Journal of Sustainable Development and Regulatory Issues, Vol.1, No.

2 (May, 2023), 39-50

P-ISSN: 2987-8071| E-ISSN: 2987-8063| DOI: https://doi.org/10.53955/jsderi.v1i2.6

Journal of Sustainable Development and Regulatory Issues (JSDERI)

http://journal.contrariusactus.com/index.php/JSDERI/index

| Research Article |

The Implementing a Carbon Tax as a Means of Increasing Investment Value in

Indonesia
Al Fadilla Yoga Brata 1*, Rakotoarisoa Maminiaina Heritiana Sedera 2
1 Faculty of Law, Universitas Sebelas Maret, Surakarta, Indonesia.
2ISCAM Business School, Antananarivo, Madagascar.

*Correspondence: [email protected]

Received: April 10, 2023/ Accepted: April 31, 2023/ Published: May 13, 2023.

Abstract: The impact of a carbon tax in Indonesia, where it could lessen environmental changes, generate income
economically, and raise the value of investments in renewable energy, is described and examined in this study.
Doctrinal legal research is the research methodology used. To reach logical conclusions about legal issues, doctrine
research is used. Research work can be made more qualified by using legal research. Carbon emissions in Indonesia
have been significantly reduced by 13.917% due to the urgency of implementing a carbon tax, and worldwide
carbon emissions have decreased by 14.292%. Investments in a mix of renewable energy sources gain value. The
implementation of a carbon tax may need help. The political system and the administration of governmental
institutions are barriers to implementing the carbon tax—the impact of the economy and business on public
disapproval. The government sets revenue management by its objectives, the carbon tax policy is associated with
an energy sustainability policy, and the coalition is tightened as part of the strategy to address these issues.

Keywords: Carbon; Investment; Indonesia; Tax;

This is an open-access article under the CC–BY 4.0 license

INTRODUCTION
The industrial revolution that took place in the 18th century had a significant impact
on the transformation of the world economy. Extreme changes in technology,
production methods, new ways of organizing production, and creating markets in
Europe and the United States were responsible for the rapid economic escalation.
Thanks to technological transformation and communication, goods became abundant,
and trade grew as local production evolved into production between countries. As a
result, almost all regions that experienced the industrial revolution saw increased per
capita income and living standards. It must be recognized that the many advances of
the industrial revolution caused some environmental problems, primarily the carbon
emitted by the industry. This is a significant challenge for governments in many
countries, as the need for development is a trade-off for producing greenhouse gases
that contribute to global warming. In line with economic growth, increased economic
activity is generally followed by increased greenhouse gas emissions.

Looking at the global scale of increasing CO gas emissions2 that we can see in the
results of the Emissions Database for Global Atmospheric Research report in 2021, the
increase in gas emissions almost returned to the level of 2019, reaching 37.9 Gt (only
0.36% below the 2019 value). Compared to the 2020 pandemic year, global CO2
emissions in 2021 were 5.3% higher. As a carbon emitter, Indonesia produced lower

39
 Al Fadilla Yoga Brata, et al. (The Implementing a Carbon Tax as a Means)

emissions in 2021 compared to 2019, with a reduction value from 2019-2021 of -6.9%,
including the EU27 countries that reduce carbon emissions. Global per capita CO2
emissions have increased by about 13% from 4.26 t CO2/capita to 4.81 t CO2/capita
between 1990 and 2021. However, the decrease in gas emissions must be
accompanied by reducing fossil fuel use in Indonesia. This is because, according to
research using the GAIN model to determine the level of contributors to gas emissions
in Indonesia from 1990 to 2050, the increase in CO2 emissions is dominated by coal
fuel. Fuel demand for power plants in Java in 2003 reached 74% of the total national
fuel demand, contributing the most carbon emission gases in Indonesia.

