Impacts assessment of market-based economic instruments on the NDC targets of waste sector in Indonesia: AIM/CGE

Ambiyah Abdullah and Toshihiko Masui

No 333214, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: In 2016, the Indonesian government had set a target to reduce the total GHG emission from the waste sector by 0.4% and 1% by 2030 without and with any international assistance respectively. Municipal solid waste is the largest source of the total GHG emission of waste sector in Indonesia. Therefore, the improvement of municipal solid waste is one of the current high agendas of the Indonesian government. In 2017, the Indonesian government had set targets to reduce up to 30% of municipal solid waste amount and 70% of waste handling rate by 2025. To support the realization of these targets, the Ministry of Environment and Forestry together with the Ministry of Finance of Indonesia announced the main economic instruments (production and consumption taxes and specific financial supports) to be applied to all plastic products and municipal solid waste sectors in Indonesia respectively. These market instruments are expected to also bring the additional financial sources for the government to achieve national targets of waste sector in Indonesia. On the other hand, these market instruments will also indirectly affect the NDC targets of waste sector in Indonesia. This study aims to assess the impacts of the above-mentioned market -based economic instruments on NDC targets of waste sector in Indonesia. This study uses the AIM/CGE model which is based on the 2010 Indonesian IO table with a more detailed disaggregation on electricity and tax accounts. The disaggregation of electricity and consumption tax is done using the several national statistical data and GTAP 9 database respectively. The finding shows the implementation of 5% increase in consumption tax on all plastic products can be less economic cost and be a priority policy option for the Indonesian government. This can be combined with the adequate amount of special financial support to be spent on the waste and recycling sector with the aim to reduce the sectoral GDP losses of consumption tax.

Keywords: Resource/Energy Economics and Policy; Marketing (search for similar items in EconPapers)
Date: 2020
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