Skip to main content
SpringerLink
Log in

Understanding the political challenges of introducing a carbon tax in Indonesia

International Journal of Environmental Science and Technology Aims and scope Submit manuscript

Cite this article

Abstract

Indonesia is the 6th largest carbon emitter in the world. It is also one of the most vulnerable countries to climate change, with a population of 250 million people spread across thousands of islands and low-lying coastal areas. This paper investigates the political challenges to introduce a carbon tax as a climate policy option in Indonesia. It is based on the analysis of 29 in-depth elite interviews with key Indonesian stakeholders. It finds that, while political elites seem, in principle, to be open to the idea of a carbon tax, they are also cognisant of the impact of corruption challenges in the Indonesia context. Meanwhile, the business community opposes a carbon tax and fears the introduction of additional costs that may influence productivity and competitiveness. Non-government organisations, however, support its immediate introduction. Overall, this work makes an important contribution to the ever-growing academic debate on the introduction of carbon prices to assist carbon mitigation efforts. It also has important ramifications in terms of transparency, accountability and political pluralism in Indonesia.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Notes

  1. Deforestation is the removal of trees without replanting or the conversion from forests to provide agricultural land.

References

  • Aldy JE, Stavins RN (2012) The promise and problems of pricing carbon: theory and experience

  • Andersen MS (1994) Governance by green taxes: making pollution prevention pay. Manchester University Press, Manchester

    Google Scholar 

  • Andrew J, Kaidonis MA, Andrew B (2010) Carbon tax: challenging neoliberal solutions to climate change. Crit Perspect Account 21(7):611–618

    Google Scholar 

  • Bali AS, Capano G, Ramesh M (2019) Anticipating and designing for policy effectiveness. Policy Soc 38(1):1–13

    Google Scholar 

  • BAPPENAS (2015) Dokumen Pendukung Penyusunan INDC

  • Baranzini A, Goldemberg J, Speck S (2000) A future for carbon taxes. Ecol Econ 32(3):395–412

    Google Scholar 

  • Baranzini A, Van den Bergh JC, Carattini S, Howarth RB, Padilla E, Roca J (2017) Carbon pricing in climate policy: seven reasons, complementary instruments, and political economy considerations. Wiley Interdiscip Rev Clim Change 8(4):462–472

    Google Scholar 

  • Baumol WJ (1972) On taxation and the control of externalities. Am Econ Rev 62(3):307–322

    Google Scholar 

  • Baumol WJ, Oates WE (1971) The use of standards and prices for protection of the environment. In: The economics of environment. New York: Springer

  • Baylis K, Fullerton D, Karney DH (2013) Leakage, welfare, and cost-effectiveness of carbon policy. Am Econ Rev 103(3):332–337

    Google Scholar 

  • Böhringer C, Rutherford TF (1997) Carbon taxes with exemptions in an open economy: a general equilibrium analysis of the german tax initiative. J Environ Econ Manag 32(2):189–203

    Google Scholar 

  • Burnham P, Lutz KG, Grant W, Layton-Henry Z (2008) Research methods in politics. Macmillan International Higher Education, London

    Google Scholar 

  • Charmaz K (2014) Constructing grounded theory, 2nd edn. SAGE Publications, London

    Google Scholar 

  • Cherry TL, Kallbekken S, Kroll S (2012) The acceptability of efficiency-enhancing environmental taxes, subsidies and regulation: an experimental investigation. Environ Sci Policy 16:90–96

    Google Scholar 

  • Chiroleu-Assouline M, Fodha M (2014) From regressive pollution taxes to progressive environmental tax reforms. Eur Econ Rev 69(C):126–142

    Google Scholar 

  • Clapp J, Meckling J (2013) Business as a global actor. The Handbook of global climate and environmental policy, pp 286–303

  • Cleetus R (2011) Finding common ground in the debate between carbon tax and cap-and-trade policies. Bull Atom Sci 67(1):19–27

    Google Scholar 

  • Cohen L, Manion L, Morrison K (2011) Research methods in education. Routledge, London

