Once More Delayed, Government Decides to Implement the Carbon Tax in 2025

JAKARTA. The government finally revealed that the imposition of a carbon tax will be carried out starting in 2025.

Previously, the government had twice deferred the implementation of the policies regulated in Law Number 7 of 2021 on the Harmonization of Tax Regulations (HPP).

The initial plan, the carbon tax was originally set to take effect on 1 April 2022, however, since it was not ready yet, the government postponed it until 1 July 2022, which ultimately could not be realized.

According to the Coordinating Minister for Economic Affairs Arilangga Hartarto, as quoted from cnbcindonesia.com, the implementation of the 2025 carbon tax will be in parallel with the carbon trade.

Cap and Tax Scheme

If referring to the HPP Law, the carbon tax rate that will be imposed is at least IDR 30 per kilogram of carbon dioxide equivalent.

Meanwhile, the imposition of a carbon tax uses two mechanisms, namely the first to set emission limits that may be carried out by each industry and the mechanism of tax rates that must be paid for each certain unit.

These two schemes are also known as cap and tax schemes, namely carbon tax and cap-and-trade schemes which are commonly used in many countries.

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Quoting Kontan.co.id, the imposition of this carbon tax is carried out to reduce greenhouse gas emissions or achieve the target of net zero emission in 2060. However, the government did not explain why the implementation of the carbon tax had to be postponed until 2025.

Hampered by Economic Conditions

Meanwhile, on some occasions, Minister of Finance Sri Mulyani Indrawati revealed that the imposition of a carbon tax depends on several factors, one of which is economic conditions. Currently, it is considered inappropriate to implement a carbon tax because the world is facing an energy crisis and a surge in inflation.

In fact, the Special Advisor to the Minister of Finance, Masyita Crystallin, said that the implementation of the carbon tax also depends on the readiness of the regulations that are still being drafted. There are at least three roadmaps being prepared, such as the carbon tax roadmap, the energy transition roadmap, and the carbon market roadmap.