Indonesia to Impose Carbon Tax in April 2022 Using Two Schemes

TEMPO.CO, Jakarta - Starting April 1, 2022, Indonesia's Finance Minister Sri Mulyani Indrawati will start collecting carbon taxes from coal-fired power plant entrepreneurs. The billing will be done only if a plant emits CO2 exceeding the cap set by the government.

"That way, they can buy carbon credits elsewhere," Sri Mulyani said at a press conference on Thursday, October 7.

Sri said that the new rules will create a new ecosystem called the carbon market. She said that the cap for coal-fired plants will be determined by the Energy and Mineral Resources Ministry.

On the same day, the DPR's plenary session passed the Law on the Harmonization of Tax Regulations. One of the new regulations is the Carbon Tax.

Sri Mulyani said there are two schemes in imposing a carbon tax. The first scheme is 'Cap and Trade', wherein a generator that emits more than the capped amount of Co2, for example Plant A, must purchase an emission permit (SIE) certificate from a plant that emits Co2 below the cap, say, Plant B. Another way is for Plant A to buy emission reduction certificate (SPE).

The second scheme is the 'Cap and Tax', where Plant A then gives the SIE from Plant B. However, there is still the excess of CO2 emission that cannot be covered by the proceeds of the SIE purchase. The excess emission will be subject to carbon tax.

The carbon tax rate is set at Rp30 per kilogram of carbon dioxide equivalent (CO2e) or equivalent units. According to Deputy Finance Minister Suahasil Nazara, Rp30 is the lowest tariff. "This means that it can be adjusted, according to the carbon price," he said.

Read: Indonesia Sets Carbon Tax Rate at Rp30 per Kilogram

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