IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Reducing fuel subsidy or taxing carbon? Comparing the two instruments from the economy, environment, and equity perspective for Indonesia

  • Arief Anshory Yusuf


    (Department of Economics, Padjadjaran University)

  • Arief Ramayandi


    (Center for Economics and Development Studies Dept. of Economics, Padjadjaran University)

Reducing fuel subsidy and taxing carbon have a tendency toward reducing energy consumption and carbon emissions. However, both instruments may have differing impacts in their magnitudes of the emissions reduction and on the economy as a whole. Using INDONESIA-E3 (Economy-Equity-Environment) model, a computable general equilibrium (CGE) model which includes carbon emissions, carbon taxation, as well as, strong feature in distributional analysis, this paper compares and contrast the two instruments to find which policy is better in improving the three pillars of sustainable development: economy, equity, and the environment. The result suggests that given the same amount of government budget saving, carbon tax is relatively superior to using a fuel subsidy reduction instrument, because it can accelerate the decline in CO2 emissions with a lower cost on the economy in terms of GDP reduction with more favorable distributional effect. This has not taken into account the economic incentives it creates for the economy to be less reliant on carbon-intensive energy.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: First version, 2008
Download Restriction: no

Paper provided by Department of Economics, Padjadjaran University in its series Working Papers in Economics and Development Studies (WoPEDS) with number 200808.

in new window

Length: 12 pages
Date of creation: Oct 2008
Date of revision: Oct 2008
Handle: RePEc:unp:wpaper:200808
Contact details of provider: Postal: Jalan Cimandiri No.6, Bandung 40115
Phone: (062)022-4204510
Fax: (062)022-4204510
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Yusuf, Arief Anshory, 2006. "Constructing Indonesian Social Accounting Matrix for Distributional Analysis in the CGE Modelling Framework," MPRA Paper 1730, University Library of Munich, Germany.
  2. Peter Warr, 2006. "The Gregory Thesis Visits the Tropics," Departmental Working Papers 2006-03, The Australian National University, Arndt-Corden Department of Economics.
  3. Tao Kong & Arief Ramayandi, 2008. "Survey Of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 44(1), pages 7-32.
  4. Peter G. Warr, 2001. "Welfare Effects of an Export Tax: Thailand's Rice Premium," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 903-920.
  5. Philip D. Adams & J. Mark Horridge & Brian R. Parmenter, 2000. "MMRF-GREEN: A Dynamic, Multi-Sectoral, Multi-Regional Model of Australia," Centre of Policy Studies/IMPACT Centre Working Papers op-94, Victoria University, Centre of Policy Studies/IMPACT Centre.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:unp:wpaper:200808. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Arief Anshory Yusuf)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.