The Powerful Indonesia’s Plastic Excise Tax

For decades, plastic was being used every day and celebrated as cheap. Besides, Indonesia has produced around 60 millions per year. This is the ultimate weapon of Indonesia against plastic pollution.

One of the most notable and transformational changes in global climate policy in recent years is the implementation of plastic tax policies. At early 2000s, several European Union (EU) countries have adopted measures that have opened the door to the development and spread of similar policies worldwide. Some countries such as the UK, Italy, Spain, and South Africa have brought in a transparent plastic tax regimes while countries like India have opted for a complete ban on plastic. The moves come as part of a larger push in global context to address plastic waste, which is the most significant environmental problem. Having such policies become popular over time, they also evolved significantly including in Southeast Asia (SEA).

Indonesia’s Single-Use Plastic Reduction policy, enacted under Minister of Environment and Forestry Regulation No. 75 of 2019, marks one of the more concrete steps the country has taken toward curbing plastic waste. The regulation imposes a surcharge of IDR 200 to 500 on plastic bags. A modest figure on its own, yet one intended to work through the logic of price rather than prohibition. Jakarta, Bali, and Surabaya were among the first cities to adopt the measure, with national rollout expected to follow. By 2023, plastic usage had fallen by 41.68 percent: evidence, however partial, that consumers do respond to even small financial disincentives.

The government’s 2022 proposal for an excise tax on plastic packaging extended this logic further. Where the bag fee targeted retail consumption directly, the excise tax aims upstream, at the supply chain itself, raising the cost of packaging in an effort to reshape how manufacturers produce and how consumers buy. The proposal sat within a much larger fiscal picture, total tax revenue targets for 2022 ranged from IDR 1,499.3 trillion to IDR 1,528.7 trillion, of which the plastic excise was only one component. Whether the tax will meaningfully reduce consumption is less certain than the bag fee’s results suggest, since plastic packaging remains, for now, difficult to substitute in sectors such as food and beverage, where demand tends to hold steady even as prices rise.

Read against the IPCC’s framework, this policy fits more readily into the category of transformational adaptation than incremental adjustment: it does not simply tweak existing practice but reorganizes, at least in principle, how an entire sector functions. Adopted at a national scale, it has the kind of reach that could plausibly seed new regional strategies and, with that, a different way of thinking about climate adaptation, one oriented less toward defense and more toward regeneration.

At the industry level, a higher cost of doing business with conventional plastics creates room, even pressure, for alternatives. Some of this is already visible. Indonesia has used pyrolysis technology since 2020 to convert plastic waste into energy, a small but telling example of how environmental constraint can double as industrial opportunity, in this case feeding into the broader energy transition. If the excise tax pushes other firms toward similar experimentation, whether biodegradable materials, recyclable packaging, or investment in recycling infrastructure more broadly, its effects could extend well past the immediate goal of reducing bag use, moving the sector closer to something resembling a circular economy, where plastic is reused rather than simply discarded.

Consumer behavior is the other side of this. A price on plastic is, in part, an attempt to make its cost visible at the point of purchase, nudging people toward cloth bags, glass containers, or other reusable goods. There is some supporting evidence at the macro level. Plastic and rubber production output has declined by 0.93 percent over the past decade, a figure that overlaps with, though cannot be fully attributed to, a decade of tightening plastic policy. What may matter more than the number itself is the slower cultural shift underneath it. Plastic, once treated as cheap and disposable, is increasingly framed as something with a real cost attached, both economic and environmental. Whether that framing holds will likely depend on how well it is reinforced through public education, not pricing alone.

The clearest long-term stakes are environmental. Plastic pollution in Indonesia touches ecosystems, fisheries, tourism, and public health in ways that are well documented, and marine life in particular bears a disproportionate share of the damage. An excise tax, layered onto existing single-use plastic restrictions, will not resolve this on its own, but it adds another point of pressure against the volume of plastic entering these systems in the first place.

None of this has gone unchallenged. The Indonesian Aromatic and Plastic Olefin Association (INAPLAS) has argued that the tax threatens industry profitability, and with it, the income and value-added tax revenue the sector currently generates. The proposed rate of IDR 30,000, or roughly USD 2.1, per kilogram of plastic bags is lower than comparable rates in Malaysia, the Philippines, and Vietnam, but lower than elsewhere is not the same as negligible, and the financial burden on producers is real. The more useful response is probably not to dismiss this tension but to manage it. Phasing the tax in gradually, pairing it with incentives for firms willing to shift toward sustainable production, and directing the resulting revenue back into waste management and recycling infrastructure, so that the policy strengthens the system it is meant to protect rather than simply taxing the one it is trying to change.

References:

WRI Indonesia. 2024. Siaran Pers 7^th Steering Board Committee Meeting NPAP: Indonesia Tingkatkan Peran Strategis dalam Pengurangan Polusi Plastik. Accessed through https://wri-indonesia.org/id/berita/7th-steering-board-committee-meeting-npap-indonesia-tingkatkan-peran-strategis-dalam

IPCC. Sixth Assessment Report: Working Group II – Impact, Adaptation and Vulnerability.

Danareksa Research Institute. 2023. Tren Produksi Dan Konsumsi Plastik di Indonesia. Accessed through https://www.danareksa.co.id/dris-pulse-check-tren-produksi-dan-konsumsi-plastik-di-indonesia/

Ismawati, Yuyun, Septiono M.A, Proboretno N. (2022). Country Situation Report: Plastic Waste Management and Burden in Indonesia. Accessed through https://www.nexus3foundation.org


Keywords: Plastic waste reduction, plastic excise tax, circular economy