Carbon Tax Confirmed to Take Effect From 1 July 2022

Date of Post

April 5, 2022

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The government will postpone the implementation of the carbon tax.

Previously, the government planned to implement a carbon tax starting on 1 April 2022. However, the government postpones the plan to implement a carbon tax to July 2022.

The Head of the Fiscal Policy Agency of the Ministry of Finance, Febrio Kacaribu, explained that the implementation of the carbon tax is postponed because the government still intends to formulate adequate and consistent derivative regulations, namely by harmonizing HPP Laws and Presidential Regulation on Implementation of Carbon Economic Value. In addition to formulating more comprehensive derivative regulations, the implementation of the carbon tax is postponed because the government will focus on ensuring the supply for all community needs, prices, and community purchasing power toward Ramadan and Eid al-Fitr 2022.

For information, the government stipulated the lowest carbon tax rate of Rp30 per kilogram of carbon dioxide equivalent (CO2e) or equivalent units. In the initial stage, the carbon tax will be imposed on the coal-fired Steam Power Plant sector. The imposition of the carbon tax will be carried out by taking into account the carbon tax roadmap and the carbon market roadmap. The carbon tax roadmap sets out carbon emission reduction strategies, priority sector targets, alignment with new and renewable energy development, and/or alignment between various other policies.

Minister of Finance Sri Mulyani addressed at a virtual event on 31 March 2022 that:

“The implementation of the carbon tax should be carried out on April 1, 2022, but we still have to coordinate to synchronize the roadmap; Efforts to harmonize the rules are still being discussed so that they are in line with the roadmap for reducing carbon emissions to achieve net-zero emissions by 2060”.

Sri Mulyani addressed that the imposition of a carbon tax is rather complicated. In terms of price, for example, the price of carbon in the world is different, which creates the risk of leakage. Not surprisingly, carbon trading between countries requires a global agreement.

Read More:  Tax treatment of Fintech activities

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