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Unfolding Stories
New carbon tax signals higher power costs amid calls for clarity
The introduction of the tax is part of an ambitious tax overhaul, approved by parliament on Thursday, that includes raising value-added taxes (VAT) next year and cancelling a planned corporate tax cut.
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I
ndonesia is set to become Asia's fourth country to introduce a carbon tax but analysts expect opposition from industries that have warned of implementation problems and higher power costs that could undermine manufacturing competitiveness.
The introduction of the tax is part of an ambitious tax overhaul, approved by parliament on Thursday, that includes raising value-added taxes (VAT) next year and cancelling a planned corporate tax cut.
The carbon tax will be introduced at a minimum rate of Rp 30 (US$0.0021) per kilogram of CO2 equivalent (CO2e), less than half of the originally proposed rate of Rp 75.
It will be imposed at the floor rate on coal-fired power plants from April while a carbon trade mechanism is established. A carbon market is expected to be in operation by 2025.
Indonesia is the world's top exporter of thermal coal and the eighth-biggest carbon emitter.
The new tax is part of a plan to slash carbon output that has included bringing forward a goal of net zero emissions from 2070 to 2060 or sooner.
The carbon tax has been generally welcomed though some industry analysts have questioned the logic of the government taxing carbon emitted by utilities while at the same time subsidizing the electricity they produce.
