Financial Impact Analysis of Carbon Pricing on Geothermal Power Plant Project Investment at PT PLN (Persero)

Climate change is a significant global challenge, mainly driven by greenhouse gas (GHG) emissions. The energy sector is a major contributor to GHG emissions, accounting for approximately 73% of global emissions in 2022. Within the energy sector, electricity emitted 13 GtCO2 or contributes approximately 35% of global emissions related to energy. To address this challenge, PLN, a state-owned electrical utility in Indonesia, has declared a roadmap to achieve Net Zero Emissions by 2060. The company has also implemented some strategic initiatives to achieve the goal. Carbon pricing is one of the key efforts that enable PLN to receive incentives for reducing GHG emission while also enhancing financial performance. This study examines effects of implementing a carbon trading mechanism on the financial metrics of a 110 MW Geothermal Power Plant project investment. The results demonstrate a 13.58% increase in NPV, a faster payback period from 8.37 to 7.67 years, and a 0.31% rise in the MIRR. These results indicate the potential improvements in project investments financial performance that PLN can achieve while still aligning with global environmental objectives.