Financing green recovery from fossil fuel taxation and subsidy reform

Abstract

The COVID-19 pandemic has had a significant impact on Indonesia's fiscal position. Government debt, normally capped at 3% of GDP, is likely to approach 5% in 2022 due to suppressed revenues, high health costs and stimulus spending (Suroyo & Diela, 2021). The government could partially fill this budget gap by reforming some types of fossil fuel subsidies and taxes. While taxes are the principal means for governments to raise revenues, the Organisation for Economic Co-operation and Development (OECD) (2021) highlights that they should have roles beyond this, such as addressing socio-economic problems that have arisen from the COVID-19 pandemic. Further, G20 members have also stressed the importance of including funds to mitigate and tackle climate change in their recovery budgets and ensure financial flows are consistent with a low-carbon emission pathway (G20, 2021). This brief summarizes the findings from three recent publications by the International Institute for Sustainable Development related to subsidy reform and taxation pertaining to Indonesia. We based our series of briefs on the five principles of achieving a fossil free recovery in the flagship report (Sanchez et al., 2021).

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https://rgu-repository.worktribe.com/output/1763889