Carbon Tax Ecosystem of an Energy Transition Phase
The study conducted by World Bank has a unique section that provides recommendations for how Indonesia might accelerate economic development and increase resilience, while simultaneously decreasing emissions of greenhouse gases released into the atmosphere. The transformation of Indonesia’s economy into one that is low in carbon emissions and climate-resilient has the potential to bring about a new phase of economic development and the alleviation of poverty.
Through the implementation of fiscal, financial, and trade policies, Indonesia has the potential to contribute to the progress it has already achieved in tackling the difficulties related to climate change. It is possible for fiscal measures to assist in increasing revenues and disincentivize the use of fossil fuels.
It is possible to raise capital for climate change adaptation and mitigation, via the use of financial instruments such as green bonds. The importation of items that are necessary for the mitigation and adaptation to climate change might be simplified via the implementation of trade policy changes. It is possible for Indonesia to make progress in its transition to a greener economy, by formulating strategies to finish reforming subsidies for energy and expanding carbon pricing. This might either simplify non-tariff trade barriers that are relevant to green products or phase them out entirely.
In contrast, Ganjar Pranowo strongly urges that an energy transition should be gradually imposed, as it is tough; Indonesia has settled the roadmap of year of 2060 for a fully new & renewable energy (NRE) mainstream. He promotes the energy transition in a geopolitical perspective, in which Indonesia should conserve natural resources of fossil energy rather than to seek opportunities for renewable energy development.
The procedure is not a simple one. The issues that we will face in the future will be more severe if we do not make the shift to a different energy source from this point forward. When the money runs out and all of the resources that are now available are depleted, we will be in a transitional phase. Why does Singapore take advantage of Australia’s coal supply? In spite of the fact that it could be our market potential, the NRE has a tremendous amount of economic potential. A change is being made in a gradual manner.
There is a levy known as a carbon tax that is levied on any product that is responsible for the emission of carbon, such as fossil fuels. In accordance with the definition provided by the Organization for Economic Cooperation and Development (OECD), a carbon tax is a kind of carbon pricing that is determined by the amount of carbon dioxide emissions.
Although it guarantees maximum levels of emission reduction, a carbon tax does not ensure that marginal costs will be lower than they would otherwise be. A price on carbon, on the other hand, may be used to compensate for reductions in emissions.
The introduction of a carbon tax in Indonesia seems to be less difficult and more suitable than the adoption of an emissions trading policy or an emission trading system (ETS). This is because the carbon tax would target carbon emissions.
Prabowo Subianto mentioned that to make sure the carbon tax works as the new engine of GDP growth, the percentage of students enrolled in higher education at Science, Technology, Engineering, Maths (STEM) should reached 45%, the ratio of students studying science and engineering to students studying social sciences is 65 to 35. The number of scientists and engineers would be sufficient for the development of innovation, which is the foundation for economic development. The total factor productivity (TFP) contribution to economic growth reaches 65%, and investment amounts to 3% for R&D of green manufacturing to maintain green product sustainability.
Prabowo Subianto pointed out the key success factors are improving the quality, quantity, and capacity of innovation in natural resources in downstreaming sectors, including the business sector, institutions, and the government, with the assistance of a rise in the number and quality of scientists and engineers.