1. Since the industrial revolution occurred in 1942, state development for industrialization and economic growth has been highly dependent on fossil resources as a capital for nation-building and resulted in ecosystem degradation. On the other hand, negative externalities arising from these activities have not been valued as it profoundly impacts the next generation like a snowball effect. One indicator that can describe the impact resulting from the previous industrialization is the high greenhouse gas (GHG) emissions.
  2. Most countries agree that environmental economy approaches, such as carbon pricing, are necessary to combat the negative externality of global greenhouse gas (GHG) emissions. Governments have a wide variety of policy alternatives to address the negative externality of emissions depending on the degree and depth of the policy intervention, and carbon tax can be one of the options. Carbon pricing schemes work by placing a direct cost on each emission produced. The revenue obtained from a carbon tax can be recycled for various purposes such as general government spending, compensation for carbon cost burden, Mitigation support for covered sectors, and mitigation activities in industry sectors not already covered.
  3. This report shows that six G20 countries (Japan, South Africa, Argentina, France, Ireland, and Mexico) and one ASEAN Member States (Singapore) have implemented a carbon tax. For each ton of CO2 generated, France charges the highest price at USD 52.4, while Japan charges the lowest at USD 2.6. However, each country has different targets for this carbon tax implementation as the sectors covered differ. On the other hand, Indonesia has not implemented a carbon tax and plans to introduce it as one of its latest fiscal instruments to mitigate climate change and seek more revenue in the year 2022. 
  4. Some countries have shown that carbon tax could generate additional revenue that can be recycled for further direct and/or indirect carbon mitigation plans. For example, Argentina, Ireland, and Mexico allocated their carbon tax revenue to general government spending and non-mitigating earmarking. France and South Africa compensate the burdened stakeholders by reducing the electricity generation levy and lowering the income and corporate taxes. Japan and Singapore recycle all of their carbon tax revenue for green spending. France and Ireland also recycled their remaining spending to support energy efficiency in low-income households. While Indonesia, which will soon implement a carbon tax, is planning to combine all the revenue recycling approaches.



Filda C. Yusgiantoro
Senior Researcher, Purnomo Yusgiantoro Center

I Dewa Made Raditya Margenta
Researcher, Purnomo Yusgiantoro Center

Researcher, Purnomo Yusgiantoro Center

Felicia Grace Ratnasari Utomo
Research Staff, Purnomo Yusgiantoro Center


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