Global warming and extreme climate change, particularly the increase in global temperatures, have emerged as prominent subjects of contemporary public discourse. In 2022, global temperatures were recorded as the sixth highest since 1880, exhibiting an average increase of 0.86°C relative to the 20th-century mean. (National Centers for Environmental Information (National Centers for Environmental Information (NCEI, 2022). Numerous factors contribute to the rise in temperatures, both nationally and internationally, with carbon emissions being a significant contributor among greenhouse gases. These emissions mainly originate from human activities and daily routines, particularly from combustion processes such as power generation and industrial activities. China is responsible for approximately 27% of global carbon emissions, representing a 174% increase in emissions between 1990 and 2010. Developed nations, including the UK, Australia, and the USA, contribute substantially to global carbon emissions and bear considerable responsibility for their mitigation. (Abeydeera et al., 2019).

Indonesia, being among the top ten global contributors to carbon emissions, encounte rs substantial challenges in reducing its greenhouse gas emissions, especially due to the pre dominance of coal-fired power plants in its energy sector. In response, the Indonesian gover nment introduced its carbon tax policy in 2021, with limited implementation beginning in April 2022 targeting coal-fired power plants through a cap-and-tax mechanism. This initial p hase represents an early and partial step toward a more comprehensive carbon pricing syste m currently under development.

It is essential to recognize that the responsibility for global carbon emissions does not rest exclusively with the highest-emitting nations. These emissions largely result from the p roduction of industrial goods driven by international demand. Developed nations, which con sume a significant portion of these goods, indirectly contribute to emissions generated in ma nufacturing hubs. This interconnected dynamic highlights the need for shared accountabilit y. Both producing and consuming countries must implement policies to reduce emissions col lectively. A comprehensive approach, including sustainable production practices and respons ible consumption, is essential to address the global carbon crisis effectively. International tr ade and economic activities create complex interdependencies, as countries and industries i nfluence each other's carbon emissions. Therefore, carbon emissions represent a shared glob al responsibility that requires international cooperation to develop effective emission reducti on solutions. Some socially responsible companies voluntarily take on the responsibility of reducing emissions. In contrast, profit-oriented companies may lack the incentive to do so, as emissio n reductions often incur higher costs. Government regulations on carbon reduction often ser ve to restrict their carbon emissions. At present, carbon taxes and carbon quotas are two wi dely implemented instruments for achieving emission reductions. (Wang et al., 2023).

Some socially responsible companies voluntarily take on the responsibility of reducing emissions. In contrast, profit-oriented companies may lack the incentive to do so, as emission reductions often incur higher costs. Government regulations on carbon reduction often serve to restrict their carbon emissions. At present, carbon taxes and carbon quotas are two widely implemented instruments for achieving emission reductions. (Wang et al., 2023).

Indonesia, as a large country, contributes significantly to carbon emissions. Based on World Bank data from 2019, Indonesia’s per capita carbon emissions reached 2.30 tons of CO2e, reflecting a steady increase since 2013. Therefore, the increasing volume of carbon emissions poses a significant threat to national welfare. Notable consequences include climate change and the potential for substantial economic losses. It is thus essential for the Indonesian government to address these risks through effective policies, for instance, through the adoption of a carbon taxation system.

According data from (Team, 2023), global carbon dioxide emissions reached approximately 36,000 metric tons (MtCO₂) in 2021. Indonesia contributed 615.93 M tCO₂, equivalent to about 1.72 percent of total global carbon emissions, placing it as the 10t h highest carbon-emitting country in the world. In 2022, this share increased to 1.96 percen t of global carbon emissions.

According to information provided by the Ministry of Environment and Forestry, econ omic impact projections indicate that climate change in Indonesia could hinder the fulfillme nt of basic citizen needs by 0.66% to 3.45% of the National Gross Domestic Product (GDP), with the average estimated impact reaching 2.87% of the National GDP by 2030. This analy sis considers the impact of disasters on key sectors, such as the spread of diseases due to flo ods, landslides, and droughts, as well as the impact on agriculture from floods, while the im pact on infrastructure is calculated separately. The sustainability of sectors essential to hu man life heavily depends on their ecosystem conditions, and disasters can threaten the sust ainability of these ecosystems. If ecosystem damage and disasters are considered, potential l osses could reach IDR 4,328.38 trillion.

The enactment of Law Number 7 of 2021 marked the initial step in introducing a carb on tax, aiming to harmonize tax regulations while incorporating carbon tax provisions. Cur rently, the government is developing the framework for determining and applying the carbo n tax. The implementation of carbon trading, including technical details and the operational ization of the carbon tax, is anticipated to commence around 2025. Globally, countries emplo y various methods and policies to limit carbon emissions, which are closely linked to the dev elopment of carbon trading markets. One common application in carbon trading markets is t he Cap and Trade mechanism, where each company is allocated a cap represented by permi ts or quotas for their carbon emissions within a specific period.

