Indonesia to defer carbon tax implementation amid global economic uncertainty


Indonesia’s carbon tax scheme, which was set to go into force in July, could be postponed due to global economic volatility and to give authorities time to prepare, according to a government official. 

Indonesia, the world’s largest thermal coal exporter and the 10th biggest carbon emitter in the world, had pledged to achieve net zero emissions by 2060. To attain this goal, the long-awaited carbon tax has been considered as a key tool and financial incentive to promote emission reduction. 

Yet, the country announced the deferral of the tax in April due to Russia-Ukraine conflict and US Federal Reserve monetary policy changes which had put pressure on inflation in many countries around the world. 

“Considering global economic conditions that have not been conducive, and we are also continuing to develop our carbon market plan,” said Febrio Kacaribu, “the government is considering revisiting the implementation of the carbon price this July.”

He noted that Indonesia, the 2022 G20 host country, will still start to charge a carbon tax on greenhouse gas emissions from coal-fired power plants this year, and that this will be highlighted as a strategic strategy at the summit.

CERAH, a local clean energy research tank, argued that the carbon price should be implemented as soon as possible to create revenue to finance green energy development.

By implementing a carbon tax, the state income can be diverted towards renewable energy which has been shown to stimulate economic recovery after the pandemic in other countries, said CERAH researcher Mahawira Dillon. 

Environmentalists have also criticized Indonesian authorities for proposing a carbon tax at 30,000 rupiah (US$2.02) per tonne of carbon dioxide equivalent, claiming that the rate will be too low to discourage the use of coal for power generation.

According to government officials, the rate would be kept low at first due to worries about the cost of power but will be raised to reflect market rates for carbon if such trading is established.

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