Indonesia’s Carbon Tax: Status and Design

Updated 2026-11-02 · 4 min read · By the akar.earth specialist team

Pajak karbon Indonesia explained: the carbon tax in UU 7/2021, its IDR 30 per kg CO2e minimum rate, postponed rollout and links to carbon trading.

Indonesia’s carbon tax (pajak karbon) exists in law but has not been fully implemented. Law No. 7 of 2021 on Harmonisation of Tax Regulations (UU HPP) introduced it with a minimum rate of IDR 30 per kilogram of CO2 equivalent, and the planned 2022 start for coal-fired power was postponed; confirm the current status with the tax authority before relying on it.

What the carbon tax is

The carbon tax is one of the instruments in Indonesia’s carbon economic value (NEK) framework. The Komrah NEK secretariat lists the NEK instruments as carbon trading, results-based payments, the carbon levy and Article 6 schemes. The tax sits in the levy family, alongside trading through PTBAE-PU allowances and SPE-GRK offsets.

UU 7/2021 set out the core design:

• a tax on emissions that have a negative environmental effect;
• a minimum rate of IDR 30 per kg CO2e, equal to about IDR 30,000 per tonne;
• phased introduction, starting with coal-fired power generation;
• a link to carbon trading, so the tax applies to emissions above a cap that are not covered by allowances or offsets.

The tax was first scheduled to start in 2022 for coal power and was then postponed. We have not found a confirmed, in-force implementation date in the sources we reviewed. Check announcements from the Directorate General of Taxes (DJP) and the Ministry of Finance.

Who it would apply to

On the original design, the first taxpayers would be coal-fired power plants already in the power-sector emissions trading system that began in 2023. Other sectors would follow in phases tied to the roadmap for carbon trading. The current anchor for the NEK framework, Perpres 110/2025, governs how the instruments fit together; tax-specific details come from Ministry of Finance rules.

Forest-carbon developers would not pay the tax. Their link is on the supply side: offsets may reduce a taxpayer’s taxable emissions if the rules allow.

How it was meant to work

The design is often described as “cap-and-tax”:

1. A company in a capped sector receives an emission cap through PTBAE-PU.
2. Emissions under the cap create a surplus that can be sold.
3. Emissions over the cap must be covered by buying allowances or eligible offsets.
4. Any remaining excess would be taxed at the applicable rate.

The low minimum rate, IDR 30 per kg, is well below most international carbon prices. In a cap-and-tax system, the rate acts as a ceiling on what a capped company would pay for uncovered emissions, so it also caps how much a compliance buyer would pay for offsets.

What it means for forest-carbon developers and buyers

Do not plan demand around the tax yet. Until implementing rules are in force, the carbon tax is not a reliable source of offset demand. Research on Indonesian credits already points to restrictive compliance eligibility as one reason prices sit at a fraction of real abatement cost.

A low rate limits compliance prices. Even when the tax applies, a minimum of about IDR 30,000 per tonne suggests compliance demand would favour cheap offsets. High-integrity forest units may still find better value with voluntary and international buyers. See our carbon credit pricing guide.

Watch the offset rules. The key question for developers is whether nature-based SPE-GRK can reduce taxable emissions, and in what quantity. That will be set in implementing regulations.

For capped companies, the tax adds a reason to manage positions early. Our carbon strategy work helps compliance and voluntary buyers model their options.

How to track the carbon tax

The carbon tax sits in tax law, so its implementing rules come from the Ministry of Finance rather than the environment or forestry ministries. Watch three places: Ministry of Finance regulations on rates and procedures, announcements from the Directorate General of Taxes on start dates, and any update to the carbon trading roadmap that names the next capped sectors. A start date for a sector beyond power generation would be the first strong signal of new compliance demand.

Open questions

• Implementation date and first sector. Not confirmed in our sources.
• Applied rate. Whether the government will apply the minimum or a higher rate.
• Offset eligibility. Which units, vintages and sectors can reduce taxable emissions.
• Interaction with the carbon levy under the NEK framework, and with any border-adjustment pressure from trading partners.

For the broader framework and the difference between compliance and voluntary markets, see compliance vs voluntary and the Indonesia regulation hub.