The Back and Back of the Carbon Tax: From Unfinished Regulations to Global Risks Page all

GOVERNMENT postpone the application carbon tax starting July 1, 2022. This is the second delay in the implementation of the carbon tax schedule. The unfinished readiness of regulations and related sectors as well as global economic risks are considered.

Carbon tax is the mandate of Law Number 7 of 2021 concerning Harmonization of Tax Regulations (UU HPP). The closing provisions of the HPP Law, specifically Article 17 Paragraph (3), state that the carbon tax will begin to be implemented on April 1, 2022. The target is that the carbon tax will be fully implemented in 2025.

Also read: Important Points Changes and Additional Tax Rules in the HPP Law

The clause in the closing provisions of the HPP Law also states that coal-fired power plants will be the first to be subject to a carbon tax, using a rate of Rp. 30 per kilogram of carbon dioxide equivalent or equivalent units using the mechanism. cap and tax.

The provisions regarding the carbon tax are contained in Chapter VI of the HPP Law. Minister of Finance Sri Mulyani Indrawati in her presentation on the HPP Law on October 7, 2021 explained that there will be two schemes in the implementation of the carbon tax, namely cap and trade and cap and tax.

KOMPAS.com/PALUPI ANNISA AULIANI Carbon Tax Scheme in the HPP Law

Entities that produce emissions in excess of the upper limit (cap) carbon emissions are required to purchase emission permits (SIEs) from entities whose emissions are still below cap or purchase an emission reduction certificate (SPE/carbon offset).

In the event that the entity cannot purchase SIE or SPE for its excess emissions, the remaining emissions will be subject to a carbon tax.

First delay

On March 28, 2022, the Ministry of Finance announced the postponement of the implementation of the carbon tax. The implementation of the carbon tax has been rescheduled to start July 1, 2022.

“We see room to delay the implementation of this carbon tax, which was originally April 1, 2022, we can postpone it to around July while we prepare more comprehensive laws and regulations,” said Head of the Fiscal Policy Agency (BKF) of the Ministry of Finance Febrio Kacaribu at a conference. March 2022 edition of APBN, Monday (28/3/2022).

According to Febrio, the legislation that covers the carbon tax is not only a derivative of the HPP Law. He among other things referred to the existence Presidential Regulation (Perpres) Number 98 of 2021 concerning Implementation of Carbon Economic Values ​​for Achieving Nationally Determined Contribution Targets and Control of Greenhouse Gas Emissions in National Development.

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“Because there is also Presidential Decree 98 related to the economic value of carbon, from the beginning we wanted to ensure the consistency of the policy on this carbon tax in the context of the economic value of carbon,” said Febrio.

Febrio emphasized that the regulation of the carbon tax will be connected with the main points of regulation regarding the carbon market which is one of the scopes of Presidential Regulation Number 98 of 2021. “From the start we wanted to connect between the two,” he said.

In this first delay, Febrio said that the government was also monitoring the readiness of supply and the price of needs, related to people’s purchasing power.

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Then, via a press release dated April 1, 2022, Febrio explained that the carbon tax will be applied when regulations and the electricity sector as the first sector to be taxed are more ready. The hope is that the implementation of the carbon tax will really have an optimal impact.

The regulation in this case is a technical regulation on the implementation of the carbon tax. The implementing rules include tariffs and the basis for imposition, methods for calculating, collecting, paying or depositing, reporting, as well as a carbon tax roadmap.

Other technical rules related to the carbon tax are the emission limit for the PLTU sub-sector and the procedure for implementing the economic value of carbon in power plants which will be determined by the Ministry of Energy and Mineral Resources (ESDM).

In this regard, said Febrio, the government is also preparing technical regulations from Presidential Regulation No. 98 of 2021. In this case, the derivative rules include the implementation of carbon economic value (NEK) and nationally determined  contributions (NDC) at the Ministry of Environment (KLHK) and the Steering Committee on Carbon Economic Values ​​at the Coordinating Ministry for Maritime Affairs and Investment.

“Climate issue is a cross-sectoral issue. We will continue to maintain and strengthen coordination so that regulations that complement each other can optimize the government’s efforts to control climate change,” said Febrio.

Also read: Does Carbon Tax Also Target Consumers?