    Google Scholar 

  • Creswell JW (2014) Research design: qualitative, quantitative, and mixed methods approaches. SAGE Publication Inc, Los Angeles

    Google Scholar 

  • Crowley K (2017) Up and down with climate politics 2013–2016: the repeal of carbon pricing in Australia. Wiley Interdiscip Rev Clim Change 8(3):e458

    Google Scholar 

  • Dexter LA (1970) Elite and specialized interviewing. Northwestern University Press, Evanston

    Google Scholar 

  • Downie C (2017) Business actors, political resistance, and strategies for policymakers. Energy Policy 108:583–592

    Google Scholar 

  • Downie C (2018) Ad hoc coalitions in the U.S. energy sector: case studies in the gas, oil, and coal industries. Bus Polit 20(4):643–668

    Google Scholar 

  • Dryzek JS (1995) Political and ecological communication. Environ Polit 4:13–30

    Google Scholar 

  • Falkner K (2008) Business power and conflict in international environmental politics. Palgrave Macmillan, New York

    Google Scholar 

  • Francis K, Chapman Y, Whitehead D (2016) An overview of research theory and process. In: Schneider Z, Whitehead D, LoBiondo-Wood G, Haber J (eds) Nursing and midwifery methods and appraisal for evidence-based practice. Elsevier Australia, Australia, pp 19–32

    Google Scholar 

  • Fukuoka Y (2012) Politics, business and the state in post-Soeharto Indonesia (Report). Contemp Southeast Asia 34(1):80

    Google Scholar 

  • Garnaut R, Howes S, Jotzo F, Sheehan P (2008) Emissions in the platinum age: the implications of rapid development for climate-change mitigation. Oxf Rev Econ Policy 24(2):377–401

    Google Scholar 

  • Goulder L (1995) Environmental taxation and the double dividend: a reader’s guide. Int Tax Public Finance 2(2):157–183

    Google Scholar 

  • Goulder LH, Schein AR (2013) Carbon taxes versus cap and trade: a critical review. Clim Change Econ 4(03):1350010

    Google Scholar 

  • Gray WB, Metcalf GE (2017) Carbon tax competitiveness concerns: assessing a best practices carbon credit (Forum: carbon Tax Border Adjustment). Natl Tax J 70(2):447

    Google Scholar 

  • Halimanjaya A, Maulidia M (2014) The coordination of climate finance in Indonesia. ODI Publishing, Jakarta

    Google Scholar 

  • Harrison K (2010) The comparative politics of carbon taxation. Annu Rev Law Soc Sci 6(1):507–529

    Google Scholar 

  • Harvey WS (2011) Strategies for conducting elite interviews. Qual Res 11(4):431–441

    Google Scholar 

  • Heede R (2014) Tracing anthropogenic carbon dioxide and methane emissions to fossil fuel and cement producers, 1854–2010. Clim Change 122(1):229–241

    CAS  Google Scholar 

  • Hourcade JC (1993) Modelling long-run scenarios: methodology lessons from a prospective study on low CO2 intensive country. Energy Policy 21(3):309–326

    Google Scholar 

  • Hsu S-L (2012) The case for a carbon tax: Getting past our hang-ups to effective climate policy. Island Press, New York

    Google Scholar 

  • Hughes L, Urpelainen J (2015) Interests, institutions, and climate policy: explaining the choice of policy instruments for the energy sector. Environ Sci Policy 54:52–63

    Google Scholar 

  • Indonesia Corruption Watch (2015) Hasil penelitian potensi konflik kepentingan anggota DPR 2014-2019. Indonesia Corruption Watch, Jakarta

    Google Scholar 

  • Jenkins JD, Karplus VJ (2017) Carbon pricing under political constraints: insights for accelerating clean energy transitions. Oxford University Press, Oxford

    Google Scholar 

  • Jotzo F (2012) Can Indonesia lead on climate change?’. In: Reid AD (ed) Indonesia rising: the Repositioning of Asia’s third Giant. ISEAS, Singapore

