ENVIRONMENTAL TAXATION IN SELECTED ASIAN ECONOMIES: A CONCEPTUAL COMPARATIVE ANALYSIS OF EFFECTIVENESS AND POLICY LESSON FOR INDONESIA

Abstract

This study evaluates environmental taxation across four dimensions: environmental, economic, governance, and social; in five selected Asian countries. The production and consumption process frequently exclude environmental cost, leaving the society to bear the consequences of damaged nature ecosystem and increasing prevalent of climate crisis. Introduced by Pigou, environmental tax is presented as a fiscal instrument to incorporate these externalities into economics decision making process.  Focusing on China, South Korea, India, Vietnam, and Thailand, this study comparatively evaluates the effectiveness of environmental tax implementation across different dimensions. These countries represent important cases given their rapidly expanding economies, significant environmental pressures, and relatively developed environmental taxation frameworks within Asia region. The investigation shows that carbon intensity declined in five countries, although only South Korea recorded a decline in absolute CO₂ emissions. Evidence from China indicates improvements in local pollution, while India illustrates constraints in the use of environmental tax revenues. Yet, broader economic effects and the actual social incidence of environmental taxation remain insufficient to establish comprehensive policy effectiveness. To synthesize these findings, the study develops a promise-design-implementation-response-outcome framework, linking policy effectiveness to the selection of appropriate tax bases, effective tax rates, enforcement capacity, technological alternatives, and revenue use. For Indonesia, the findings highlight the importance of aligning environmental tax instruments with policy objectives, strengthening measurement and verification mechanisms, and integrating revenue accountability and social protection into policy design.