Indonesia delays carbon tax scheme again on global risk

The Indonesian government has again postponed the start of a carbon tax scheme, which was set to be implemented by 1 July, citing global risks stemming from Russia's invasion of Ukraine.

This is the second time the new tax scheme has been delayed. It was originally set to begin in April this year but was moved back to July because of unfinished supporting regulations needed to ensure proper implementation, according to the country's ministry of finance.

There is currently no definite target implementation date for the carbon tax scheme. But the finance ministry said the government wants the new tax scheme to be operational by the time the G20 summit takes place, which will be hosted by Indonesia in November. By doing so, Indonesia can showcase this as an example of implementing carbon tax schemes in developing countries, it said.

The latest postponement was because of the emergence of global risks this year, the ministry of finance said. It added that the main focus of the government is to protect the national economy from global risks, such as an increase in global food and energy prices following Russia's invasion of Ukraine which has contributed to an increase in domestic inflation.

The ministry said that the postponement of the carbon tax scheme will give more time for relevant agencies to iron out any issues regarding the implementing of rules and regulations needed for the new tax scheme. The process of improving the supporting regulations is carried out by taking into consideration all related aspects, including the development of carbon markets, the achievement of nationally determined contributions (NDC) targets, sector readiness, and economic conditions.

Indonesia's carbon tax scheme is part of the national government tax overhaul that was signed into law last year. It targets individuals and corporations that purchase carbon-containing goods or engage in activities that generate carbon emissions, with coal-fired power sector being the first industry that the new scheme will be applied to. Coal plants under the system will have to pay 30,000 rupiah/t ($2.02/t) of carbon dioxide equivalent for emissions above a set limit.

By Antonio delos Reyes