; and
2. Financial Authority Service Regulation Number 60/POJK.04/207 concerning Issuance and Requirements of Sustainable Environmental Security (Green Bond).
Reference:
1. Eni, Eni and Snam form a Joint Venture to Develop the First CCS Project in Italy, https://www.eni.com/en-IT/media/press-release/2022/12/eni-snam-form-joint-venture-develop-first-ccs-project-in-italy.html, cited from eni.com on April 17th, 2024;
2. Kimura, Shigeru, et. al. Study on Potential for Promoting Carbon Dioxide Capture, Utilisation, and Storage (CCUS) in ASEAN Countries Vol. II, 30 March 2022, published by Economic Research Institute for ASEAN and East Asia; and
3. Nyoman Ery Wahyudi, Investasi ‘Gudang Karbon’ Mahal, Pemerintah Dorong Konsep CCS Hub, https://ekonomi.bisnis.com/read/20240123/44/1734858/investasi-gudang-karbon-mahal-pemerintah-dorong-konsep-ccs-hub, cited from Bisnis.com on April 17th, 2024.