Internalizing the Polluter Pays Principle in Indonesia's Carbon Tax: Legal and Regulatory Implications

Abstract

The implementation of carbon tax in Indonesia in Law Number 7 of 2021 is a significant step for the internalization of the Polluter Pays Principle (PPP). This norm is part of the mitigation steps in climate change. This study uses a qualitative study method with a transnational legal process to understand how international environmental norms are internalized into the domestic regulatory regime. Although the implementation of the carbon tax has been carried out, the realization of PPP is still nascent and has not developed substantially. The main findings in this study are that there are obstacles including inappropriate legal definitions, inadequate enforcement architecture, and the absence of strong financial safeguards to ensure that tax revenues are allocated effectively to climate-related expenditures. These barriers significantly weaken the policy capacity to reduce emissions or drive progress in the green economy. Therefore, this study argues that without improved institutional readiness, policy harmonization, fiscal integration, carbon taxes and PPPs are merely substantive declarations of Indonesia's commitment to the global climate regime.