They are moving on from the estimated increase in gas emissions in Indonesia.
Indonesia took action to reduce gas emissions by ratifying the Paris Agreement into a
legal governing document in 2016 and committing to reduce emissions before 2030.
Indonesia's emission reduction commitment in the Paris Agreement is 29 percent of its
efforts and 41 percent. To demonstrate its commitment to reducing CO2 emissions
pollution, Indonesia adopted a new carbon energy policy, tax carbon. Tax carbon is a
form of mandatory climate energy policy and a cap and trade system. Tax carbon
allows the government to impose a tax corresponding to each fossil fuel's carbon
content, such as coal, natural gas, and gasoline. Tax carbon differs from a cap-and-
trade system in that it sets emission limits and distributes tradable permits according to
the set emission limits. Meanwhile, a cap-and-trade system allows companies to decide
how they value emissions. Companies that can reduce emissions in their production
process can share their excess quota with competitors who cannot.

The carbon tax regulation in Indonesia has been regulated in Law Number 7 of
2021 concerning the Harmonization of Taxation. However, the widespread
implementation of the carbon tax will begin in 2025, during which 2021-2024 is the
time to establish the carbon tax mechanism. Indeed, taxing carbon is the most cost-
efficient way to price the externalities associated with carbon emissions. Increasing the
effective price of carbon will reduce emissions, inhibiting carbon growth in the
atmosphere. At the same time, after a carbon tax was introduced in a country, foreign
loans to fossil companies increased by 6.8 percent. At the same time, as domestic fossil
lending decreased, overall fossil lending fell by about 0.4%. Regarding the prospect of
the value of the contribution of carbon taxes to state revenues, we can see it in several
countries, such as the Solomon Islands and China. The Solomon Islands, where
environment-related taxes contributed 5.4% of gross domestic product (GDP) in 2019.
In the study, implementing a carbon tax could generate additional revenue of about
0.8% of GDP, a significant but feasible fiscal effort within ten years. However, it limits
global warming to 2°C. In July 2021, 4.1 million tons of carbon dioxide quota worth
CNY210 million ($32 million)1

A look at the projected value of future investments that Indonesia can capitalize on.
The scale of worldwide investment in the energy sector has doubled, reaching over
420 billion, with 70% of these funds allocated to renewable energy sources. To
ensure long-term sustainability and meet the growing demand for energy at the
household and industrial levels, it is estimated that a certain amount of annual

1 ADB, Carbon Pricing for Green Recovery and Growth, 2021

https://doi.org/http://dx.doi.org/10.22617/TCS210403-2

Journal of Sustainable Development and Regulatory Issues 40

Al Fadilla Yoga Brata, et al. (The Implementing a Carbon Tax as a Means)

investment is required.2 The implementation of this carbon tax should be implemented

immediately by the government. As many companies are investing in renewable
energy simultaneously, the government must establish green financing and credit-
related services for these groups and businesses. To answer these challenges, there is an
urgency to implement a carbon tax in Indonesia.

METHOD
This research uses doctrinal legal research methods. Doctrinal analysis is used to
make logical conclusions about legal issues. Legal research helps make research work
more qualified. This research proposal is descriptive. The primary data source is
secondary information derived from the literature review. Using qualitative descriptive
analysis, the collected data was examined. This research also relies on the legislation
on taxing carbon in Indonesia. Other approaches, such as the statutory approach,
were also used in collecting accurate data. The researchers conducted qualitative data
analysis with legal document interpretation techniques during the literature study so
that the results were presented analytically and critically.

RESULT AND DISCUSSION

The Urgency of Tax Carbon Implementation as an Investment Value Enhancement Instrument
Policies have important implications for economic and environmental performance,
although the outcomes are not always clear. Unfortunately, this lack of clarity is partly
due to the need for more analytical capability to evaluate economic or environmental
performance in isolation, which fails to consider the extent to which financial and
ecological outcomes are interrelated. Tax carbon is one of the categories of indirect
taxes, which are taxes levied on transactions. The greater a company’s dependence on
producing a good using fossil fuels, the more significant the impact of imposing a
carbon tax. If the company does not depend on fossil fuels to deliver goods, then the
imposition of a carbon tax has less effect on the company's activities.

