Taxing Coal to Hit the Goals

The briefing proposes a coal tax for Indonesia to address the environmental and health costs of coal, which accounts for 40% of the energy sector's carbon emissions. Drawing on India's experience with a coal 'cess', the authors suggest a tax of IDR 78,700 (USD 5.50) per tonne, which could generate IDR 49 trillion (USD 3.6 billion) annually. This revenue could fund a just transition, compensate vulnerable households for rising electricity prices, and incentivize clean energy investment. The document notes that while Indonesia is considering an emissions trading scheme (ETS) and a carbon tax, these take longer to implement, making a targeted coal tax a more immediate and administratively simpler solution.

• Coal is a primary driver of pollution in Indonesia, contributing 40% of the energy sector's carbon emissions and causing significant health impacts, including an estimated 95,155 premature deaths from ambient air pollution in 2018.
• The Indonesian government is exploring carbon pricing options, including a pilot emissions trading scheme (ETS) for 80 coal power plants and a proposed carbon tax of IDR 75,000 (USD 5.10) per tonne of CO2.
• A proposed coal tax of IDR 78,700 (USD 5.50) per tonne, modeled after India's system, would generate approximately IDR 49 trillion (USD 3.6 billion) per year in Indonesia.
• India's use of a coal 'cess' (special tax) since 2010 demonstrates the political and economic feasibility of such a measure, raising USD 3.7 billion in 2019 and funding clean energy projects via the National Clean Environment Fund.
• Implementing a coal tax in Indonesia would face challenges, specifically the inability of the state-owned power company PLN to pass costs to consumers due to government electricity subsidies, which totaled IDR 54 trillion (USD 3.6 billion) in 2021.
• To mitigate the social impact of a coal tax, the document recommends using tax revenues to provide welfare payments to vulnerable consumers rather than increasing electricity subsidies.

APA

Sumarno, T. B., & Laan, T. (2021). Taxing Coal to Hit the Goals. International Institute for Sustainable Development. https://www.iisd.org/system/files/2021-08/taxing-coal-indonesia-reduce-carbon-emissions.pdf

Chicago

Sumarno, Theresia Betty, and Tara Laan. Taxing Coal to Hit the Goals. International Institute for Sustainable Development, 2021. https://www.iisd.org/system/files/2021-08/taxing-coal-indonesia-reduce-carbon-emissions.pdf.

Wikipedia

{{cite report |last1=Sumarno |first1=Theresia Betty |last2=Laan |first2=Tara |title=Taxing Coal to Hit the Goals |publisher=International Institute for Sustainable Development |date=August 2021 |url=https://www.iisd.org/system/files/2021-08/taxing-coal-indonesia-reduce-carbon-emissions.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sumarno2021taxing, author = {Sumarno, Theresia Betty and Laan, Tara}, title = {{Taxing Coal to Hit the Goals}}, institution = {International Institute for Sustainable Development}, year = {2021}, month = aug, url = {https://www.iisd.org/system/files/2021-08/taxing-coal-indonesia-reduce-carbon-emissions.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }