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Regional Impact Analysis of Carbon Tax Implementation on Indonesia s Coal Power Plant with Interregional Input-output Method

Author

Listed:
  • Ahmad Syafiq Kamil

    (BRINNational Research and Innovation Agency of Indonesia, Deputy for Development Policy, Indonesia.)

  • Lindri Setyaningrum

    (National Research and Innovation Agency of Indonesia, Deputy for Development Policy, Indonesia.)

  • Ade Chandra Lesmana

    (National Research and Innovation Agency of Indonesia, Deputy for Development Policy, Indonesia.)

  • Megawati Suharsono Putri

    (National Research and Innovation Agency of Indonesia, Deputy for Development Policy, Indonesia.)

  • Syandi Negara

    (National Research and Innovation Agency of Indonesia, Deputy for Development Policy, Indonesia.)

  • Heni Susiati

    (National Research and Innovation Agency of Indonesia, Deputy for Development Policy, Indonesia.)

  • Yohanes Dwi Anggoro

    (National Research and Innovation Agency of Indonesia, Deputy for Development Policy, Indonesia.)

Abstract

The excessive use of greenhouse gases (mainly carbon dioxide) causes a global emission of greenhouse gases. This has eventually brought climate change and global warming, that will affect the human life standard. Also it has several economical impacts such as increasing the mitigation budget for anticipating the climate change problems by applying a carbon tax as one of strategies to reduce carbon emissions. Carbon tax is one of additional economic instrument and has high possibility to be implemented in Indonesia to help its future low carbon development especially on energy sector. Under such a circumstance, this paper aims to predict the possible impact of implementing a carbon tax implementation on Coal Power Plant (CPP) and revenue recycling for 6 regions in Indonesia i.e. Sumatera, Jawa, Bali and Nusa Tenggara, Kalimantan, Sulawesi, Maluku and Papua. The IRIO (InterRegional InputOutput) model of six regions in Indonesia has been developed based on the Central Bureau of Statistics with seventeen sectors in 2016 to evaluate the impact of carbon taxes with a carbon price of 2,1 USD/ton on CPP and to show the scenarios for the distribution impact of carbon tax revenues on output, wages, and GRDP. The results show the implementation of a carbon price of e 2.1USD/ton will give extra revenue of around 241 Billion Rupiah nationally with the distribution of 73%, 15%, 7%, 3%, 2%, and 1% from Java, Sumatera, Kalimantan, Bali-Nusa Tenggara, and Maluku-Papua, respectively. Through revenue recycling, those values could increase the total output, wages, and GDRP per region by around 451, 100, and 169 Billion Rupiah, respectively. The revenue recyling option and its economic impact for each 17 sectors are also identified in the study with spesific characteristics for each region. In conclusion, the result could help the government determine its climate change mitigation strategy, so it could boost the regional economy. Based on the study results, this paper recommends the government to conduct an intensive monitoring and evaluation on low carbon policies for CPP in Java and Sulawesi.

Suggested Citation

  • Ahmad Syafiq Kamil & Lindri Setyaningrum & Ade Chandra Lesmana & Megawati Suharsono Putri & Syandi Negara & Heni Susiati & Yohanes Dwi Anggoro, 2023. "Regional Impact Analysis of Carbon Tax Implementation on Indonesia s Coal Power Plant with Interregional Input-output Method," International Journal of Energy Economics and Policy, Econjournals, vol. 13(3), pages 149-157, May.
    • Handle: RePEc:eco:journ2:2023-03-18
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    References listed on IDEAS

    as
    1. Zhang, Hongxia & Hewings, Geoffrey J.D. & Zheng, Xinye, 2019. "The effects of carbon taxation in China: An analysis based on energy input-output model in hybrid units," Energy Policy, Elsevier, vol. 128(C), pages 223-234.
    2. Auffhammer, Maximilian & Schlenker, Wolfram, 2014. "Empirical studies on agricultural impacts and adaptation," Energy Economics, Elsevier, vol. 46(C), pages 555-561.
    3. Maximilian Auffhammer, 2014. "Cooling China: The Weather Dependence of Air Conditioner Adoption," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 9(1), pages 70-84, March.
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    More about this item

    Keywords

    Carbon tax; Economic impact; IRIO model; GRDP; Wages;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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