Tax carbon can be used as a potential policy as a new branch to attract investment
into the country. To explore this potential, the government must synergize in making
tax carbon and environmental regulations. This can be seen in the study of tax carbon
in China, where environmental regulations significantly influence energy and heavy
industries. CO2 emissions from these two industries in 2030 will decrease by 4.97%
and 4.77% in the carbon emissions trading scenario and 6.01% and 5.83% in the tax
carbon scenario. However, the carbon emissions trading policy outperforms the tax
carbon policy because the carbon emissions trading policy will result in lower
economic costs. However, for emission reduction, the carbon tax policy exceeds the
carbon emission trading policy because the total emissions from 2020 to 2030 are the
smallest in the carbon tax scenario. Therefore, policymakers should consider regional
economic development plans to choose the proper environmental regulation.

Regulation on carbon tax in Indonesia should be implemented immediately.

Reflecting on projections, implementing carbon tax policies mainly affects countries'
export and import levels when they have a high proportion of carbon-intensive goods
in their markets. The imposed carbon tax will increase the price of energy-intensive

2 Michael Jefferson, ‘A Crude Future? COVID-19s Challenges for Oil Demand, Supply and Prices’,
Energy Research & Social Science, 68 (2020), 101669 https://doi.org/10.1016/j.erss.2020.101669

Journal of Sustainable Development and Regulatory Issues 41

Al Fadilla Yoga Brata, et al. (The Implementing a Carbon Tax as a Means)

goods and reduce the demand for energy-intensive goods in the domestic market.
Carbon emissions drop significantly by 13.917%, and global carbon emissions drop by
14.292%. This scenario results in the most significant emission reduction of all systems.
Implementing a domestic carbon tax policy in Indonesia reduces the production level
of carbon-intensive goods in the country. Therefore, this policy can effectively mitigate
domestic carbon emissions, however, when Indonesia imposes a carbon tax of
$40/tCO2.

Regarding carbon tax regulation in Indonesia, it will use caps and trade in specific
sectors such as coal, diesel, and gasoline. These are examples of fossil fuels that can be
subject to a carbon tax in Indonesia. A cap and trade scheme means that entities that
emit more than the maximum limit must purchase Emission Permit Certificates from
entities that emit below the maximum limit or purchase Emission Reduction
Certificates. The carbon price level is planned to be higher or at least equal to the
carbon price in the carbon market, which has a minimum IDR 30 per kilogram of
carbon dioxide equivalent. Implementing a carbon tax in Indonesia must maintain the
carbon market so that it is not exploited by industrialized countries that emit carbon.
Also, the government should remember that fossil fuels are still produced cheaply in
Indonesia, even though they are expensive. In addition, Indonesia still relies up to
90% on fossil fuels for its electricity, so implementing a carbon tax must be carefully
planned.3

Carbon tax implementation already has a regulatory framework through Law 7 of

2021 on Harmonization of Taxation and Law 32 of 2009 and its derivative
regulations. In the Taxation Harmonization Act, a carbon tax is regulated in Chapter
IV Article 13, which contains the subject of a carbon tax to the tariff that governs it. In
addition, based on Article 49 (3) of Law Number 32 of 2009 concerning
Environmental Protection and Management, environmental audits of certain high-risk
activities are implemented periodically. An environmental audit is an evaluation
carried out to assess the compliance of the person in charge of the business and
training with the legal and policy requirements set by the government, which will
collaborate with stakeholders from the Ministry of Finance through the Financial
Services Authority (OJK) Regulation Number 51/POJK.03/2017 OJK can be involved
in monitoring the amount of carbon emissions generated by the company to confirm
the reliability of the company's sustainability report. This is also regulated more
technically in Presidential Regulation No. 98 of 2021, aimed at CPI: ETS, RBP, carbon
tax, and other mechanisms based on technological and technical developments. While
emissions trading will be mandatory, the other four will be voluntary.4

