“Carbon Pricing Regulation in Indonesia: a Legal Analysis”, en.tempo.co (2 April 2022)

APCEL’s Senior Research Fellow, Dr Linda Yanti Sulistiawati, writes on carbon pricing regulation in Indonesia. She highlighted that the  new presidential regulation (Regulation) identifies a few trading mechanisms, including a ‘cap and trade’ scheme between two business entities, a carbon offset scheme, and result-based payments. Carbon trading will be conducted via an Indonesian bourse, and levies will be charged on transactions. This Regulation is complementary to the previously enacted carbon tax. Indonesian carbon tax is set with a minimum rate of Rp.  30 (US$ 0.002) per kilogram of CO2 equivalent (CO2e), or US$ 2.13 per ton of CO2e emission above the stipulated cap (cap and tax). This rate is acutely lower than the estimated carbon tax rate for Indonesia by the World Bank and IMF at US$ 30-100 per ton of CO2e. Experts have opined that this current tax rate will not encourage behavioral change – business sectors would rather pay the carbon tax than invest in new technologies or use renewable alternatives to reduce carbon emissions. There are also possibilities of this low carbon tax becoming an invitation for extractive industries to invest in their activities in Indonesia, which would cause environmental degradation in Indonesia.  The Government of Indonesia (GoI) needs to make a clear assessment of the current carbon tax, and since the regulation is pointing as a ‘minimum rate’, the implementing regulation should hike the tax rate higher than this minimum rate.  At any cost, Indonesia needs to prioritize the benefit of carbon pricing for the needs of the people directly affected by carbon and climate impacts, such as indigenous communities, local communities, and the poorest of the poor; and Indonesia needs to safeguard her environment under the sustainable development principle. These are top priorities and need to be reflected as such in the upcoming implementation of carbon pricing regulations.

The article can be found : https://en.tempo.co/read/1577672/carbon-pricing-regulation-in-indonesia-a-legal-analysis.