Febrio emphasized that the implementation of the carbon tax is not only aimed at increasing state budget revenues. According to him, the carbon tax is also an instrument of climate control in achieving sustainable economic growth according to the polluter pays principle.polluter pays principle).

“The imposition of a carbon tax is expected to change the behavior of economic actors to switch to low-carbon green economic activities,” said Febrio

On the other hand, the process of compiling a roadmap or roadmap carbon taxes need to pay attention to the carbon market roadmap. The carbon tax roadmap will include a strategy for reducing carbon emissions in the NDC, priority sector targets, alignment with new and renewable energy development, and alignment with other regulations.

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“In its implementation, the government will pay attention to the right transition so that the implementation of this carbon tax remains consistent with the momentum of post-pandemic economic recovery,” said Febrio.

According to Febrio, the imposition of the carbon tax will be carried out in stages by taking into account the priorities in achieving the NDC target, the development of the carbon market, sector readiness, and Indonesia’s economic condition. The goal is that the carbon tax in Indonesia fulfills the principles of justice, is affordable, and prioritizes the interests of the community.

“The various renewed efforts and commitments show the government’s seriousness in addressing the impacts of climate change. Therefore, we need to optimize all existing instruments, including APBN and private funding,” said Febrio.

Second delay

Announcement regarding the postponement of the implementation of the carbon tax again in the June 2022 State Budget Press Conference, on Thursday (23/6/2022). Global economic conditions, including geopolitical situations such as the war in Ukraine, are a consideration for delays in addition to unfinished regulatory preparations.

“With the current conditions, the government is considering reviewing the implementation of the carbon tax. (However), the carbon tax is still targeted to be imposed for the first time on coal power plants with the mechanism cap and tax starting in 2022,” said Febrio.

Also read: Twice Delayed, Government Cancels Carbon Tax Implementing as of July 2022

According to Febrio, regulations supporting the implementation of the carbon tax are still being finalized by all ministry agencies, including the Ministry of Finance. The preparation of this regulation, he continued, took into account all aspects, especially the development of the carbon market and the readiness of the related sectors. Global conditions, said Febrio, also continue to be carefully anticipated.

In a press statement Friday (24/6/2022)the Ministry of Finance reaffirmed its commitment to achieve an NDC of 29 percent with its own efforts and 41 percent using international support by 2030, even though the implementation of this carbon tax is delayed again and will not take effect from 1 July 2022.

Febrio said the government still puts climate change as a priority. However, he said, the economy is currently also facing global risks that overshadow efforts to recover the economy after the Covid-19 pandemic.

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“Currently, the main focus of the Government is to protect the national economy from the spread of global risks, one of which is the increase in global food and energy commodity prices in line with the war in Ukraine which has led to an increase in domestic inflation,” explained Febrio.

With these developments, he continued, the government prioritized the function of the APBN to ensure the availability and stabilization of energy and food prices in the country, including providing subsidies and various forms of social protection to protect the poor and vulnerable from the impact of price increases.

“APBN as a shock absorber (shock absorber) becomes a central instrument in maintaining and protecting the economy and the people from the impact of rising global food and energy prices,” said Febrio.

Also read: Global Food Crisis, Bigger Threat Than Russia’s Invasion of Ukraine

The government also continues to make the implementation of a carbon tax in 2022 a strategic achievement (deliverables) which became an example at the G20 high-level meeting.

“Including part of these deliverables, the Government also encourages other climate change mitigation actions, including through the energy transition mechanism (energy transition mechanism/ETM) which on the one hand prematurely retires coal-fired power plants (phasing down coal) and on the other hand accelerating the development of new and renewable energy (EBT) while still considering the social and economic impacts,” said Febrio.

Separately, a tax researcher, Fajry Akbar, believes that the implementation of a carbon tax in 2022 is deemed inappropriate. This is because the price of energy commodities such as fuel oil and coal is currently high.

As quoted by Kontan, Fajry suggested the government to run the carbon tax administration first without collecting it. He also regrets that until now the technical regulation of the carbon tax has not been completed.

“The most important thing is that the administration runs without any carbon tax collection and then relaxation is given. Later, when energy prices return to normal, then a carbon tax will be collected (when) on the other hand, the administration is ready,” added Fajry, Friday (6/24/2022).

Read on Cash: The implementation of the carbon tax on July 1, 2022 is postponed, this is what tax observers say

Manuscript: KOMPAS.com/PALUPI ANNISA AULIANI

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