Assessing the Impact of Carbon Trading to Indonesia Geothermal Project Economic

Abstract

Indonesia possesses abundant geothermal potential, ranking among the world's leading countries with total reserve of 23.36 Gigawatts; however, only 2.29 Gigawatts are currently exploited. Unfortunately, geothermal projects in Indonesia frequently encounter difficulties in reaching the production phase due to a complex interplay of economic, technical, and social factors. To address the economic challenges associated with the projects, maximizing the revenue potential of geothermal derivative products, such as carbon trading, alongside electricity sales has emerged as potential approach. This paper aims to assess the implications of carbon trading on geothermal power plant projects in Indonesia. The research draws upon literature review related to economic components of geothermal projects, carbon trading schemes, and case studies of carbon trading. Through scenario analysis, the study compares the economic returns of geothermal projects with and without carbon trading. Additionally, the paper identifies the challenges and opportunities that carbon trading presents for geothermal power plants in Indonesia. Preliminary results indicate that carbon trading has a positive impact on enhancing the returns of geothermal projects. Furthermore, the integration of carbon trading offers additional benefits, including generating supplementary state revenue, improving the environmental perception of geothermal power plants, and fostering sustainable development. By embracing carbon trading, Indonesia's geothermal sector can potentially overcome economic hurdles and create a more favorable investment environment, unlocking the full potential of its geothermal resources.