The country is one of the world's biggest polluters and there has been scant progress on a multi-billion-dollar investment plan agreed with the United States and European nations last year to wean the archipelago off coal.
The government has lauded the exchange as a way to reduce emissions towards reaching the country's climate goals by the 2050 deadline agreed under the $20 billion Just Energy Transition Partnership at the Indonesia-hosted G20 summit in November.
"I want to congratulate OJK (Financial Services Authority), BEI (Indonesia Stock Exchange) and related authorities for the launch of the first carbon exchange in Indonesia, marking the beginning of carbon trading in our country," President Joko Widodo said at the launch.
"This is Indonesia's real contribution to fight with the world against the climate crisis."
He said the emissions trading market would help Indonesia reach its target climate pledges agreed under the 2015 Paris Agreement to help prevent global warming past 1.5 degrees Celsius.
"Concrete steps are needed to address this, and the carbon exchange that we launch today can be a concrete step," he said.
The Indonesian leader added that the exchange could create a new sustainable economy, estimating it had the potential to be worth at least 3,000 trillion rupiah ($194 billion).
The trading will take place on the Indonesia Stock Exchange and it will be overseen by the Financial Services Authority.
At least 13 transactions took place at the start of Tuesday's trade, with more than the equivalent of 459,000 tons of carbon dioxide traded, according to a board at the stock exchange.
OJK chairman Mahendra Siregar said authorities hoped 99 coal-fired power plants would take part in the new exchange, around 86 percent of the total operating in the country.
Indonesia is the biggest coal exporter in the world and environmentalists have questioned the government's commitment to its climate pledges as it continues to build coal-fired power plants it had already commissioned.
They have blamed more than half a dozen such plants around capital Jakarta for pollution spikes that have hit the city in recent weeks.
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