Quo Vadis Green Tax Reform Indonesia

The term green tax reform refers to a fiscal policy scheme that incorporates environmental costs into the taxation system to shift economic behavior toward sustainability. A key milestone in Indonesia’s fiscal reform was marked by the enactment of Law No. 7 of 2021 on the Harmonization of Tax Regulations (UU HPP). The government included a carbon tax in the UU HPP as a form of Indonesia’s commitment to controlling emissions, promoting a clean energy transition, and increasing state revenue to fund climate mitigation programs (Ministry of Finance, 2022). The initial rate was set at IDR 30 per kilogram of CO₂e, equivalent to US$2 per ton of CO₂, with phased implementation starting from coal-based electricity sectors.