Carbon Tax : Potential For State Revenue And Potential For Carbon Emission Reduction In Indonesia

Abstract

This study aims to analyze the potential impact of carbon tax implementation on state revenue and carbon emission reduction in Indonesia. Using a mixed-methods approach that combines both qualitative and quantitative methods, data were collected through interviews and document analysis. The results indicate that implementing a carbon tax in Indonesia holds significant potential for increasing state revenue. By applying the calculation formula namely Revenue = Carbon Emissions × Tax Rate, the estimated state revenue would reach approximately IDR 123.86 trillion for the period of 2018–2022, assuming a carbon tax rate of IDR 30,000 per ton CO₂e is applied nationally. This finding suggests that carbon tax can function not only as an environmental control instrument but also as a strategic alternative source of state financing in the transition toward a green economy. Additionally, the carbon tax has the potential to reduce carbon emissions. Based on the OECD (2022) study, each €10/ton CO₂e increase results in a 1.5% decrease in emissions, implying an emission-price elasticity (dE/dP) of -0.15. If Indonesia implements a tax rate equivalent to €30/ton CO₂e, the theoretical emission reduction could reach 4.5%. This level of elasticity demonstrates that a carbon tax policy could serve as an effective instrument for gradual emission reduction, particularly when expanded to major sectors such as energy, transportation, and land-use change.