Government Still Delays the Carbon Tax Implementation


The government is still holding back on the carbon tax policy, which actually took effect on 1 July. This was conveyed by the Fiscal Policy Agency (BKF) of the Ministry of Finance. BKF emphasized that the implementation of the carbon tax will be implemented if the momentum is deemed right, especially regarding domestic economic conditions.

This was conveyed by the Head of the BKF Financial Sector Policy Center at the Ministry of Finance Adi Budiarso in a dialogue entitled Balancing Between Economic Development and Green Policy which was held virtually on Tuesday (9/8/2022).

“We continue to monitor domestic economic conditions to see the right moment for the implementation of it,” he said.

Adi said that the uncertainty of the global economy had triggered the postponement implementation in Indonesia.

However, he said the government was continuing to formulate the necessary regulations to apply in the future.

The government previously planned to implement two financial instruments, namely carbon trading and carbon taxes, in the context of reducing carbon emissions and handling the climate crisis.

The Ministry of Finance has also drafted a roadmap until 2025. The roadmap is designed to support a just and sustainable energy transition.

Referring to the draft roadmap, this year the carbon tax should be applied in a limited manner (cap and tax scheme) for coal-fired power plants at a rate of IDR 30,000/tCO2e.

However, the carbon tax which was originally implemented on April 1, 2022, as stated in Law Number 7 of 2021 concerning the Harmonization of Tax Regulations (UU HPP) was later postponed to July 1, 2022. However, to this day, it has not been implemented, and has not known when it will be implemented.

For information, the Carbon Tax is a tax imposed on carbon emissions that harm the environment.

The definition of it is taken from Law Number 7 of 2021 on the Harmonization of Tax Regulations (UU HPP), particularly in Article 13 Paragraph (1). The HPP Law is indeed the first basis for the implementation in Indonesia, in addition to several other regulations which are the Carbon Tax regulation as a derivative regulation of the HPP Law.

In the HPP Law, it is stated that the imposition of a Carbon Tax is carried out by taking into account the Carbon Tax roadmap and/or the Carbon Market roadmap.

The roadmap contains the following: Carbon emission reduction strategies; Priority sector targets; Alignment with the development of new and renewable energy; and/or Alignment between various other policies.