This mechanism involves verifying a company's carbon emissions after one year of ope ration to determine whether it exceeds or does not exceed the allocated carbon emission per mits. If a company's total carbon emissions exceed the allocated permits, the company must compensate for the excess emissions by reducing them by the difference between the generat ed emissions and the number of permits held. Conversely, if a company's total carbon emissi ons are below the permits, the surplus can be traded on the carbon exchange, regulated by t he government (Irama, 2020).

In the context of cap-and-trade implementation, the carbon trading market enables th e exchange of emission allowances both domestically among companies and internationally across countries. This complexity has led to the creation of the European Union Emissions Trading System (EU ETS), a significant multinational carbon trading framework. Nations p articipating in transactions through the EU ETS include the United Kingdom, France, and Finland. Nevertheless, this approach may not be fully sufficient to achieve substantial reduc tions in global carbon emissions, highlighting the need for carbon taxes as an additional me asure to enhance emission control within the trading market. At present, Indonesia has not yet introduced a carbon tax; therefore, no direct effects of such a tax, particularly in relation to coal-fired power plants, have been observed.

In the meantime, the Director of Electricity Technical and Environmental Affairs at t he Ministry of Energy and Mineral Resources of the Republic of Indonesia held a webinar o n the Application of Carbon Economic Value in the Electricity Sector, outlining several key points. The carbon tax is implemented based on the carbon tax roadmap established by the government and/or the carbon market roadmap. This tax applies to individuals or entities t hat purchase carbon-intensive products or conduct activities resulting in carbon emissions. The revenue generated from the carbon tax may be directed toward climate change mitigati on programs, as stipulated by Government Regulation and subject to approval by the Indon esian House of Representatives (DPR RI) during the State Budget (RAPBN) formulation. T he carbon tax rate is set at a minimum of IDR 30.00 per kilogram of CO₂ equivalent (CO₂e). Since April 1, 2022, the carbon tax has been applied to the coal-fired power plant sector und er a cap-and-tax mechanism.

Therefore, This research is crucial in supporting government efforts to limit carbon e missions in Indonesia, particularly in coal-fired power plants. The initiative has significant potential to contribute to carbon emission reduction efforts. The results of this study may pr ovide a useful reference for the government in projecting carbon tax revenues and supportin g global environmental preservation initiatives. The insights provided by this study are exp ected to be useful in shaping effective policies for sustainable energy practices.

Anthropogenic and Natural Radiative Forcing (Forster et al., 2007), As outlined in the Intergovernmental Panel on Climate Change (IPCC) report, which discusses the role of CO₂ from human activities in driving climate change, human actions are identified as the prima ry factor behind the rising concentrations of greenhouse gases (GHGs). Over the past centu ry, the combustion of fossil fuels like coal and oil has significantly elevated carbon dioxide le vels. This occurs as burning these fuels results in the combination of carbon with atmospher ic oxygen, generating CO₂. Furthermore, to a lesser extent, activities such as agricultural la nd clearing, industrial operations, and other human-driven actions also contribute to the in crease in greenhouse gas concentrations. (N.A.S.A., 2024).

Coal-fired power plants represent a significant source of carbon emissions within Indo nesia's energy sector, where the release of carbon from coal combustion leads to various adv erse environmental consequences, such as climate change and air pollution. In response, In donesia has introduced a carbon tax policy to mitigate these challenges. The rise in CO₂ con centrations, which drives global warming, remains one of the most pressing global concerns. The forestry and energy sectors are the two primary contributors to national emissions, wit h deforestation and electricity generation being major sources. The predominant use of oil a nd coal fuels has been identified as a key driver of CO₂ emissions in Indonesia. (Cahyono et al., 2022). The complexity of the interaction between various variables influencing the imple mentation of carbon tax policies necessitates a comprehensive explanation and evaluation of these policies.

Carbon emissions describe the discharge of carbon into the atmosphere occurring wit hin a particular geographical region and during a specified timeframe. (Ministry of Energy and Mineral Resources, 2020). The global increase in carbon emissions can be attributed to various factors, including economic growth, fossil fuel consumption, and population expansi on (Agency, 2020). Examples of carbon emissions include carbon dioxide (CO₂), nitrogen oxides (N₂O), methane (CH₄), sulfur hexafluoride (SF₆), and various other co mpounds (Zhang et al., 2008). These emissions, commonly referred to as greenhouse gases (GHGs), are major contributors to global warming (Organisation for Economic Co-operation & (, 2023))

By the end of 2021, Indonesia had risen to the fifth position among the largest cumul ative carbon emission contributors globally (Mutia, 2022). This reflects a concerning trend, especially when compared to earlier data from 2011. In response, and in line with its commi tment to the Paris Agreement in 2015, Indonesia has demonstrated its dedication to reduci ng its carbon footprint and combating global climate change.

