Environmental Taxation Policies
ECONOMIC PULSEDEAR JAKARTA, 2050
Audrey Kirsten Kullit
10/19/20253 min read
Since the ancient Egyptians and Romans, taxation policies have been used to assist efforts during change. Centuries ago, that change usually meant wars. Under today’s landscape, taxation policies may seem like a dread, a confusing one, especially to you and me. However, though we may not be entering any wars anytime soon (hopefully so), taxation policies have continued to stand the test of time, used for economic crises, political efforts, and perhaps our most important battle – the environment.
Environmental taxation, also known as green tax, is defined by the OECD as a tax based on a unit that is proven to have an impact on the environment. According to an article by Politeknik Keuangan Negara STAN, if a tax is collected for government objectives related to the environment, change/encourage positive individual behavior in an effort to preserve the environment, or is aimed at environmental preservation, it can be classified as such. While the idea of giving money to the government may be up in the air for most people right now, research indeed shows that green tax seems to be a positive method towards encouraging more environmentally friendly behaviour (Streimikiene, 2015).
If you step outside your homes right now, you’d be made well aware of how alarming the state of Jakarta’s environmental condition is. We, as a country, still have a fair load of progress if we dream of reaching the vision of Indonesia Emas 2045. Some of its goals relating to environmental change are: to have greenhouse gas emission intensity reduced to 93.5%, reach a quality index of 83.0, and be able to develop more environmentally friendly infrastructures. This lack of progress is a failed effort of the government first and foremost, but it is undoubtedly also a failed level of participation from individuals and corporations.
Though still at a minimal level, several environmental taxation policies have been implemented in Indonesia, such as the Carbon Tax in Article 13 of Law Number 7 of 2021 concerning the Harmonization of Tax Regulations Law (UU HPP), which applies to people or entities who buy products containing carbon, conduct carbon-emitting activities, or even goods whose goods produce carbon emissions. There are also variations of green tax that are often applied at a regional level, such as fuel tax or vehicle tax. Other sorts of efforts are the discounted value-added tax on electric vehicles.
When people start associating environmentally friendly choices with convenience, it leads to big changes. If we widen the scope a bit, take a look at other policies Jakarta has implemented, such as value-added tax discounts or the elimination of ganjil-genap for electric vehicles, it's no coincidence that electric vehicles have also had a 104.13% growth in the second quarter of 2024. Indonesia is still in its early stages of policy implementation for us to directly examine the impacts, so it's rather difficult to assess whether booms in the market like these are a result of policies that signal long-term development, or whether they’re just bubbles that will eventually burst. But if we look at other countries, like Sweden (a rather gracious comparison, I might add), they introduced a carbon tax in 1991 and eventually saw a 33% drop in emissions while GDP continued to grow.
Though it seems like an (maybe overtly) optimistic outlook, it was a change that took nearly 30 years. Looking back at Indonesia, our first serious involvement in environmental taxation policies was just 3 years ago in 2022. We’ve still got another 20 years ahead of us to find any progress. So it’s a pretty good thing that most of the people reading this have still got another 20 to 50 years in them. It may seem rather futile to understand the role of environmental taxation when we really have little involvement in it – I doubt any teenager is deciding on buying an EV or reducing emissions for their business, but it's in our lifetime that we can see these policies become tools of change.
Sources:
https://scholarhub.ui.ac.id/cgi/viewcontent.cgi?article=1228&context=jvi
https://pajak.go.id/en/artikel/future-carbon-tax-indonesia-emas-2045