Strengthening Important Matters After Passing Carbon Tax

On October 29, 2021, the Indonesian government has passed the Tax Harmonization Law (UU HPP) which was promulgated in Law no. 7 of 2021. The application of a carbon tax or carbon tax is one of the new things that appears in the HPP Law.

In general, a carbon tax can be defined as a tax imposed on emissions from fossil fuels. This tax is implemented as a way to reduce greenhouse gas pollution generated in the company’s production process and reduce the dependence of individuals and companies on the use of fossil fuels.

The carbon tax will be implemented in stages starting April 2022. As an initial stage, this tax will be applied to the Coal Steam Power Plant (PLTU) sector at a rate of IDR 30.00/kg equivalent to the amount of emissions that exceed the set limit. Coal PLTU was chosen as the first target of the carbon tax, because the power generation sector is one of the largest sectors in Indonesia that contributes greenhouse gas emissions. This is considered reasonable considering that at least 61% of electricity sources in Indonesia come from coal-fired power plants.

The carbon tax rate of IDR 30,-/kg CO2 equivalent or IDR 30,000/ton CO2 equivalent is actually relatively cheaper compared to other countries that have implemented a carbon tax, considering that IDR 30,000 is only worth 2.1 USD after conversion. It is noted that Japan charges a tariff of 3 USD/ton CO2 equivalent, while Canada charges a tariff of 31.83/ton CO2 equivalent. In addition, Switzerland and Sweden apply tariffs which are among the highest among other countries, which are 101 USD/ton CO2 equivalent and 137 USD/ton CO2 equivalent.

Ideally, a high carbon tax rate will accelerate changes in the behavior of economic actors in an effort to reduce greenhouse gas pollution. The policy of gradually implementing tax rates as adopted by the Indonesian government cannot be judged to be less effective because carbon taxes are still a new concept for the community, so an introduction is needed that cannot be implemented harshly and on a large scale. The gradual introduction of a carbon tax is expected to create new habits in protecting the environment by reducing carbon emissions that are released directly into the air.

In the implementation of the HPP Law, the government’s follow-up in the form of Government Regulations and Ministerial Regulations must be carefully considered so that the smooth implementation of the carbon tax can be applied in a sustainable manner. The government must understand that the main purpose of the carbon tax is to protect the environment, so that the carbon tax cannot be treated like other taxes, which are merely a source of income. Mixing carbon taxes and other taxes into one big pocket of state revenue will make the main objectives of carbon taxes, emission reduction and greenhouse gas pollution, blurry, because carbon taxes are the same as other taxes.

It is necessary to create a special mechanism system for managing carbon taxes, so that state revenues from carbon taxes can later be re-spended by the state for low-carbon development. We must understand that Indonesia still does not have facilities that support low-carbon activities, so that carbon taxes are expected to be the backbone in implementing low-carbon policies in the future, such as the construction of renewable energy power plants, green technology research, green industry incentives, and others. other.

Of course, this must be carried out in a transparent and accountable manner in order to avoid a decline in public confidence in the government’s efforts to preserve the environment. The government needs to understand that without substitution for industry and energy sources that play a major role in air pollution through emissions, the implementation of a carbon tax will only be considered as a way for the government to make money regardless of the public interest, in this case climate change caused by the effect of greenhouse gases.

The process of implementing the carbon tax will certainly not be separated from the technical implementation that will be carried out based on Government Regulations and Ministerial Regulations. The government again needs to understand that the carbon tax requires a series of infrastructure that is more focused on climate change measurement models rather than only focusing on financial models in the formulation of instruments to clarify the technical implementation of the carbon tax.

For this reason, the government needs to choose the destination sub-sector and the type of carbon tax to be applied. Furthermore, international standards must be applied in the technical formulation of carbon tax implementation in order to prepare clear and transparent targets, measurements, and evaluation models.

Given that the carbon tax is still a new thing, the government should pay attention to the human resources (HR) prepared to implement this tax. The implementation of the carbon tax requires the government to carry out special training for the human resources involved, so that knowledge of the importance of mitigating climate change becomes a mindset in every decision making and implementation of daily work.

Effective communication to the public, especially prospective taxpayers and taxpayers, in the business sector affected by the implementation of the carbon tax is also important to note. All implementation techniques, policies, and qualified human resources will not be able to succeed in implementing the carbon tax, if the community as the tax target does not understand well or even reject the application of this tax.

A clear and clear explanation of the implementation steps, objectives, directions, benefits, and evaluation of the implementation of the carbon tax must be communicated to the public in order to avoid misunderstanding and public rejection of the carbon tax which can increase economic and political risks. The government as an umbrella in the state is obliged to carry out targeted, open, and transparent communication so that the wider community can easily understand the implementation of the carbon tax.

The HPP Law that has been approved is a strong foundation in starting efforts to systematically reduce greenhouse gas emissions and effects. Furthermore, it will be up to the government to demonstrate and prove its seriousness and seriousness in implementing the carbon tax without forgetting the original purpose of this tax, which is to promote low-carbon development and reduce emissions.