CO-2 EMISSIONS REDUCTION BY PRICE DEREGULATION AND FOSSIL-FUEL TAXATION - A CASE-STUDY OF INDONESIA

As environmental issues, and the issue of global warming in particular, rise to the top of the international agenda, developing nations are faced with a major question: how to confront these environmental problems and simultaneously address a number of more pressing developmental imperatives? This paper tries to answer that question on a limited scale using Indonesia as a case study. The study indicates that by deregulating energy prices and imposing different levels of taxation on fossil fuels, Indonesia could reduce its CO2 emissions without considerably suppressing the growth of its economy. In the long run, however, these policies cannot cope with the inevitable rise in coal-use in Indonesia, due to constraints on domestic natural gas and oil resources. Limiting the growth of coal consumption in the future will require direct technological intervention in the supply and demand of energy and a shift in current energy export and import policies.