1.What sorts of pollution problems would you expect in a small African village? In a city in India?

In the
people's Republic of China? In New York city? In Cikarang Indonesia? In your Country?

2. Suppose you are assigned the task of drafting a law to impose a tax on smoke emissions. What
provisions would you put into the law?

a. How would you decide the size of the tax?

b. What would you do about smoke emitted by a municipal electricity plant?

c. Would you use the same tax rate in densely and sparsely settled areas?

What information will you need to collect before determining what you would do about each of the
preceding provisions? Ini gimini yi

As we know, smoke or gas carbon emissions from the use of fossil fuels by factories, power
plants, and vehicles are the main causes of air pollution. According to AirVisual, an international air
quality data index, Jakarta, Indonesia ranked at the top 5 position as the city with the worst air pollution
in the world. Nowadays, Jakarta had an Air Quality Index (AQI) of 126 and classified as unhealthy for
sensitive group. As reported by Jakarta’s Environmental Service (Atika, 2019), the most significant
contributor to Jakarta’s air quality is the vehicle’s carbon emission.

Furthermore, due to the corona pandemic caused the use of fuel or BBM to drop dramatically
which makes the air cleaner because it has minimal pollution. To maintain and improve this air quality,
we must apply a carbon tax. Besides reducing pollution or addressing negative externality of carbon gas
emissions, the imposition of a carbon tax can increase state revenues. The government can also fulfil its
commitment in the Paris Agreement to reduce greenhouse gas emissions by 26% by 2020 and 29% by
2030.

A carbon tax has a significant impact on the industry sector. The company would rather choose
carbon tax than other carbon pricing types because carbon tax has a certain price (Ratnawati, 2016).
Therefore, the company can calculate their operating expenses directly. However, there is a possibility
of slowing the economy due to competitiveness. These issues should be addressed by implementing a
tax-free threshold, reducing tax rate for industries, reducing current energy tax, and reducing bad taxes
(VAT, Salary). Also, the government can give incentives to the company which committed to energy
efficiency.

a. How would you decide the size of the tax?

According to Journal Of Vehicle, State Finance And Carbon Tax Public Policy As A Policy Alternative To
Overcome Negative Externality Of Carbon Emissions In Indonesia: “Carbon Tax As A Policy Alternative To
Overcome Negative Externality Of Carbon Emissions In Indonesia” (Ratnawati.2016) stated that,
theoretically, the principle in determining the size of the tax or the tax rate is the equivalent of the social
marginal damage costs of adding one tonne of CO2 to the social marginal benefits of reducing one tonne
of CO2. This theory also suggests that the tax rate should increase with the increase in the rate of
growth of the marginal damage from emissions.

Then, according to her journal, there are two alternatives to decide the size of tax, such as:
  The Interagency Panel on the Social Cost of Carbon (2010) estimates the social cost of carbon to
be between USD4.7 and USD65 per tonne of CO2 (2007 USD). By using this social cost
calculation of carbon to determine the initial tax rate, the tax rate can be set at a relatively low
level and increase it over time to minimize economic disruption. If the tax is to be fixed at a fixed
rate, as is generally the case with widely applicable taxes, the optimal tax rate will be in a
condition where the marginal benefit of abatement equals the marginal cost of abatement.
Determining the optimal carbon tax rate using the marginal benefit of abatement equation,
together with the marginal cost of abatement, is recommended for Indonesia because it is more
reflective of the actual price conditions for carbon and is more dynamic and can be adjusted
over time when the price of carbon changes.
 We can calculate the social cost damage base on the cost of illness. This is accordance with
the Regulation of the Minister of Environment Number 7 of 2014 concerning
Environmental Losses Due to Pollution, which states that the cost of illness approach is
used if pollution and / or environmental damage causes health problems so that the
sufferer cannot work. Losses can be calculated as long as the person concerned is sick.
The calculated costs include the cost of treatment, doctor's consultation fee, medicine
and laboratory; consumption expenses during illness; accommodation expenses when
sick; transportation expenses during treatment; loss of income; decreased productivity.
Furthermore, the tax value is estimated by dividing the total economic loss by the total
pollution load (Bestari et al., 2014; Hidayat & Syafitri, 2016).

 Another alternative that can be used in determining the carbon tax rate is to determine a tax
rate that can achieve the emission reduction as targeted (for example, a 29-41% reduction in
2030).
This approach separates the analysis into two components: an overall social decision about what
tolerable levels of GHG in the atmosphere are and a technical analysis of how best to achieve
this goal. When using this approach using the same target, the range of tax rates they generate
is the same as the result of an exact assessment of the social cost of carbon.

Carbon Tax for Industry

In addition, in imposing a tax on industries that produce carbon gas emissions, we can use the
company's carbon emission data as a basis for imposing carbon taxes. This data is supported by the
Sustainable Finance Program which is based on the Financial Services Authority Regulation (POJK)
number 51 / POJK.03 / 2017 concerning the Implementation of Sustainable Finance for Financial
Services Institutions, Issuers, and Public Companies that implicitly support the implementation of carbon
tax policies in Indonesia. Where the POJK requires business entities or companies to periodically report
the amount of carbon emissions resulting from their business activities. As a result, the Government of
Indonesia can use the company's carbon emission data as a basis for imposing carbon taxes.

Carbon Tax for Transportation

Fundamentally, Indonesia has imposed a motor vehicle emission tax since 2019 through the Value
Added Tax for Luxury Goods (PPnBM) which is regulated in Government Regulation (PP) number 73 of
2019. According to the law, the imposition of motor vehicle emission tax is based on the volume of fuel
consumption and carbon dioxide (CO2) emissions that are produced. On the other hand, based on the
Act 28 Year 2019 concerning on Regional Tax and Regional Retribution, the basic weight of vehicle tax
imposition is based solely on axle pressure, type of motor vehicle fuel, type, use, year of manufacture,
and characteristics of motorized vehicles. Therefore, the basic weight (bobot) of motor vehicle tax (PKB)
must be in accordance with the exhaust gas emission (kg CO2/km) threshold set out in Government
Regulation Number 55 of 2012 concerning Vehicles. In Article 64 paragraph 1 it is stated that exhaust
gas emissions are a condition for motor vehicle roadworthiness. Article 65 also states that motor vehicle
emissions must be measured based on the pollutant content released by motorized vehicles and must
not exceed the stipulated threshold. The determination of the threshold is carried out by the ministry
responsible for government affairs in the environmental sector.

b. What would you do about smoke emitted by a municipal electricity plant?

https://www.liputan6.com/bisnis/read/4028710/pembangkit-listrik-tak-signifikan-sumbang-polusi-
udara

References:

https://www.purnomoyusgiantorocenter.org/carbon-tax-implementation-in-indonesia/

https://itrev.kemenkeu.go.id/index.php/ITRev/article/view/51/52