Muhammad Hendartyo, Jakarta – Coordinating Minister for the Economy Airlangga Hartarto said Indonesia planned to impose a cap and trade tax and offset or carbon tax on coal-fired power plants starting July 2022. Coal-fired power plants operating inefficiently and producing emissions higher than the upper cap will be subject to additional costs.
"Indonesia is attempting to open up innovation by applying a cap and trade tax in the power generation sector which we cannot deny that there are more efficient or more effective mechanisms [to cut emissions]," said Airlangga in a virtual discussion on Monday, June 20, 2022.
He also said the carbon tax is aimed at changing people's behavior to switch to green economic activities. "While encouraging low-carbon development, technological innovation, and investments that are more efficient, low-carbon, and environmentally-friendly," he emphasized.
The tax was initially planned to be implemented last April. However, the government delayed its implementation for three months as it is still preparing the technical regulations.
The tax amount is regulated in Article 13 of the Law on Harmonization of Tax Regulations (UU HPP), in which the government and the House of Representatives (DPR) agreed on the rate of Rp30.000 per kilogram, higher than or equal to the carbon price rate on the carbon market.
From 2022 to 2024, a carbon tax will be applied to the power generation sector or coal-fired power plants. In 2025, it will be implemented fully and expanded to other industries in accordance with their readiness.