Indonesia^s Carbon Policy: Carbon Tax or Emissions Trading?
Siti Nuraini (a*), I Made Narsa (a)

(a) Accounting Department, Airlangga University
Jl. Airlangga 4-5 Surabaya
* sitinuraini[at]feb.unair.ac.id

Abstract

The aim of this research to understand perspectives regarding the implementation of a carbon tax or carbon trading using the cap and trade method in Indonesia. This study highlights the policy from an industry perspective. The method used in this research is descriptive, involving sources such as tax observers, the government, and industries. The results indicate that the carbon emission reduction scheme implemented in Indonesia will be more profitable for the industry if it used carbon trading with a cap and trade scheme than carbon tax scheme. In the cap and trade scheme, industries with emit carbon above the upper limit can buy emission permits sold by industries that emit carbon below the upper limit or pay a carbon tax according to the amount of emissions released. Furthermore To reduce tax cost that arise in the future, industries will consider the efficiency between paying the carbon tax or purchasing emission permits. For industries, purchasing emission permits is more profitable because it can manage carbon emissions during production, so that this option will certainly be more widely chosen by industry. In addition, for industries that are members of a holding company, it will certainly be very profitable to purchase an emission permit, especially if the subsidiary emits emissions below the upper limit of carbon emissions. The parent company will purchase emission permits from subsidiaries that have surplus emissions rather than having to pay carbon taxes.

Keywords: Carbon tax, cap and trade, carbon emission, industry, Indonesia

Topic: Taxation