Jakarta – The government has adopted a policy of reforming energy subsidies to achieve decarbonization. This policy is in line with the commitment to minimize the impact of climate change.
According to the Coordinating Minister for Economic Affairs, Airlangga Hartarto Indonesia is currently in the process of preparing to implement the Carbon Economic Value (carbon pricing) instrument. The carbon pricing instrument assigns a price to carbon emissions as a result of various production and service activities.
“The application of the carbon pricing instrument is expected to encourage the industry to be more environmentally conscious and limit greenhouse gas emissions to a certain extent,” said Hartarto in a written release, Thursday (9/6).
On the other hand, he continued, carbon pricing acts as an alternative funding instrument to achieve Indonesia’s climate change targets, both according to the Nationally Determined Contribution (NDC) 2030 and Net Zero Emission (NZE) 2060.
To support the implementation of carbon pricing regulation, the government issued Law No. 7/2021 on Harmonization of Tax Regulations and Presidential Regulation No. 98/2021. These Presidential Regulations form the basis for the implementation of various carbon pricing instruments such as emissions trading, carbon credits, and performance-based payments. Meanwhile, at the technical level, the government is finalizing the derivative regulations of the presidential regulation.
“In 2021, the government will pioneer a voluntary cap-and-trade scheme, and offset crediting, which involves several electricity producers, both state-owned and private. In parallel, the government is collaborating with several international institutions in conducting assessments and studies on the development of carbon trading policies and schemes through Internationally Traded Mitigation Outcomes (ITMOs),” explained Hartarto.
In July 2022, Indonesia plans to implement a cap-and-trade tax and offset scheme for coal-fired power plants. Through this scheme, coal-fired power plants with inefficient processes or emissions higher than the upper limit will incur additional costs.
Meanwhile, Head of the Planning Bureau of the Ministry of Energy and Mineral Resources (ESDM), Chrisnawan Anditya said that the subsidy reform had been carried out, including the electricity sector. It is hoped that this subsidy policy will be more focused from commodities to direct subsidies to the community.
“We must pay attention to the public so that they can get access to energy at affordable prices. That is a concern in the energy transition, but by still paying attention to the availability of the state budget for energy transition,” he said. (Hartatik)
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