THE NATIONAL RESEARCH AND INNOVATION AGENCY
Carbon Tax Policy, Indonesia’s Commitment to Reducing Greenhouse Gas Emission
Indonesia has shown its commitment to reducing Greenhouse Gas (GHG) emission by issuing Law Number 7 of 2021 concerning Harmonization of Tax Regulations (HPP Law). This law will be the basis for implementation of carbon tax in Indonesia in addition to other regulations that regulate carbon tax as a derivative regulation of the HPP Law. As a form of its attention to this policy, the National Research and Innovation Agency (BRIN) held a Talk to Scientists (TTS) under the theme “Carbon Tax, toward an Era of Green Innovation and Investment ” on Monday, 20 June 2022.
Jakarta, 20 June 2022. BRIN supports the planned implementation of the Carbon Tax policy by conducting a study from the perspective of life sciences and socio-economics. A short study focusing on reforestation, conducted by researchers at the Center for Ecology and Ethnobotany Research, for example, indicates the need for other studies to learn strategies for optimizing the Nationally Determined Contribution (NDC) activities and controlling Greenhouse Gas (GHG) emission for national development.
Head of the Biological and Environmental Research Organization, Iman Hidayat, said that the implementation of the HPP Law is the key to creating a quality living space for humans. “This quality living space is not only for humans in Indonesia, but for humans globally, considering that Indonesia has an important position in the world’s carbon market,” said Iman.
The implementation of the HPP Law, according to Iman, further strengthens Indonesia’s commitment to realizing the national target of reducing GHG emission by 29% independently and 41% with international support by the year 2030, as stated in the Paris Agreement. Indonesia is even targeting Net Zero Emission in 2060 or earlier. “This policy will have an impact on the behavior of industries and the society in producing and consuming products with low Greenhouse Gas Emission,” he said.
In addition, continued Iman, imposition of carbon taxes gives a strong signal that encourages the development of technological innovation and investment that is more efficient, low-carbon, and environmentally friendly. “From the economic perspective, we are now getting familiar with the term Green Economy, an idea that aims to improve welfare and social equality, while reducing the risk of environmental damage globally,” he added.
Head of the Center for Ecology and Ethnobotany Research, Anang Setiawan Achmadi, stated that, based on the results of studies, in general, the enthusiasm for the implementation of carbon taxes/levies on carbon needs to be supported by all stakeholders. “Supports are needed for achievement of nationally determined contribution (NDC) targets, control of GHG emission, green investment, overcoming of climate change financing gaps, sustainable growth, and internalization of externality costs,” he explained.
Iman hoped that the implementation of the HPP Law would be able to change the behavior of economic actors to switch to low-carbon green economic activities. According to him, this can be realized if industrial and business activities can have a significant impact on the environment by encouraging industrial players and the community to produce and consume products with low GHG emission to a minimum.
The results of study by researchers at the Center for Behavioral and Circular Economic Research are included in a brief review of the implementation of carbon taxes in Indonesia. This brief review emphasizes that the carbon tax roadmap must, apart from prioritizing the achievement of the NDC target, also consider the readiness of prioritized sectors and continue to prioritize the interests of the community. The study conducted by Adang Agustuan, Raden Deden Djaenudin, and Maxensius Tri Sambodo establishes that the carbon tax roadmap must consider the development of carbon market and synchronized with the carbon market roadmap. The reason is because Indonesia has a major market potential and carbon markets in the world.
Head of BRIN’s Circular Economic Research Center, Umi K. Yaumidin, said that the study emphasized that Indonesia must protect the carbon market so as not to be exploited by developed countries that produce carbon emission. The results of the short study also suggest that the target of realizing a domestic carbon trading market in Indonesia needs to be supported both in terms of regulations and in preparation of domestic carbon trading schemes that benefit the environment and the economy.