Moving towards the implementation of carbon permits will force polluters to be

more efficient and reduce their carbon emissions. If there is no reduction in carbon
emissions, the government could receive revenue of IDR 115,646,647 million at the 29
percent reduction target level. The tax revenue would be more significant if the

3 I Gusti Putu Eka Rustiana Dewi and Ni Made Sintya Surya Dewi, ‘Analysis the Effectiveness of
Implementation Carbon Tax in Indonesia’, Jurnal Economina, 1.4 (2022), 880–89
https://doi.org/10.55681/economina.v1i4.194
4 Pradipta Dirgantara, ‘Reflecting on REDD+: Challenges Towards Indonesia’s Carbon Pricing’, IOP

Conference Series: Earth and Environmental Science, 1105.1 (2022) https://doi.org/10.1088/1755-

1315/1105/1/012003

Journal of Sustainable Development and Regulatory Issues 42

Al Fadilla Yoga Brata, et al. (The Implementing a Carbon Tax as a Means)

emission reduction target were 41 percent. The tax revenue would be around IDR
145,396,856 million. Carbon permits are similar to carbon taxes, but carbon permits
limit the carbon emissions allowed in the form of certificates. The provisions must
execute certificates purchased by polluters. Emissions that exceed the permitted limit
will be subject to heavy fines.

For a quick look at the impact of implementing a carbon tax policy that estimates
future changes in natural gas capacity, a carbon tax of $10 would reduce carbon
emissions by 1.39 and 1.55 billion metric tons per year through increased utilization of
NGCC. In addition, the relatively low carbon tax price of only $10/ton would be
more politically feasible and still generate significant net carbon tax revenue for the
federal government.5 Moving on from the explanation above, implementing carbon
tax should be immediately implemented in Indonesia. The investment value and state
revenue that Indonesia will obtain must be optimized directly. The optimization of
carbon tax must be carried out gradually, which for now is still postponed.
Challenges and Strategies for Tax Carbon Implementation in Indonesia
Regarding the challenges of carbon tax implementation, we must reflect on several
countries that have implemented a carbon tax. The carbon tax policy can be found in
Chile. Chile applies a CO2 emission tax of US$5 per ton, which will increase over time
to US$50. The impact felt by Chile is projected to reduce almost 0.6% of GDP in
2050 compared to the baseline and reduce total consumption and investment. This is
due to the increased cost of carbon-intensive activities, which are a crucial driver of
economic activity in Chile. As fossil fuel costs increase and alternative energy sources
become more attractive in terms of price, economic actors, especially larger ones,
choose to reduce their production or shift to cleaner inputs. This shift can be relatively
costly in adapting their business to the new energy model, which quickly increases the
cost of structural change. As production becomes more expensive, exports become less
competitive and fall relative to the starting point in energy-intensive sectors.

This leads to a favorable exchange rate increase for export sectors whose
production costs are less affected by the tax.6 We can see that Chile is a country that is
not a developing country. Regarding implementing a carbon tax in Indonesia, several
factors must be addressed for its performance 7 Political System and Governance of
Government Institutions. Poorly managed government institutions may also challenge
Indonesia's carbon tax policy implementation process. This is due to Indonesia's
political system, where policymakers are involved in business, suggesting that the
involvement of business people in the political system and the large number of
parliamentarians who own businesses could pose challenges to implementing a carbon
tax policy in Indonesia. Challenges to implementing the carbon tax policy also come

5 Deborah A. Carroll and Kelly A. Stevens, ‘The Short-Term Impact on Emissions and Federal Tax
Revenue of a Carbon Tax in the U.S. Electricity Sector’, Energy Policy, 158.August (2021), 112526
https://doi.org/10.1016/j.enpol.2021.112526
6 Raúl O´Ryan, Shahriyar Nasirov, and Hector Osorio, ‘Assessment of the Potential Impacts of a

Carbon Tax in Chile Using Dynamic CGE Model’, Journal of Cleaner Production, 403.February (2023),
136694 https://doi.org/10.1016/j.jclepro.2023.136694
7 Alexander Kevin Tjoanto and Maria Tambunan, ‘Tantangan Dan Strategi Dalam Proses Implementasi

Kebijakan Pajak Karbon’, Jurnal Riset Akuntansi & Perpajakan (JRAP), 9.02 (2022), 237–48
https://doi.org/10.35838/jrap.2022.009.02.20

Journal of Sustainable Development and Regulatory Issues 43

Al Fadilla Yoga Brata, et al. (The Implementing a Carbon Tax as a Means)

from the attitude of Indonesian politicians who wait and see how the public perceives
carbon tax. Hence, the procedure takes a long time to implement.

