Takeaways

• Indonesia’s Finance Ministry says a carbon tax will not be included in the 2026 State Budget, prioritizing global carbon trading instead.
• The government argues that its NDC targets have already exceeded commitments, shifting focus to selling carbon credits internationally.
• Experts warn that delaying the carbon tax could hurt long-term climate goals and potential state revenue.

Indonesia’s Ministry of Finance has confirmed that implementing a carbon tax will not be a priority in the drafting of the country’s 2026 State Budget (APBN). Instead, the government plans to strengthen global carbon trading as it continues to push for economic growth.

Director General of Strategy for Economic and Fiscal Affairs, Febrio Kacaribu, said the government will focus more on stimulating expenditures and supporting next year’s growth targets. “(Carbon tax) is not a priority. We focus on expenditures, economic growth,” he said after meeting members of the House Commission XI in Senayan, Jakarta, on Monday, November 17, 2025.

According to Febrio, Indonesia has already surpassed its current Nationally Determined Contribution (NDC) commitments for reducing greenhouse gas emissions. With this progress, the government now aims to leverage the global market by selling carbon credits from verified green projects. “It has been conveyed that our NDC achievement has exceeded commitments. So now, our focus is to sell the carbon credits globally,” he said.

Read More: Carbon Tax in Malaysia Targets Iron, Steel, and Energy Sectors

Carbon trading allows organizations to buy credits if their emissions exceed certain limits. These credits are generated from projects that help absorb or reduce emissions, such as forest conservation initiatives. Verification bodies measure carbon absorption levels and issue the credits as certificates that can be traded internationally.

This approach is different from a carbon tax, which directly charges businesses and sectors based on their fossil-fuel-related emissions, including gasoline, jet fuel, and natural gas. The tax is widely viewed as a tool that can both curb emissions and boost government revenue.

During the meeting with the House Commission XI, Febrio noted several challenges that have hindered progress on the carbon tax. These include aligning emission-reduction goals with Indonesia’s enhanced NDC target, ensuring cross-sector policy coordination, and preparing a joint ministerial regulation to manage both national and global carbon markets.

The government is also weighing the potential economic risks of introducing a carbon tax. Higher energy costs, such as increased electricity production expenses and fossil-fuel prices, could add pressure on subsidies funded by the APBN. In addition, the electricity and industrial sectors may not yet be ready to absorb the costs, which could indirectly burden households.

However, some experts argue that postponing the carbon tax could weaken Indonesia’s climate policy. Energy observer Fahmy Radhi of Gadjah Mada University said delaying the tax would repeat the pattern seen under former finance minister Sri Mulyani, when implementation was repeatedly pushed back.

Also Read: Shipping Industry Prepares for Global Carbon Tax and US Tariffs

Fahmy believes a carbon tax would contribute positively to state revenue and help Indonesia reach its net-zero emissions target by 2060. He said private companies and state-owned enterprises (SOEs), including PT PLN with its coal-based power plants, could be taxed to encourage emissions reductions. “So, in addition to increasing revenue, carbon tax also encourages SOEs as well as private companies to reduce carbon, so that the target of achieving net zero emissions by 2060 can be accomplished,” he said.

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Source: Tempo.co