Incentives for Goods for Energy Transition Prevent Green Inflation
Indonesia imposes high import tariffs on environmentally friendly goods.
REPUBLIKA.CO.ID, JAKARTA -- Greenflation has became hot topic after Gibran Rakabuming, son of Indonesian President Joko Widodo and current vice presidential candidate, mentioning it in debate night of Sunday (21/1/2024). Greenflation is inevitable due to high demand of energy transition goods, comodities and lack of supply.
Economic researcher Dandy Rafitrandi of the Centre for Strategic and International Studies (CSIS) in Indonesia says that incentivizing goods or technologies for the energy transition can prevent green inflation.
“For Indonesia, one of the ways that can curb green inflation is that the government can facilitate how cheaper import tariffs on goods or technologies for new renewable energy are made cheaper. This is because we have quite high import tariffs for environmentally friendly goods,” Dandy said in Jakarta on Monday (22/1/2024).
He added that Indonesia still charges fairly high import tariffs for environmentally friendly goods or technologies as well as for energy transitions.
Green inflation occurs when governments want to switch to new renewable energy or more environmentally friendly goods that have relatively higher prices, so that's why it mentions that the unintended consequence is green inflation.
“We see this trend (green inflation) happening at the global level, not just in Indonesia. It could also be linked to geopolitical conditions that are currently still hot such as the Russia-Ukraine War and the U.S.-China rivalry,” Dandy said.
This, he added, makes items or technologies essential to the energy transition significantly priced high. Governments around the world fear that if the energy transition is not carried out carefully, it could lead to excessive costs, especially for consumers.
What can the government do to prevent green inflation? One of them, the government should be able to see the goods or technologies needed by both manufacturers and consumers related to components to produce environmentally friendly goods or related to Indonesia's EBT industry.
“We need to be able to incentivize or facilitate regulation that makes it easier for goods or products that are environmentally friendly and needed for the energy transition. I think this can ensure that the goods can be sold and consumed cheaper by Indonesians,” Dandy said.
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