Economic and Business Influences. This challenge arises due to the negative effect of
the carbon tax, which can be seen from the simulation results conducted by the
government during the preparation of the carbon tax policy draft academy paper. The
simulation results show that a carbon tax could cause actual consumption to decline
by 0.417% in 2022, and the decline could be even more significant in 2030 to 1.97%.
Public Rejection The emergence of public rejection of the carbon tax in Indonesia can
also be caused by a lack of public trust in the government's ability to manage revenue
from the carbon tax. Trust in the government is also a problem because people doubt
that the income earned by the government is not in line with its goal, which is to
reduce emissions by the Paris Agreement that Indonesia has committed to.

The challenges faced by Indonesia in implementing the carbon tax can be seen in
the government system and trust in it. The government system and trust are basic
units to implement the policy, in line with previous research where high public trust in
the political system and government can increase public acceptance of carbon tax
policy implementation. In contrast, low government trust can cause difficulties in
carbon tax policy implementation. This is in line with comparing carbon tax
implementation in 3 countries, namely France, Sweden, and Canada. The government
system must be robust to lobby fossil energy users. From these three countries, it is
essential to consider the existence of energy lobbyists in designing carbon tax policies.
If they do not consider energy lobbyists, there is pressure from entrepreneurs from
large energy user companies. These entrepreneurs helped create exemptions to the
carbon tax for some energy-intensive industries, arguing that the tax would jeopardize
their competitive position.8

The challenge also comes with implementing a carbon tax, which is the transition
from the energy that Indonesia is currently undertaking. It should be noted that
people's income is directly proportional to fuel consumption, reflecting the UK
household income, which tends to have a positive relationship with gasoline
consumption. At a household income of $70,000, our results show that an increase in
household income of $10,000 will increase gasoline consumption by 1.7%. This effect
diminishes as income increases. For example, at a household income of $500,000, a
$10,000 increase in household income would increase gasoline consumption by 1.4%.
The UK's introduction of the carbon tax also increased fuel prices, which resulted in a
1.6% reduction in gasoline consumption. This implies that a carbon tax of five percent
per liter of gasoline reduces total gasoline demand by 8%. 9

Moving away from household income, the application of carbon tax also targets
more complex public transportation, most of which still uses fossil fuels. According to
previous research, the carbon tax on vehicles is considered unfair to people with

8 Patrick Criqui, Mark Jaccard, and Thomas Sterner, ‘Carbon Taxation: A Tale of Three Countries’,
Sustainability (Switzerland), 11.22 (2019) https://doi.org/10.3390/su11226280
9 Chad Lawley and Vincent Thivierge, ‘Refining the Evidence: British Columbia’s Carbon Tax and
Household Gasoline Consumption’, Energy Journal, 39.2 (2018), 35–61
https://doi.org/10.5547/01956574.39.2.claw

Journal of Sustainable Development and Regulatory Issues 44

Al Fadilla Yoga Brata, et al. (The Implementing a Carbon Tax as a Means)

limited cars and economic circumstances. An increase in power will lead to a rise in
public transportation prices. So a combination of taxes and compensation schemes or
subsidies can successfully increase public support for practical climate policy tools. The
reason for drawing this conclusion is that compensation or contributions significantly
positively influence equity, which in turn will affect policy support in a positive
direction. On the other hand, in a more left-oriented context, the results of this study
imply that a CO2 tax without compensation is more likely to generate slightly higher
support.10

