Indonesia maturing carbon tax regulation in response to EU’s CBAM


The Indonesian government is still working on finalizing its carbon tax regulation, which aims to anticipate the EU’s Carbon Border Adjustment Mechanism (CBAM) that will be fully implemented in 2026.

"The regulation is still being perfected as the EU will implement CBAM in 2026,"  Coordinating Minister for Economic Affairs Airlangga Hartarto said.

He said that Indonesian industries need to prepare to shift to green energy and transition into cleaner industries, as the CBAM transitional period has begun.

Indonesia's carbon tax is also intended to provide an alternative to businesses for cutting carbon emissions.

In addition to the carbon tax regulation, the government has launched IDXCarbon to support the fulfillment of the Nationally Determined Contribution (NDC) by 31.89% through its own capabilities and 43.2% with foreign assistance by 2030.

"There are two carbon taxes: voluntary and mandatory. The voluntary one was just launched by the president through the carbon exchange," Hartarto said.

He indicated that companies can choose to pay carbon tax if they do not want to buy carbon credits at IDXCarbon.

He appealed to firms whose industries produce carbon emissions to contribute to reducing emissions in Indonesia, either by purchasing carbon credits or by paying carbon tax.

"If their products are exported, they will be subject to carbon tax in other countries. It is better to have taxes imposed in the country than in other countries," Hartarto explained.

The carbon tax regulation is included in the Law on Harmonization of Tax Regulations (UU HPP) and targets all businesses that produce carbon emissions.

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