Client Newsletter – Quota Transfer of Coal Domestic Market Obligation: Cap and Trade Approach

In August 2018, Minister of Energy and Mineral Resources (“MEMR”) issued Decree No. 1924/K/30/MEM/2018 (“MEMR Decree 1924/2018”) to amend MEMR Decree No. 23.K/30/MEM 2018 on Determination of Minimum Percentage of Coal Domestic Market Obligation (“DMO”) for 2018 (“MEMR Decree 23/2018”). MEMR Decree 1924/2018 stipulated details that were missing in the previous decree, namely, the total volume of coal production in 2018 in the amount of 485 million tons and a maximum additional amount of 100 million tons for export.

In implementing the DMO, MEMR uses ‘cap and trade’ approach, where MEMR sets out a sales quota cap but also offers a balancing act through quota transfer mechanism as introduced in Directorate General of Mineral and Coal (“DGMC”) Decree No. 300.K/30/DJB/2018 on Guidelines for Implementing Requests for Evaluation and Determination of Quota Transfers in the context of Fulfilling Coal Sales Obligations for Domestic Interest (“DGMC Decree 300/2018”).

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