Not only that, the challenge experienced by Indonesia when implementing a

carbon tax is the distrust of the public and stakeholders towards the revenue obtained
by the government, which impacts public trust. This public trust is related to the fiscal
payment received by the state, which is how the government manages carbon tax
revenue and is an essential factor that can affect public acceptance of carbon tax
policies. Environmental payments can be allocated to projects that reduce carbon
emissions or fund low-carbon energy sources, such as financing renewable energy
research and development, technological innovation, and energy efficiency. Therefore,
to assist policymakers in drafting new policies or evaluating existing carbon tax
policies. The public's willingness to pay a carbon tax is strongly influenced by the
government's choice of how to spend carbon revenues.11

Despite the many challenges faced by Indonesia in implementing a carbon tax,

there are strategies to deal with these challenges. Some methods to deal with the
carbon tax policy in Indonesia are improving the political system by strengthening the
coalition. The main problem with implementing the carbon tax from the government's
perspective is the need for more political support for the performance of the carbon
tax policy. This is one of the challenges that plague the policy formulation of a carbon
tax. Three main aspects identified as political challenges from the interviews will be
analyzed here: institutional resistance, business influence, and political conflicts of
interest. There is a gradual implementation of a carbon tax policy in Indonesia to deal
with these political problems. There needs to be a gradual implementation of which
sectors first apply carbon tax. The government must immediately compile industrial
industries that use fossil fuels. According to the author, the application to PLTU had
become the right step because, before COVID-19 in 2019, more than 90% of
Indonesia's primary energy needs were supplied from fossil fuels. Renewable energy
only accounts for about 8% of the total energy supply mix.12

In addition, the government must conduct a policy evaluation to determine

whether the policy is effective. After that, the government, in the course of
implementing the carbon tax, must gradually increase the tariff of the carbon tax. It
should be noted that the carbon tax rate in Indonesia is around IDR 30.00 per

10 Sverker C. Jagers, Johan Martinsson, and Simon Matti, ‘The Impact of Compensatory Measures on
Public Support for Carbon Taxation: An Experimental Study in Sweden’, Climate Policy, 19.2 (2019),
147–60 https://doi.org/10.1080/14693062.2018.1470963
11 Lee Ann Steenkamp, ‘A Classification Framework for Carbon Tax Revenue Use’, Climate Policy, 21.7

(2021), 897–911 https://doi.org/10.1080/14693062.2021.1946381

12 Elisa Wahyuni, ‘Challenges Facing Indonesia’s Energy Commitment’, Indonesia Post-Pandemic

Outlook: Strategy towards Net-Zero Emissions by 2060 from the Renewables and Carbon-Neutral
Energy Perspectives, 2022, 2022, 23–40 https://doi.org/10.55981/brin.562.c3

Journal of Sustainable Development and Regulatory Issues 45

Al Fadilla Yoga Brata, et al. (The Implementing a Carbon Tax as a Means)

kilogram of carbon dioxide equivalent (COze) or an identical unit by Law Number 7

of 2021 concerning the Harmonization of Taxation. The government must carry out
this rate adjustment because, according to studies on environmental tariffs, green tax
rates need to be higher to reduce emissions can result in companies paying it as part of
their business obligations without increasing control over emissions management.
Examples of countries that have gradually increased carbon taxes are Canada and
Chile.13

The Government Defines Revenue Management by its Objectives. It should be

noted that implementing the tax carbon policy in Indonesia has an impact, namely
economic contraction, such as sectoral output, aggregate demand, and household
welfare. To curb these adverse effects, it can be addressed by the compensation
(revenue) scenario chosen. Among other methods, carbon tax compensation with
labor (income) tax reduction is likely the most favorable scheme, where double
benefits will be obtained. The increase in fuel price is offset by the rise in household
income through the reduction in income tax. This will therefore induce higher
domestic demand due to increased disposable income, increasing aggregate output.
The impact on household welfare is minimal (neutral) in rural and urban areas, and
inequality remains unchanged. In the scenario of income recycling through increased
government spending, the results show that GDP at factor costs declines slightly, but
GDP at market prices increases.14

