Indonesia defers carbon tax rollout amid inflation concerns


The Indonesian government has decided to postpone the implementation of its carbon tax from April to July due to global economic upheaval and continued disruptions in the energy industry, a government official said over the weekend.

Last October, the Indonesian parliament has approved the introduction of a carbon tax set at 30,000 rupiah (US$2.1) per tonne of carbon dioxide equivalent, making it the fourth Asian country to put a price on carbon with tax.

Indonesia, the world's eighth largest emitter of greenhouse gases as well as the largest coal exporter by tonnage, enacted the carbon tax as part of a plan to wean itself off fossil fuels and achieve net-zero emissions by 2060. The tax will also serve as a benchmark for a carbon market, which is set to launch in 2025.

Febrio Kacaribu, Indonesia’s Head of Fiscal Policy Agency, Ministry of Finance, said in a statement that Russia-Ukraine conflict and US Federal Reserve monetary policy changes put pressure on inflation in many countries around the world, including Indonesia. In face of these developments, the government is thus ensuring the availability and stability of energy and food prices in the country, providing various forms of social protection to protect the poor and vulnerable from the impact of price increases.

According to Kacaribu, the process of enhancing the carbon market plan, which includes the appropriate legislation and regulations that will support the application of the carbon tax, needs to be refined as well. Since the power sector will be the first sector to be charged, the government will implement a carbon tax after the regulations and electricity sector are both ready.

“The administration will pay attention to the right [energy] transition in its implementation,” he added, “so that the implementation of this carbon tax remains consistent with the momentum of post-pandemic economic recovery.”

The implementation of a carbon tax will be done in stages, he said, taking into account the National Determined contribution (NDC) target's goals, the development of the carbon market, and the condition of the Indonesian economy.

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