The Potential of Carbon Trading and Carbon Tax Analysis to Enchance the Economic Feasibility of Geothermal Power Plant in Indonesia

Abstract

Global climate change, driven by the increasing concentration of greenhouse gases in the atmosphere, has emerged as one of the most pressing challenges confronting humanity. The energy sector, particularly its continued reliance on fossil fuel combustion for electricity generation, is a major contributor to greenhouse gas emissions. In response to the urgent need to mitigate these negative impacts, various countries and international organizations have developed policies and mechanisms aimed at reducing carbon emissions. One such mechanism is the carbon trading system, a market-based instrument that enables countries or companies to buy and sell carbon emission allowances. Under this scheme, entities that successfully reduce emissions beyond their assigned targets may sell their surplus allowances to others who are unable to meet their reduction obligations. This approach fosters both efficiency and innovation in emissions reduction, with economic incentives serving as a primary driver. Geothermal Power Plants, as a renewable energy source, play a pivotal role in reducing dependence on fossil fuels. Compared to fossil power plants, Geothermal Power Plants generate significantly lower levels of carbon emissions. Therefore, analyzing the potential integration of Geothermal Power Plants into the carbon trading system could offer financial incentives and enhance the economic viability of geothermal energy. This mechanism has the potential to support the further development and expansion of geothermal power infrastructure.