TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Designing a carbon tax road map for Indonesia’s green transition
The government needs to get going with its carbon tax and related mechanisms to change the general mindset toward green products, services and behaviors to achieve its unconditional NDC by 2030.
Change Size
Clean energy: Workers check the battery panel of the solar power plant on Kodingareng Island near Makassar, South Sulawesi on Dec. 15, 2022. Indonesia is pushing for renewable energy as part of its commitment to the fight against climate change. (Antara/Abriawan Abhe)
M
itigating climate change requires controlling carbon emissions, which can be supported by carbon trading and taxation. For example, the Energy and Mineral Resources Ministry has piloted a carbon trading market in 2021 with 32 coal-fired power plants conducting 28 transactions consisting of 42,455 tons of CO2.
However, the picture for carbon taxation looks gloomier. With its implementation plan already postponed twice this year, Indonesia may miss opportunities that are highly time-sensitive if it delays its carbon tax launch further.
Looking at the existing carbon taxes in Argentina, Canada, Chile, Colombia, Japan, Mexico, Singapore and Ukraine, the policy can serve many purposes.
First, it can account for the social cost of carbon emissions so that carbon-emitting activities more accurately reflect negative externalities to the environment and society. Using this objective, carbon tax can lower emissions without specifically being positioned to achieve a politically defined emissions reduction target.
Second, carbon tax can be leveraged to reach certain abatement levels, regardless of reflecting the social costs. Third, a carbon tax can generate fiscal revenue and support a general shift towards a greener economy. Here, the objective is more about gaining revenue and less about achieving certain emission reduction targets.
Lastly, imposing a carbon tax can be an important signal to the international community, usually in linking to benchmarks used by other countries, trading partners or trade competitors.
Achieving these different purposes requires a carbon tax that uses different calculations, which may result in different rates. While the government can target multiple benefits at the same time, the carbon tax must be designed for and accountable to one primary purpose.
