Price Discovery in a Nascent Compliance Market: Early Evidence from IDXCarbon

Abstract

Using transaction-level data from the first twenty-four months of IDXCarbon trading, we examine price formation in Indonesia's compliance carbon market. Order book depth is thin and concentrated among a small number of power-sector participants. We find limited evidence of informationally efficient pricing: prices respond to regulatory announcements with a lag of several sessions and show weak co-movement with international benchmarks. We discuss the market design changes most likely to improve depth.