REDEFINING CARBON ACCOUNTABILITY: THE IMPACT OF CONSUMPTION-BASED ACCOUNTING ON INDONESIA CLIMATE POLICY AND CARBON TRADING POTENTIAL

Abstract

This paper explores the potential impact of adopting Consumption-Based Accounting (CBA) on Indonesia’s climate policy and carbon trading potential. Using an environmentally extended Single-Region Input-Output analysis, the study compares the Production-Based Accounting (PBA) and CBA frameworks to assess the extent to which carbon emissions are linked to international trade. By shifting from PBA to CBA, Indonesia can more accurately attribute approximately 24% of its total carbon emissions—those embedded in net exports—to international trade. This shift presents an opportunity for Indonesia to convert these export-related emissions into tradable carbon credits, potentially generating an estimated USD 6.89 billion annually. The analysis emphasizes the importance of centralized government management of carbon credits to ensure alignment with national climate goals and to maximize financial returns for reinvestment into renewable energy, reforestation, and low-carbon infrastructure projects. Ultimately, the adoption of CBA offers Indonesia a significant opportunity to enhance its position in global carbon markets, accelerate progress toward its net-zero emissions target by 2060, and contribute to the promotion of fair and equitable carbon trading internationally.