Abstract for: Green Sukuk Issuance on Sustainable Transportation in Indonesia

The proceeds from green sukuk in Indonesia are used to finance climate-friendly projects with the largest allocation owned by sustainable transportation projects. As one of the leading issuers of sovereign green sukuk, Indonesia has committed to achieving net-zero emissions by 2060, making green sukuk a crucial tool in financing climate mitigation projects. This study examines the role of green sukuk issuance on sustainable transportation in Indonesia through a system dynamics model approach. It explores the financial and environmental impact of green sukuk by simulating various policy interventions, investment flows, and carbon reduction scenarios. The impact of the issuance of green sukuk to finance sustainable transportation projects takes a long time to reduce carbon emissions in Indonesia. The simulation results assume that an initial issuance of IDR 17.5 trillion with an allocation of 50% to 70% in the sustainable transportation sector will reduce carbon emissions after 2050. By integrating sustainable finance principles with Islamic finance, this study highlights the potential of green sukuk as a scalable solution for bridging the funding gap in climate action initiatives. This research is certainly important in providing policy recommendations for the Government of the Republic of Indonesia regarding green sukuk financing for the transportation sector in accordance with the 2060 Net Zero Emission commitment