    Google Scholar 

  • Kallbekken S, Aasen M (2010) The demand for earmarking: results from a focus group study. Ecol Econ 69(11):2183–2190

    Google Scholar 

  • Kingdon JW (2011) Agendas, alternatives, and public policies (Updated, 2nd edn. Longman, Boston

    Google Scholar 

  • Knox-Hayes J (2012) Negotiating climate legislation: policy path dependence and coalition stabilization. Regul Gov 6(4):545–567

    Google Scholar 

  • Komisi Pemberantasan Korupsi (2009) Konflik Kepentingan. Komisi Pemberantasan Korupsi, Jakarta

    Google Scholar 

  • Leiserowitz A, Maibach E, Roser-Renouf C, Feinberg G, Howe P (2013) Climate change in the American mind: Americans’ global warming beliefs and attitudes in April, 2013. Yale Project on Climate Change Communication, New Haven

    Google Scholar 

  • Liu X (2018) Interviewing elites: methodological issues confronting a novice. Int J Qual Methods 17(1):1–9

    Google Scholar 

  • Lo A (2013) The political economy of carbon tax: international practice and the Australian model. Chin J Urban Environ Stud 1(01):1350007

    Google Scholar 

  • Mankiw NG (2009) Smart taxes: an open invitation to join the pigou club. Eastern Econ J 35(1):14–23

    Google Scholar 

  • Mehling M, Tvinnereim E (2018) Carbon pricing and the 1.5 C target: near-term decarbonisation and the importance of an instrument mix. Carbon Clim Law Rev CCLR 12(1):50–61

    Google Scholar 

  • Metcalf GE (2009) Designing a carbon tax to reduce US greenhouse gas emissions. Rev Environ Econ Policy 3(1):63–83

    Google Scholar 

  • Mete P, Dick C, Moerman L (2010) Creating institutional meaning: accounting and taxation law perspectives of carbon permits. Crit Perspect Account 21(7):619–630

    Google Scholar 

  • Ministry of Environment and Forestry (2019) Laporan Inventarisasi Gas Rumah Kaca (GRK) dan Monitoring. Pelaporan, Verifikasi (MPV) Tahun, p 2018

    Google Scholar 

  • Ministry of Finance (2009a) Ministry of finance green paper: economic and fiscal policy strategies for climate change mitigation in Indonesia. Ministry of Finance, Jakarta

    Google Scholar 

  • Ministry of Finance (2009b) Green paper: economic and fiscal policy strategies for climate change mitigation in Indonesia. Ministry of Finance, Jakarta

    Google Scholar 

  • Morris A (2016) 11 Essential questions for designing a policy to price carbon. https://www.brookings.edu/research/11-essential-questions-for-designing-a-policy-to-price-carbon. Accessed 8 June 2018

  • Nurdianto D, Resosudarmo B (2016) The economy-wide impact of a uniform carbon tax in ASEAN. J Southeast Asian Econ 33(1):1–22

    Google Scholar 

  • Page SE, Siegert F, Rieley JO, Boehm HV, Jaya A, Limin S (2002) The amount of carbon released from peat and forest fires in Indonesia during 1997. Nature 420:61–65

    CAS  Google Scholar 

  • Parry IWH, Bento A (2002) Estimating the welfare effect of congestion taxes: the critical importance of other distortions within the transport system. J Urban Econ 51(2):339–365

    Google Scholar 

  • Patton MQ (2015) Qualitative research & evaluation methods: integrating theory and practice. SAGE, Thousands Oak

    Google Scholar 

  • Poterba J (1991) Tax policy to combat global warming: on designing a carbon tax. NBER working paper series, 3649

  • Robert KY (2011) Qualitative research from start to finish. The Guilford, New York

    Google Scholar 

  • Rozenberg J, Hallegatte S, Perrissin-Fabert B, Hourcade J-C (2012) Funding low-carbon investments in the absence of a carbon tax. Clim Policy 13(1):1–8

    Google Scholar 

  • Skovgaard J, Ferrari S, Knaggard A (2019) Mapping and clustering the adoption of carbon pricing policies: what policies price carbon and why? Clim Policy 19(9):1173–1185

