Fiscal Policies: A key tool to achieve Indonesia’s land use goals?

This fact sheet by the Climate Policy Initiative examines how Indonesia can adjust its fiscal policies to balance the growth of its land use sector—which contributes nearly half of the national GDP—with a goal to reduce greenhouse gas emissions by 29% by 2030. The document identifies three primary areas for fiscal reform: shifting from production-based to land-size based levies, reforming revenue sharing with local governments to discourage land expansion, and earmarking Adjustment Funds for sustainable land use.

• Indonesia's land use sector, encompassing agriculture, mining, oil and gas, and forestry, is a major economic driver, contributing nearly half of the national GDP and almost one third of national revenue, yet it is the primary cause of greenhouse gas emissions and deforestation.
• Current revenue collection in the land use sector relies heavily on profitability rather than land size, with 93.5% of revenue (IDR 400 trillion) coming from production-based levies. This structure provides no incentive for producers to increase land-use efficiency. Additionally, the tax-to-GDP ratio for agriculture is only 1.2%, significantly lower than the national average of 12%.
• Existing revenue transfer mechanisms may inadvertently encourage local governments to support land-clearing and the expansion of agricultural and extractive industries. This is because large percentages of regional revenue come from oil, gas, forestry, and mining, while revenues from the plantation sector (VAT, corporate, and export taxes) are kept entirely by the central government.
• The Adjustment Funds have grown significantly, increasing from IDR 20 trillion in 2010 to IDR 56 trillion in 2011, but none of these funds are currently used for sustainable land use management programs.
• A case study on the palm oil industry reveals that while it contributed at least IDR 10 trillion (USD 1 billion) to national tax revenues in 2012/2013, it has a low tax-to-GDP ratio of approximately 3.4%. Furthermore, only 11-14% (IDR 1,103 billion/USD 106 million) of the sector's revenue was redistributed to local governments during that period.

APA

Climate Policy Initiative (n.d.). Fiscal Policies: A key tool to achieve Indonesia’s land use goals? https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Fact-Sheet-English-Fiscal-Policies-A-key-tool-to-achieve-indonesias-land-use-goals.pdf

Chicago

Climate Policy Initiative. Fiscal Policies: A key tool to achieve Indonesia’s land use goals? n.d. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Fact-Sheet-English-Fiscal-Policies-A-key-tool-to-achieve-indonesias-land-use-goals.pdf.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Fiscal Policies: A key tool to achieve Indonesia’s land use goals? |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Fact-Sheet-English-Fiscal-Policies-A-key-tool-to-achieve-indonesias-land-use-goals.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiativendfiscal, author = {{Climate Policy Initiative}}, title = {{Fiscal Policies: A key tool to achieve Indonesia’s land use goals?}}, institution = {Climate Policy Initiative}, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Fact-Sheet-English-Fiscal-Policies-A-key-tool-to-achieve-indonesias-land-use-goals.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }