2022 State Budget: Fiscal Policy and Structural Reform

• • . • • • • Carbon Pricing Policy Carbon Pricing Instruments Emission Trading System CO₂ CARBON PRICING POLICY UNDER DISCUSSION Aims to reduce national GHG emissions. Become a policy intervention to overcome "market failure". The practice of "polluters-pay- principle" Encouraging a low-emissions business and business ecosystem. Can be an alternative source of financing for sustainable development programs. Government, currently, is preparing Regulation on Carbon Pricing. Implementation of international carbon trading will consider the discussion of Article 6 Paris Agreement at COP 26 1 Trading Instruments a. Emission Trading System/ ETS: an entity that emits more buys an emission permit than one that emits less (cap and trade) b. Emission Offset (Crediting Mechanism): Entities undertaking emission reduction activities can sell their carbon credits to entities requiring carbon credits. 2 Non-Trade Instruments a. Carbon tax: imposed on carbon content or carbon emitting activity. b. Result Based Payment: payments are made for the results of emission reductions. BA Erisi Jarraze CAR! First Period Entity A and Entity B have the same allocation at the att beginning. of the period Emission Offset Beas, Nan T End of Period Emission Allocation Certificate Emission Obtained A has an allocation surplus that can be sold to B B Belas Alas Emsi B is a business entity that is subject to a cap C is a business Initial Emission Final Emission Emission Reduction Certificate Emission Obtained C entity that is not subject to a cap Trade Mechanisms Carbon Tax Result-Based Payment Non Trade Mechanisms No carbon credits transfer Carbon content on goods Emitting activity Source: Ministry of Finance 115

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