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Indonesia’s carbon tax rollout may face delays

JAKARTA (CNA) – Indonesia may delay rolling out its carbon tax on coal power plant emissions, officials said on Friday, as authorities have yet to finalise details a week before its April 1 start date.

Under a sweeping law passed in October, Indonesia introduced a new levy for coal power plant operators of IDR30,000 (USD2.09) per tonne of carbon dioxide equivalent (CO2e) for emissions above a set limit.

Indonesia, the world’s eighth-largest greenhouse gas emitter, has launched the highly-anticipated carbon tax as part of efforts to phase out the dirty fuel and reach net-zero emissions by 2060. The tax will also be the basis for setting up a carbon market by 2025.

Top officials are taking into account global “dynamics” like inflation and the war in Ukraine, official with Finance Ministry’s Fiscal Policy Office Hadi Setiawan said in a virtual seminar
on Friday.

“We might hear soon the result of (ministerial) discussions, whether we are still going with April 1 or whether there could be some delays,” Hadi said.

Rolling out the carbon tax will make Indonesia the fourth country in Asia to introduce such a rule but analysts expect opposition from industries that have warned of implementation problems and higher power costs that could undermine manufacturing competitiveness.

Indonesia, the world’s fourth-most populous country where coal powers 60 per cent of electricity use, has trialled the tax for 32 operators. Emissions caps were set at 0.918 tonne CO2e per megawatt hour for power plants with a capacity above 400 MW, 1.013 tonne CO2e for plants with 100 MW-400 MW and 1.094 tonne for mine-mouth plants with the same capacity.

Further details of the trial were not available but a senior Energy Ministry official said the emission caps were not yet final.

Smoke and steam billows from the coal-fired power plant owned by Indonesia Power, next to an area for Java 9 and 10 Coal-Fired Steam Power Plant Project in Suralaya, Banten province, Indonesia. PHOTO: CNA