The management of carbon tax revenues must be appropriately managed by giving

them to crucial government expenditure posts. Raising the carbon tax correlates with
poverty because it can simultaneously reduce poverty, especially for children.
However, the reform will likely increase the official measure of energy poverty. We
will now look at the distributional impact of the reforms discussed above. 15 Revenue
management must be accompanied by strict supervision from the government. Proper
revenue management will minimize the negative impact caused by the energy
transition. It should be noted that implementing the carbon tax, which has raised
concerns from some parties, will cause a decrease in GDP. According to previous
studies, the decline in GDP does not affect the country. Carbon tax revenues can be
recycled into additional investments in all sectors to secure GDP gains. In addition, a
carbon tax should be implemented to change the environment since carbon tax
revenue does not correlate with a noticeable increase in GDP. Investments made by
the government to create clean energy become cheaper for end-users due to lower
per-unit costs, and therefore, more clean energy is used. Therefore, investment in the

13 Jian Wu and Alon Tal, ‘From Pollution Charge to Environmental Protection Tax: A Comparative
Analysis of the Potential and Limitations of China’s New Environmental Policy Initiative’, Journal of
Comparative Policy Analysis: Research and Practice, 20.2 (2018), 223–36
https://doi.org/10.1080/13876988.2017.1361597
14 Herbert Wibert Victor Hasudungan, ‘The Impacts of Implementing the Carbon Tax on Fossil Fuels: A

Hybrid Cge Analysis for Indonesia’, Scientific Contributions Oil and Gas, 40.2 (2018), 91–105
https://doi.org/10.29017/scog.40.2.44
15 Seamus O’Malley, Barra Roantree, and John Curtis, Carbon Taxes, Poverty and Compensation

Options (Dublin, Ireland, 13 October 2020) https://doi.org/10.26504/sustat98

Journal of Sustainable Development and Regulatory Issues 46

Al Fadilla Yoga Brata, et al. (The Implementing a Carbon Tax as a Means)

clean energy sector is only beneficial in terms of climate change mitigation rather than
in terms of GDP or income distribution.16

Carbon tax policy is associated with an energy sustainability policy. The carbon tax
policy should be combined with the government's energy sustainability policy. The
fact that reflecting on other countries shows that experience of various countries
shows that carbon tax policies are seen as part of a mitigation portfolio rather than
the first best policy option. In addition, Haites explained that almost every region that
imposes a carbon tax also implements other policies, such as emissions trading, to
reduce greenhouse gas emissions. However, Haites emphasized that implementing
multiple policies can increase compliance costs and create complex interactions and
distributional effects. Some examples of measures that can be combined with carbon
tax measures are additional tariff measures or initiatives to invest in renewable energy
development in the power sector and public investment measures in public transit to
reduce demand for private vehicle fuels.17

CONCLUSION
By the explanation above, it can be concluded that the application of tax carbon
has a positive impact on the value of revenue and the value of an investment in the
energy mix in Indonesia to create a new atmosphere in increasing the value of an
investment in Indonesia, especially investment in renewable energy which has a
domino effect on industrial fields using fossil fuels which aim to reduce the weight of
gas emissions in Indonesia which directly protects climate sustainability. One of
Indonesia's commitments to the agreed Paris Agreement is implementing a carbon tax.
The existence of a carbon tax impacts the revenue earned by Indonesia, which can
affect the energy revolution in Indonesia in the energy mix sector. In implementing
carbon tax policy in Indonesia, several challenges hinder the implementation of the
carbon tax, such as unsynchronized political support, rejected by the community
because it can harm labor-intensive industries that use fossil fuels and many politicians
who get into the business which sometimes the company carried out by politicians is
affected by the policy that rejects the implementation of the carbon tax policy.
However, there are strategies to deal with the many obstacles by creating coalitions
between politicians, improving revenue management, and including carbon tax as a
regulation related to the energy revolution or energy mix.

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