Fiscal policy for managing Indonesia's environment

The objective of this paper is to examine the role of fiscal policy in the management of Indonesia's environment. The aim is to develop a framework that will allow an examination of possible fiscal instruments and their relevance to Indonesia's context. It is important to note that fiscal policy is one possible area of policy intervention. Regulatory policies would also continue to play a major role. A comprehensive environmental management strategy will need to be based on a balanced combination of regulatory and fiscal policy instruments. Furthermore, a critical element underlying the successful implementation of this strategy will be the availability of an appropriate institutional mechanism. The paper provides an overview of Indonesia's key environmental issues followed by the framework for fiscal policy instruments. The Indonesian Government's progress on environmental management policies is examined briefly to provide background for the discussion of possible fiscal policy options. Finally, the paper provides a summary and conclusions.