Understanding the political challenges of introducing a carbon tax in Indonesia
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ORIGINAL PAPER
Understanding the political challenges of introducing a carbon tax in Indonesia R. Dyarto1 · D. Setyawan1 Received: 8 April 2020 / Revised: 2 August 2020 / Accepted: 1 September 2020 © Islamic Azad University (IAU) 2020
Abstract Indonesia is the 6th largest carbon emitter in the world. It is also one of the most vulnerable countries to climate change, with a population of 250 million people spread across thousands of islands and low-lying coastal areas. This paper investigates the political challenges to introduce a carbon tax as a climate policy option in Indonesia. It is based on the analysis of 29 indepth elite interviews with key Indonesian stakeholders. It finds that, while political elites seem, in principle, to be open to the idea of a carbon tax, they are also cognisant of the impact of corruption challenges in the Indonesia context. Meanwhile, the business community opposes a carbon tax and fears the introduction of additional costs that may influence productivity and competitiveness. Non-government organisations, however, support its immediate introduction. Overall, this work makes an important contribution to the ever-growing academic debate on the introduction of carbon prices to assist carbon mitigation efforts. It also has important ramifications in terms of transparency, accountability and political pluralism in Indonesia. Keywords Climate change · Climate policy · Carbon prices
Introduction Indonesia is extremely vulnerable to the effects of climate change due to its high greenhouse gas emissions (GHG). The land sector contributes significant share of Indonesia’s GHG, whereas this is mostly a result of deforestation1 (Jotzo 2012). The highest rates of deforestation in Indonesia occurred in 1990s, with forests in Sumatera and Kalimantan rapidly vanished (Tsujino et al. 2016). Peatlands also contributes a quite significant GHG emission to Indonesia’s land-based, particularly during early 2000s (Page et al. 2002). The burning of oil, gas and coal provides another significant part of Indonesia’s GHG emissions profile. Based on the recent data from the Indonesian Ministry of Environment and Forestry (2019), transportation and manufacturing sectors had contributed for around 48 per cent of carbon emission in Indonesia. The emissions sourcing from this sector has been growing Editorial responsibility: Jing Chen. * D. Setyawan [email protected] 1
Fiscal Policy Agency, Ministry of Finance of Republic of Indonesia, Jalan Dr. Wahidin Raya, No. 1, Jakarta, Indonesia
substantially at around 6 per cent per year, where its growth rate has been doubled every 12 years (Jotzo 2012). Bappenas (2015) projected that emissions from this sector will compose more than a half of total emissions in Indonesia by 2030. In a short-term, the most potential GHG reductions can be gained from the forestry and land-based sector; however, to sustain a long-term emission reduction, Indonesia should enforce a reform in the energy sector (Jotzo 2012). In the absence of sound policy measures to decarboniz
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