A carbon tax represents a type of levy applied to fossil fuel consumption, aiming to mi nimize pollution and mitigate adverse effects such as climate change and air pollution. (Ratnawati, 2016). Fossil fuels such as oil, coal, and natural gas are non-renewable hydrocarbon resources. Imposing a carbon tax on these fuels raises their market prices, thereby discoura ging overconsumption. This tax is primarily applied to fossil fuels utilized in energy generat ion, with the amount calculated based on the volume of carbon dioxide released during com bustion. The tax predominantly targets industries responsible for greenhouse gas (GHG) e missions, aiming to promote the adoption of cleaner, more environmentally sustainable tech nologies within the industrial sector. (Stern, 2007).

Following the implementation of the HPP Law, Indonesia requires that the carbon tax rate be set at a level equal to or higher than the market value of carbon per kilogram of carb on dioxide equivalent (CO2e). The primary objective of the carbon tax is to reduce GHG emi ssions by obligating individuals and businesses to offset the carbon footprint associated with goods and services that have not yet achieved full carbon neutrality. Furthermore, the carbo n tax may contribute to national economic growth and enhance public welfare. (Pamungkas & Haptari, 2022).The core principle behind the carbon tax is to minimize the negative impa cts caused by consumption of carbon-intensive goods and services. Moreover, the carbon tax provides potential benefits such as promoting economic growth and enhancing public welfar e (Investor (Daily, 2021). The revenue generated from this tax can be allocated to support sec tors that directly impact people's lives and promote technological advancement. As global ca rbon emissions continue to rise, carbon taxation plays a crucial role in compensating for the environmental costs associated with high-carbon activities. This mechanism not only suppo rts emission reductions but also strengthens the national economy and fosters sustainable d evelopment (Daily, 2021).

As one of the power plants in Indonesia, Coal-Fired Steam Power Plants (PLTU) are r elied upon by the Government for electricity supply (Sabubu, 2020). Coal-fired PLTUs fall in to the category of steam power generation facilities, which are thermal and fossil fuel-based, using coal as their primary fuel source. The process of generating electricity from coal-fired steam begins with the selection of the type of coal to be used at the facility. The selected coa l is then fed into a boiler to start the steam production process. The generated steam is used to drive steam turbines, which in turn drive electricity generators. Steam is produced under high-temperature conditions, typically around 570°C, and at a pressure of about 200 bar.

Carbon emissions are a textbook example of market failure, where private actors do n ot internalize the full social costs of their activities, leading to excessive pollution. From a m icroeconomic perspective, this represents a negative externality, which justifies government intervention through taxation (Pigou, 1920). The Pigouvian tax theory suggests that the ide al carbon tax should correspond to the marginal social cost associated with carbon emission s, thus internalizing external costs and aligning private decisions with social welfare. From a macroeconomic standpoint, carbon taxes not only address environmental degradation but also generate fiscal revenues that can be recycled to support green investments, reduce othe r distortionary taxes, and stimulate economic growth (the so-called double dividend hypothe sis). This theoretical framework forms the basis for our analysis of Indonesia's carbon tax po licy using a system thinking approach.

However, it is important to recognize that the use of coal-fired steam power plants has significant environmental impacts, particularly in the form of environmental pollution. The se plants produce waste, primarily in the form of fly ash, which spreads toxic and potentiall y deadly pollutants into the environment. In contrast, some developed countries have found innovative ways to utilize fly ash, using it as a construction material in concrete and cement production.

System thinking, according to (Thwinkorg, 2014), It involves both the art and science o f drawing dependable conclusions about behavior through a comprehensive understanding o f the fundamental structures. System thinking also employs a causal framework to explain t he interdependent relationships among variables and systems. (Suryani et al., 2022). Since it presents conceptual dynamics of variables, system thinking offers a powerful and efficient w ay of thinking, enhancing awareness, precision, and intelligence. Therefore, system thinking is not just a technique but also an effective and efficient discipline of thought (Prahasta, 2018). Over time, the paradigm of system thinking has become increasingly recognized and util ized by various groups, serving as a foundation for designing impactful and sustainable poli cies across multiple fields. As such, mastering system thinking is crucial for various stakeho lders, including academics, public officials, and the general public (Sarasi et al., 2021). Based on its definition and components, the following are some features of system thinking (Acaroglu, 2017):

a. Interconnectedness:

