Carbon Tax as an Economic Instrument in the Transition to a Green Economy

Abstract

The urgency to address climate change has prompted countries to adopt innovative fiscal strategies that support environmental sustainability. Among these, carbon taxation emerges as a pivotal economic instrument to internalize environmental costs and accelerate the transition toward a green economy. This study explores the role and effectiveness of carbon tax policies in supporting sustainable economic development. The objectives include analyzing carbon tax as a fiscal tool, evaluating its implementation in various countries, identifying key success factors, and providing policy recommendations for Indonesia. Employing a systematic literature review (SLR) method, this research synthesizes data from peer-reviewed articles, policy reports, and international case studies. The findings reveal that carbon taxes, when designed with fiscal coherence and transparency, have significantly contributed to emission reductions and the development of green sectors. Countries with clear revenue recycling mechanisms and robust regulatory frameworks demonstrate higher policy acceptance and effectiveness. Moreover, integrating carbon taxation within broader fiscal strategies enhances economic resilience while achieving environmental goals. The study highlights that carbon taxation is not merely a fiscal penalty but a transformative lever in green economic governance. Despite limitations in empirical scope, the research provides a valuable theoretical and practical framework for designing adaptive and context-sensitive carbon tax policies. For Indonesia, the findings suggest that a carefully tailored carbon tax strategy can bridge fiscal sustainability with ecological stewardship.