Carbon Tax Is Getting Closer, This Is the Preparation of the Indonesian Government

The Indonesian government is now getting serious about implementing a carbon tax, there are various efforts that the government has prepared, one of which is preparing a carbon trading mechanism.

Chairman of the Board of Commissioners of the Financial Services Authority (OJK) Wimboh Santoso said that his agency is currently preparing an ecosystem for the carbon market, considering that carbon trading can be done through the carbon exchange or direct trading. According to him, the preparation of the carbon market also requires cross-ministerial and institutional coordination.

“We continue to prepare the ecosystem for the carbon market in Indonesia and cooperate with various stakeholders,” he said at a press conference of the Financial System Stability Committee (KSSK), Wednesday (13/4/2022).

Wimboh also said that there are several aspects that need to be prepared. In the process, OJK also cooperates with other ministries and institutions. Such as the Ministry of Finance, Ministry of Environment and Forestry, and Bank Indonesia (BI).

The carbon market is a major part of the government’s efforts to reduce carbon emissions. This is also in line with Indonesia’s commitment to reduce global carbon emissions, as stated in the Nationally Determined Contribution (NDC).

“Later on, the form is to give a mandate to the capital market as a center for carbon trading in Indonesia,” he continued.

Indonesian President Joko Widodo (Jokowi) has issued Presidential Regulation (Perpres) 98/2021 regulating the establishment of a carbon exchange to support the implementation of carbon trading. The carbon exchange is a system that regulates the recording of carbon stocks, carbon trading, and the ownership status of a carbon unit.

In addition to carbon trading, the government’s efforts to control carbon emissions are also carried out through the implementation of a carbon tax which will begin in July, in which the implementation of a carbon tax is planned in early April 2022 while waiting for the readiness of the carbon market mechanism.

The imposition of a carbon tax has been regulated in the Law on the Harmonization of Tax Regulations (HPP). At the initial stage, the implementation of a carbon tax will be carried out on coal-fired power plants at a rate of Rp. 30/kilogram of carbon dioxide equivalent (CO2e) or an equivalent unit.

Carbon taxes are imposed using a cap and trade mechanism. Therefore, the government must also prepare a carbon trading mechanism that does not only apply domestically, but also internationally.

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