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Carbon tax, energy policy, and sustainable development in Indonesia

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  • Djoni Hartono
  • Witri Indriyani
  • Beta Septi Iryani
  • Ahmad Komarulzaman
  • Anda Nugroho
  • Robi Kurniawan

Abstract

The effectiveness of carbon taxes has been subject to important debates on the sustainable development pathway. As an archipelagic country that is vulnerable to climate change, the impact of implementing this policy instrument is still understudied in the literature. This study examines the effect of carbon tax and recycling scenarios on the Indonesian economy by employing a dynamic computable general equilibrium (CGE). The result revealed that carbon tax revenue recycling combined with household transfer and investment yielded better GDP and employment rate than a household transfer only in the medium and long terms. Furthermore, the carbon tax revenue recycling on household transfer and renewable energy investment created energy intensity reductions. This study recommends implementing the tax by prioritizing specific sectors, setting appropriate tax levels, applying a transitional policy, and diversifying the investment strategy to align with the sustainable development pathway.

Suggested Citation

  • Djoni Hartono & Witri Indriyani & Beta Septi Iryani & Ahmad Komarulzaman & Anda Nugroho & Robi Kurniawan, 2023. "Carbon tax, energy policy, and sustainable development in Indonesia," Sustainable Development, John Wiley & Sons, Ltd., vol. 31(4), pages 2332-2346, August.
    • Handle: RePEc:wly:sustdv:v:31:y:2023:i:4:p:2332-2346
    DOI: 10.1002/sd.2511
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