Green Financing Strategy to Sustain Government Revenue

On 13 October 2025, Indonesia’s Finance Ministry announced a review of green tax incentives. The government intends to combine a hybrid scheme with green bonds to safeguard state revenue. The measure aims to reinforce the clean‑energy transition.

Previous incentives, such as VAT exemption for electric vehicles, were seen as ineffective because they mainly benefited higher‑income consumers while the national power mix remains dominated by fossil fuels. The proposed hybrid model will focus on strategic sectors like energy, transport and waste processing, pairing tax relief with technical assistance. Green bonds—debt securities whose proceeds are earmarked for environmentally friendly projects—will engage banks to broaden financing impact.

If implemented, the blend of tax incentives and green bonds should preserve the revenue base while generating new jobs in the green economy. The Tax Oversight Committee stresses that an inclusive fiscal strategy can strengthen the long‑term tax base. Transparency mechanisms such as green‑budget tagging will allow the government to monitor fund effectiveness and environmental outcomes.