The post-Covid-19 economic recovery has reaped excellent results. After being corrected by 2,07 percent in 2020, the Indonesian economy could grow 3,69 percent in 2021.

However, it has consequences for a serious increase in carbon emissions. In a short time, carbon emissions have increased beyond pre-pandemic conditions.

Citing a report released by the United Nations Environment Program (UNEP), carbon emissions produced by three sectors, namely power generation, industry, and residential, during January–May 2021 have already exceeded pre-pandemic levels. In fact, during the 2020 pandemic alone, carbon emissions fell from 638 million tons to 579 million tons.

Carbon emissions are predicted to continue to increase and play a major role in creating climate change and causing disasters. Throughout 2021, the National Disaster Management Agency (BNPB) recorded more than 5.000 disasters in Indonesia.

Of that, 99,5 percent are hydrometeorological disasters caused by climate change. The economic loss reaches an average of IDR 22,8 trillion per year.

In the future, climate change will pose a serious threat to the global and national economy, both in the short and long term. Bank Indonesia Deputy Governor Juda Agung said the costs incurred due to extreme weather could reach 40 percent of gross domestic product (GDP) in 2050.

However, if mitigation is carried out in accordance with the Paris Agreement commitments, these costs can be reduced to 4 percent of GDP.

The Role of Government and Business

The Indonesian government has actually been paying great attention to carbon emissions for a long time. In 2016, the government ratified the Paris Agreement through Law No. 16. To achieve this commitment, Indonesia has set a target contribution to reducing greenhouse gas (GHG) emissions.

That is, 29 percent with their own efforts and 41 percent with the support of international cooperation from a business as usual condition in 2030. The costs involved are also very large. To realize the commitment with its own resources, USD 365 billion is needed, while with international support, USD 479 billion is needed.

For the success of that commitment, the government continues to strive by doing many things. Among other things, the development of sustainable finance through fiscal policy, issuance of green financing instruments, and attracting the involvement of the private sector. In addition, the government cooperates with financial sector authorities to achieve the set targets.

This commitment will be achieved more quickly if all sectors contribute to reducing carbon emissions. Climate Transparency Indonesia documents that 99 percent of carbon emissions in 2020 will be contributed by the business sector. Among these are the industrial, construction, electric power, and other energy-related sectors. Meanwhile, the household sector only contributes 1 percent of the total amount of carbon emissions in Indonesia.

The business sector in using fossil fuels as energy such as coal and oil will release gas or carbon emissions into the atmosphere. That way, it is true that companies as actors from the business sector are grouped in the largest carbon emitters.

The real role of companies (business sector) to be involved in reducing carbon emissions can be done by disclosing activities that refer to efforts to reduce carbon emissions. Sustainability reports can be a platform that helps companies disclose their carbon emission reduction activities.

Carbon emission reduction activities will be captured as a positive signal for investors so that the company gets support and legitimacy from all its stakeholders. Companies that reduce carbon emissions are considered not only focused on profit, but also pay attention to moral ethical aspects. Attention to reducing carbon emissions is considered an effort to save human survival.

The support and legitimacy of these stakeholders will certainly make the company more effective and efficient in achieving its financial goals. This action is also a mitigation of environmental damage, as well as handling community pressure regarding environmental damage.

Companies will benefit from increased sales because it encourages consumer preferences to use goods and services from environmentally responsible companies.

Although it has a positive value for the company's sustainability, it turns out that the company's awareness to report its sustainable report in the last five years is still far from expectations. In December 2021, of the 766 issuers listed on the Indonesia Stock Exchange, only 154 companies or only 20,1 percent reported their efforts to reduce carbon emissions. This fact shows the low awareness of companies in Indonesia about the dangers of environmental damage caused by carbon emissions.

It seems that many companies only think about short-term interests in business practices. They do not think about the impact of environmental damage that threatens human life in the future as a result of the large carbon emissions released into the air.

In fact, the real threat of climate change caused by the release of carbon emissions in the air has begun to be felt in various forms of disasters that have befallen mankind, especially in Indonesia.

Carbon Tax Expansion

Attention to reducing carbon emissions in the long term will greatly benefit the company. Companies will benefit from increased sales due to consumer preferences to use goods and services from environmentally responsible companies.

For this reason, it is necessary to disclose activities that refer to efforts to reduce carbon emissions as a form of mitigation of environmental damage. It is also a response to public pressure regarding environmental damage.

In addition, companies need to integrate the idea of ​​reducing carbon emissions into the business policies they take, such as implementing the concept of green investment and green financing. By implementing a green investment policy, companies are only willing to take and implement environmentally friendly investment projects.

By implementing a green funding policy, the company will only seek funding sources from financial institutions that are very concerned about environmental safety issues.

To accelerate the achievement of significant carbon emission reductions, the government also needs to make policies that encourage all companies to increase their carbon emission reduction activities. The implementation of the carbon tax that has been implemented in July 2022 in the PLTU sector needs to be implemented more broadly in other sectors.

Carbon taxes will stimulate companies to reduce carbon emissions. This is because high carbon emitters will be subject to high taxes. On the other hand, low carbon emitters will receive lower tax rewards. (*)

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