Indonesia
Law 7/2021 on Harmonization of Tax Regulations
Summary Description
Implements a carbon tax on all GHG emitting activities, including the agriculture sector in 2025.
Species
Farmed animals
Jurisdiction
Indonesia
Sub-Jurisdiction
N/A
Type of Act
Legislation
Status
In force
Legal Value
Binding
Date Enacted
2021
Date Updated
June, 2023
Official Citation
Indonesia Law No. 7 of 2021 on Harmonization of Taxation Regulation
Strengths & Weaknesses
Strengths
- The scope of the carbon tax is broad and extends to:
- Individuals or organisations that purchase carbon-containing goods or engage in activities that generate carbon emissions over a certain period.
- All businesses that emit substantial amounts of carbon in sectors such as energy, transportation, waste and agriculture.
- A range of GHGs, including Carbon Dioxide (CO2), Methane (CH4) and Nitrous Oxide (N2O).
- The revenues generated from the carbon tax will be allocated to tackle climate change.
Weaknesses
- While the tax rate is set to be higher than the market price, the minimum tariff is too low (IDR 30 per kg. Co2e) to trigger behavioural change.
- The tax will start applying to the agricultural sector in 2025 only and it is still unclear what will the tariff rate be for this sector, and whether exemptions will be granted.
- Indonesia's broader climate policy does not include the elimination of harmful subsidies, and still provides subsidies to fossil fuels which outweigh the spending on climate activities, thereby posing issues regarding policy coherence.
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