As part of a significant overhaul of its tax system, Indonesia’s government is considering the implementation of a carbon tax on fossil fuel use that it said could cut greenhouse gas emissions.


The country’s finance ministry is also looking at raising VAT rates and reforming income tax, but at the centre of the change would be coal, diesel and gasoline use, as well as others that are used by vehicles and factories across the nation.

It added that there could also be a focus on “carbon intensive sectors such as the pulp and paper, cement, electricity generation and petrochemical industries” in Indonesia, which is a sizable producer of coal, gas and oil and is a top greenhouse gas emitter worldwide.

Revenue from the increases would be earmarked for environmentally friendly sectors and welfare programmes, the ministry said in a report.

The Indonesia Coal Mining Association told Reuters it was not consulted about the plan. It pointed out that additional taxes would put even more pressure on what is already a sunset industry.

“The second point is, if we’re talking about reducing carbon, we’ve done many practical efforts,” said Executive Director Hendra Sinadia, noting that there are reclamation efforts in place to reduce deforestation rates as well as technology to mitigate coal power plant emissions.

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