Evaluative Study on the Impact of Carbon Tax Implementation in Promoting Environmentally Friendly Industries in Indonesia

This study evaluates the implementation of Indonesia’s carbon tax policy and its role in promoting the transformation toward environmentally friendly industries. Using a qualitative literature review approach, the research synthesizes evidence from academic publications, policy reports, and institutional documents to assess policy effectiveness, institutional readiness, and industry responses. The findings indicate that the current carbon tax—characterized by low pricing levels, limited sectoral coverage, and weak enforcement—has not yet functioned as a significant driver of green innovation or sustainable investment. The analysis shows that many firms perceive the tax primarily as a regulatory formality rather than a strategic market signal, largely due to policy ambiguity, insufficient integration with green finance mechanisms, and weak inter-institutional coordination. The study underscores the importance of aligning fiscal instruments with complementary policies and robust institutional frameworks to enhance their effectiveness in developing country contexts. It also highlights the need for future empirical research focusing on firm-level behavioral responses and the long-term effects of carbon pricing on industrial sustainability. Keywords: carbon tax; environmental fiscal policy; green industrial transformation; Indonesia; climate policy implementation.