Taxing coal to hit the goals: a simple way for Indonesia to reduce carbon emissions.

Sumarno, Theresia Betty; Laan, Tara

Abstract

The Government of Indonesia has pledged to reduce absolute carbon emissions by between 29% and 41% by 2030 compared to "business as usual" (Republic of Indonesia, 2021). To help achieve this, the government is considering options for carbon pricing, including an emissions trading scheme (ETS), a carbon tax, or results-based payments. A pilot ETS is underway in the electricity generation sector, and a draft law has proposed a carbon tax of IDR 75,000 (USD 5.10) per tonne of carbon dioxide (Jiao & Sihombing, 2021). Carbon pricing is an effective and economically efficient way to reduce emissions, but significant details will need to be resolved, including fuel and sectoral coverage, exemptions for vulnerable consumers, and timeframes for implementation. Negotiations to resolve these issues will take time. As an interim and immediate measure, we recommend the government simply increase taxes on coal as a de facto form of carbon taxation. A coal tax is recommended for four reasons: 1) coal is highly polluting; 2) taxes are an effective way to reflect coal's negative impact in its price; 3) a coal tax would be relatively easy to administer; 4) a tax would generate significant revenue.

Citation

SUMARNO, T.B. and LAAN, T. 2021. Taxing coal to hit the goals: a simple way for Indonesia to reduce carbon emissions. Winnipeg: International Institute for Sustainable Development (IISD) [online]. Available from: https://www.iisd.org/publications/taxing-coal-indonesia-reduce-carbon-emissions

• Working Paper Type: Discussion Paper
• Online Publication Date: Aug 20, 2021
• Publication Date: Aug 31, 2021
• Deposit Date: Jan 29, 2023
• Publicly Available Date: Jan 29, 2023
• Publisher: International Institute for Sustainable Development
• Keywords: Fossil fuel industry; Taxation; Carbon emissions reduction; Indonesia
• Public URL: https://rgu-repository.worktribe.com/output/1763871
• Publisher URL: https://www.iisd.org/publications/taxing-coal-indonesia-reduce-carbon-emissions