Investor Presentaiton
Investment Landscape
Indonesia's carbon bill should encourage low-carbon
investment and standardise climate impact calculations.
Indonesia is the world's largest exporter of palm oil, January 2020-21
Harmonised Tax Law (HPP) introduced a carbon tax in Indonesia,
October 7, 2021
Indonesia
10%*
Malaysia
34%•
Others
Oil plantations are key
To reducing rural poverty
57%
Indonesia exported 29m
tonnes of palm oil in 2017
The EU was the second-largest importer of Indonesian palm oil exports in 2018
India
EU
China
Other
49%-
25%
-
14%
12%
In December 2018 the EU banned
palm oil imports for biofuel, arguing
that the industry contributes to
ASEAN's extensive deforestation.
Palm oil imports still permitted for
other products, such as food
and cosmetics.
Indonesia has among the lowest carbon taxes implemented to date
Indonesia
Singapore
Spain
France
0
10
In June 2021 the House of Representative proposed a
price of $5.20. The Indonesian Chamber of Commerce
and Industry (KADIN) argued that a high carbon tax
would excessively burden business still recovering from
the pandemic. Price was subsequently reduced by 60%.
20
30
$ PER TONNE OF CO₂E
WHEN
Starting from
April 2022
GOALS
•
•
OPPORTUNITY
Regulate the carbon trade, which will be limited to the domestic market
until national greenhouse gas (GHG) reduction targets are met
Provide performance-based payments for reduced GHG emissions
Impose a levy on carbon emissions
Attract investments for low-carbon enterprises, particularly in energy,
transportation and manufacturing
Grant Indonesia first-mover advantage over neighbouring
countries for sustainable development and exports, and
possibly standardise methods to price carbon and
account for its impact
AMOUNT
Rp30,000 per kg
(approximated to $2.10 per
tonne) of carbon dioxide
equivalent (CO₂e)
Could potentially ease barriers to EU-Indonesia trade
Proposed Carbon Border Adjustment Mechanism could limit trade
between Indonesia and the EU
Tari proposed in July 2021 for carbon-intensive products imported to
the EU. Designed to encourage industry and trading partners to avoid:
Carbon
leakage from
the EU*
Emission-heavy
imports to the
EU
40
50
*redirection of emissions if industries move to non-EU
markets with lower environmental standards
Given the EU's 2018 ban
on palm oil imports for
biofuel due to deforestation
links, there is an
expectation that this may
include restrictions on palm
oil trade
Sustainable trade
Indonesia is the largest global
exporter of palm oil. The EU
historically represented the country's
second-largest trade partner for
the commodity, but EU imports of
palm oil from Asia began to decrease
after the bloc's end-2018 ban on
biofuel. The July 2021 Carbon Border
Adjustment Mechanism and COP26
focus on deforestation may further
reduce palm oil imports. On the other
side of the coin, the HPP confirmed in
October 2021 will introduce one of the
region's first carbon taxes from April
2022 to attract low-carbon foreign
investment and could reverse this
trend. Additionally, standardised
carbon accounting will enable
an objective financial analysis of
business costs and efforts related to
GHG emissions reductions.
PwC
OBG ESG Report
O
OXFORD
BUSINESS
GROUP
Sources: ASEAN Briefing; DW; European Commission; MoF; OECD; PwC; Reuters; SpringerOpen; Statista
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