Carbon Series: Aspects of Carbon Tax According to the HPP Law

Carbon Series: Aspects of Carbon Tax According to the HPP Law

Carbon Series - 18 Sep, 2023 10:09 WIB

The implementation of carbon tax is one of Indonesia's commitments to reducing CO2 emissions. Basically, carbon tax is a tax imposed on CO2 emissions from various economic activities that contribute to climate change. The HPP Law (Harmonization of Tax Regulations) No. 7 of 2021 in Indonesia introduces carbon tax as one of the instruments to reduce CO2 emissions. Furthermore, Government Regulation Number 50 of 2022, Article 69, specifically elaborates on the aspects of the implementation of rights and obligations of carbon tax. Here are some aspects of carbon tax:

  1. Applicability: imposed on carbon emissions that have a negative impact on the environment;

  2. Direction of carbon tax application: taking into account the roadmap for the carbon market and/or the roadmap for carbon tax, which contains strategies for reducing carbon emissions, priority sector targets, alignment with the development of new and renewable energy, and alignment with various other policies;

  3. Principles of carbon tax: principles of justice (just) and affordability (affordable) with due regard to the business climate and the poor;

  4. The carbon tax rate is set higher than or equal to the carbon price in the carbon market with a minimum rate of Rp 30,000 per kilogram of carbon dioxide equivalent (CO2e);

  5. Utilization of state revenue from Carbon Tax is carried out through the APBN mechanism. It can be used, among others, for climate change mitigation, providing social assistance to poor households affected by carbon tax, subsidizing renewable energy, and others;

  6. Taxpayers who participate in carbon emissions trading may be given a reduction in carbon tax;

  7. The implementation of carbon tax: effective on April 1, 2022, which was first imposed on entities engaged in the field of coal-fired power plants with a cap and tax scheme that is in line with the implementation of the carbon market that has begun to operate in the coal-fired power plant sector.


For comparison, the carbon tax rate set at Rp 30,000 per kilogram of CO2e is still much lower than the carbon tax rate in Singapore, which is around Rp 56,89 per kilogram of CO2e, even though the amount of carbon emissions generated in Indonesia is still far above Singapore. In addition, Article 13 paragraph 5 of the HPP Law states that the subject of carbon tax is only individuals and business entities that purchase goods containing CO2 or generate carbon emissions, which points to consumers as the subject of carbon tax. For example, if a coal company sells coal to another industry, it will be considered a carbon tax collector and not a subject of carbon tax.


Also read: Carbon Series: An Introduction to Carbon Tax in Indonesia


It is hoped that the carbon tax regulations that tend to target consumers will receive attention from the government in the future. So that in the future, carbon tax becomes one of the control tools in realizing a just tax system that not only changes the behavior of consumers but also producers who are major contributors to CO2 emissions.

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