Indonesia to Impose Carbon Tax in April 2022

The Indonesian government would impose a carbon tax in April 2022 as part of the country’s tax reforms.

On Thursday, the House of Representatives passed into law the 2021 Law on Harmonization of Tax Regulations, which subject every kilogram of carbon equivalent emissions that exceed a certain cap to Rp-30 tax (0.21 cent dollar), roughly equivalent to about $2.1 per metric ton of carbon, Jakarta Globe reported.

“The implementation of this carbon tax makes Indonesia equal with developed countries that have implemented this carbon tax policy, including the UK, Japan, and Singapore,” Head of the Fiscal Policy Agency of the Ministry of Finance, Febrio Kacaribu, said

The carbon tax would change the behavior of economic actors to switch to low-carbon green economic activities.

This objective, according to the Ministry of Finance,  was part of the government’s efforts to achieve the target of reducing greenhouse gas emissions by 29% on its own and 41% with international support by 2030. 

The initial stage of the carbon tax would be applied to the Coal Steam Power Plant (PLTU) sector on April 1, 2022, using a tax mechanism based on the emission limit (cap and tax). 

The carbon tax was to be fully implemented by 2025 through the carbon exchange, where companies, could trade their emissions permit through gradual expansion of the carbon taxation sector depending on its readiness and the creation of carbon tax management regulations.

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