    Google Scholar 

  • Steg L, Dreijerink L, Abrahamse W (2006) Why are energy policies acceptable and effective? Environ Behav 38(1):92–111

    Google Scholar 

  • Stern N (2008) The economics of climate change. Am Econ Rev 98(2):1–37

    Google Scholar 

  • Stern NH et al (2006) Stern review: the economics of climate change. HM Treasury, London

    Google Scholar 

  • Stiglitz JE, Stern N, Duan M, Edenhofer O, Giraud G, Heal G, Pangestu M (2017) Report of the high-level commission on carbon prices. Carbon Pricing Leadership Coalition, p 29

  • Tienhaara K (2014) Business: corporate and industrial influence. Handbook of global environmental politics, pp 164–175

  • Tienhaara K, Orsini A, Falkner R (2012) Global corporations. Global Environmental Governance Reconsidered, pp 45–67

  • Tsujino Riyou, Yumoto Takakazu, Kitamura Shumpei, Djamaluddin Ibrahim, Darnaedi Dedy (2016) History of forest loss and degradation in Indonesia. Land Use Policy 57:335–347. https://doi.org/10.1016/j.landusepol.2016.05.034

    Article  Google Scholar 

  • van Heerden J, Gerlagh R, Blignaut J, Horridge M, Hess S, Mabugu R, Mabugu M (2006) Searching for triple dividends in South Africa: fighting CO2 pollution and poverty while promoting growth (energy-related environmental tax). Energy J 27(2):113

    Google Scholar 

  • Van Manen M (2014) Phenomenology of practice: Meaning-giving methods in phenomenological research and writing (Developing qualitative inquiry). Left Coust Press Inc, Walnut Creek

    Google Scholar 

  • Wang Q, Hubacek K, Feng K, Wei Y-M, Liang Q-M (2016) Distributional effects of carbon taxation. Appl Energy 184:1123–1131

    Google Scholar 

  • World Resources Institute (2017) How can Indonesia achieve its climate change mitigation goal? An analysis of potential emissions reductions from energy and land-use policies

  • Yusuf AA, Ramayandi A (2010) Reducing fuel subsidy or taxing carbon? Comparing the two instruments from the economy, environment, and equity perspectives for Indonesia. Econ Finance Indones 58(1):115–129

    Google Scholar 

  • Yusuf A, Resosudarmo B (2015) On the distributional impact of a carbon tax in developing countries: the case of Indonesia. Off J Soc Environ Econ Policy Stud 17(1):131–156

    Google Scholar 

Download references

Acknowledgements

The author would like to thank Assoc. Prof. Cassandra Star and Assoc. Prof. Rodrigo Praino at Flinders University, Adelaide, Australia for their valuable insights and contributions to the study. The author also wishes to express gratitude to the Fiscal Policy Agency, Ministry of Finance of the Republic of Indonesia for providing facilities and providing funding that has made this research endeavour possible.

Author information

Authors and Affiliations

  1. Fiscal Policy Agency, Ministry of Finance of Republic of Indonesia, Jalan Dr. Wahidin Raya, No. 1, Jakarta, Indonesia

    R. Dyarto & D. Setyawan

Authors
  1. R. Dyarto
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. D. Setyawan
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to D. Setyawan.

Ethics declarations

Ethical approval

All procedures performed in studies involving human participants were in accordance with the ethical standards of the institutional and/or national research committee (name of committee: Andrea Fiegert, Rae Tyler, and Peter Wigley; reference number: 7347) and with the 1964 Helsinki Declaration and its later amendments or comparable ethical standards.

Additional information

Editorial responsibility: Jing Chen.

Rights and permissions

Reprints and Permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Dyarto, R., Setyawan, D. Understanding the political challenges of introducing a carbon tax in Indonesia. Int. J. Environ. Sci. Technol. 18, 1479–1488 (2021). https://doi.org/10.1007/s13762-020-02925-4

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s13762-020-02925-4

Keywords

search

Navigation