Rethinking Carbon Pricing: Balancing Market Incentives and Environmental Protection Through BUMICX

Universitas Gadjah Mada, Faculty of Law, Yogyakarta, Indonesia

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Abstract

This article analyses the paradox of green development in Indonesia, which on the one hand promotes the energy transition agenda and global climate commitments, but on the other hand continues to strengthen its dependence on fossil fuels, particularly coal. Using a mixed approach that combines normative legal analysis and empirical studies of emissions data, fiscal regulations, and energy policies, this research shows that carbon tax instruments in Indonesia still function more as a means of political-economic legitimacy than as effective instruments for controlling emissions. The cap-and-tax model that has been adopted risks turning emissions into a financial commodity rather than an ecological limit that must be adhered to. To address these weaknesses, this article proposes the Balanced Upgraded Model for Integrated Carbon Taxation (BUMICX) as an innovative policy framework. This model positions carbon tax not only as a source of state revenue, but also as a structural mechanism to encourage green investment, strengthen institutions, and ensure ecological and social justice. The findings of this study confirm that without consistent and certain regulatory reform, market orientation tends to override environmental protection, putting decarbonization efforts at risk of being trapped in rhetoric without real transformation.