The Impact of Carbon Tax Application on the Economy and Environment of Indonesia

Abstract

As the most efficient market with a mitigation instrument basis, carbon tax is highly recommended by economists and international organizations. This paper examines the impact of implementing carbon tax policy on value of change in GDP, GDP Quantity Index, Government Household Demand, Private Household Demand, and CO2emission effects in Indonesia by using the dynamic energy Computable General Equilibrium (CGE) model. This study used GTAP-E that was part of GTAP 9 in 2011. GTAP-E consists of 140 countries and 57 sectors aggregated into eleven regions and eight sectors. There were three scenarios of carbon tax used in this paper that were China, Singapore, and India. The result shows that both GDP and GDP index have a negative impact due to the carbon tax of US $20/tCO2, US$ 10/tCO2, and US $1.60/t CO2. The greater the application of the carbon tax is, the greater the decrease of values of GDP, Government Household Demand, Private Household Demand towards carbon tax policies in Indonesia are. The negative impact of carbon tax is greater for the Private Household Demand that is indicated by all commodities except crude oil has decreasing demand from baseline scenario (no tax). While in the Government Household Demand, agriculture sector, crude oil, refined oil product, and other industries, carbon tax has a positive impact. In the environmental facet, if the carbon tax in Indonesia is implemented in accordance with the above simulation, then it appears that carbon tax can reduce emissions of CO2.

The Impact of Implementing a Carbon Tax on Welfare: Case Study of Indonesia and The Other ASEAN Member Countries

“…Puttanapong et al (2015) also found that increasing the carbon tax was able to reduce carbon emissions. Not only with the Dynamic CGE model, research using GTAP E (Nong, 2018 andAyu, 2018), the SAM model (Frey, 2017;Grottera et al, 2017), the MIT EPPA model (Octaviano et al, 2014) revealed that a carbon tax would be able to reduce carbon emissions.…”

“…This result is in line with Wattanakuljarus (2019) who also used the Dynamic computable general equilibrium (CGE) Model in Thailand, the use of a carbon tax of 20% was able to reduce emissions by 2030. Not only with the Dynamic CGE model, research using Global Trade Analysis Project (GTAP) E (Ayu, 2018;Bi et al, 2019;Cao et al, 2016;Coxhead et al, 2013;Kat et al, 2018;Nong, 2018;Nurdianto & Resosudarmo, 2016;Ojha et al, 2020;Ward & Batista, 2016;Yusuf & Resosudarmo, 2015), the SAM model (Frey, 2017;Grottera et al, 2017), the MIT EPPA model (Octaviano et al, 2014) reveals that a carbon tax will be able to reduce carbon emissions.…”

Potensi Penerapan Kebijakan Carbon Tax Pada Industri Konstruksi Indonesia

“…Model CGE yang umumnya digunakan untuk mengetahui dampak atas kebijakan energi adalah model CGE-IndoCEEM (Indonesia Clean Energy and Energy Conservation) yang dikembangkan oleh tim kolaborasi peneliti Batlibang ESDM (Badan Penelitian dan Pengembangan Energi dan Sumber Daya Mineral), Badan Kebijakan Fiskal Kementerian Keuangan, dan Monash University. Salah satu hasil pemodelan CGE memperlihatkan bahwa penerapan carbon tax di Indonesia efektif dapat mengurangi emisi karbon sebesar 9,6% jika ditetapkan tarif carbon tax sebesar 20 USD/tCO2e (Ayu, 2018). Penerapan carbon tax dapat menjadi sumber pendapatan besar pada industri-industri padat energi dan karbon seperti industri konstruksi, pulp dan kertas, tekstil, petrokimia, dan transportasi (Irama, 2019;Yusuf dan Resosudarmo, 2015).…”

Carbon tax, energy policy, and sustainable development in Indonesia

“…Having such importance, only a few studies examine the impact of the carbon tax policy in Indonesia. A carbon tax policy is predicted could reduce CO 2 emissions in the country (Ayu, 2018). Focusing on the distributional impact of a carbon tax, it is estimated that the intervention in Indonesia is not necessarily regressive (Yusuf & Resosudarmo, 2015).…”