System thinking requires the ability to shift from linear to circular (non-linear) thinking, incorporating loops or feedback. This shift allows all components or variables to become interconnected.

b. Synthesis:

Synthesis refers to the combination of components (variables) to form something new (emergence) and interconnected as a whole. In system thinking, the goal is similar understanding the components, relationships, and connections that form overall dynamics. Essentially, synthesis is the ability to see how the system's components work together.

c. Emergence:

From a systems perspective, larger phenomena emerge from what are considered small elements, resulting from the synergy of these interrelated small elements.

d. Feedback:

Because of the interconnectedness, systems typically contain elements that form feedback loops. After understanding the system, interventions can be made through its feedback loops if necessary. There are two types of feedback: reinforcing and balancing. Reinforcing loops do not always lead to beneficial outcomes; when a component becomes dominant (too strong), it may not need further reinforcement, as its growth tends to become exponential, similar to human, flora, and fauna populations under certain conditions. Conversely, in balancing loops, the components continuously balance the system (through natural predators, specific constraints, or deliberate regulations). However, if a population (component) is excessively reduced due to balancing processes, another population may potentially explode (reinforcing) in the future.

e. Causality:

As part of system thinking, causality can explain everything in terms of mutual influence within a system. Understanding this provides a deeper perspective on the agents (variables) involved, feedback, connections, and relationships, all of which are part of system mapping.

f. System Mapping:

System mapping is one of the tools in system thinking. The principle involves identifying and mapping each component (variable) to understand how they relate, interact, and collaborate within a system. However, to intervene or implement policies (which will dramatically alter the system's behavior/dynamics), more in-depth research is still needed.

The following is the research framework developed to address the study being conducted:

The following is the research framework developed to address the study being conduct ed: This research framework begins with the initial stage, where the research process rel ated to carbon tax policy is clearly formulated, including the research objectives and the sco pe of the issues to be investigated. This stage is crucial to ensure that the entire research pr ocess has a clear direction and is focused on the objectives to be achieved. Next, the process moves into the Design Thinking phase, where the methods used aim to deeply understand t he problem and identify the needs of various stakeholders involved. In this stage, data collec tion and literature review are conducted to gain a comprehensive understanding. This proce ss involves steps such as understanding the problem's context, defining the problem specific ally, generating solution ideas, and creating an initial model of the proposed solution.

The subsequent phase involves the creation of a Causal Loop Diagram (CLD), which maps the cause-and-effect relationships between various factors related to carbon tax policy. This diagram helps visualize the complexity of the system under investigation by identifyin g potential positive and negative feedback loops. Once the CLD is completed, an analysis ph ase is conducted to ensure the diagram's accuracy and relevance to real-world conditions. T he analysis involves triangulation of sources by delving into insights from three groups: inte rnal stakeholders, external stakeholders, and academics, as well as further investigation int o the carbon tax policy. This process aims to test the reliability and validity of the developed model, ensuring that all identified causal relationships accurately reflect reality.

The next stage is the Final Causal Loop Diagram, where the validated diagram is up dated and refined based on findings from the validation phase. These revisions result in a fi nal diagram that is more accurate and representative of the system being studied. This final diagram then serves as the basis for formulating more effective and efficient policy recomme ndations. Finally, the research process concludes with the compilation of research findings, i ncluding the final CLD, and policy recommendations based on the conducted analysis. Thes e recommendations are intended to guide policymakers in designing and implementing carb on tax policies that are more effective in reducing carbon emissions and their negative impa cts on the environment, while also considering their effects on industry and society. Overall, this research framework provides a systematic and comprehensive approach to understandi ng and developing carbon tax policies, involving in-depth analysis and empirical validation t o ensure that the resulting policies are truly effective and practically applicable.

Data for this study were collected from both secondary and primary sources. Secondar y data included peer-reviewed literature, government policy documents, statistical database s (e.g., Global Carbon Atlas, IEA, and national statistics), and relevant academic publication s. Primary data collection involved semi-structured interviews and focus group discussions (FGDs) with policymakers (Ministry of Finance), academics, and private sector representati ves.

The triangulation process was conducted in three stages: literature triangulation to i dentify relevant variables, expert triangulation through stakeholder consultations to validat e causal relationships, and model triangulation via iterative revisions of the CLD based on e xpert feedback. To strengthen validity, the CLD structure was partially cross-validated agai nst actual statistical data for key variables such as coal consumption, CO2 emissions, and el ectricity demand. This consistency check ensured the alignment of the qualitative model wit h empirical trends, thereby enhancing the model's credibility.

In application, system thinking is expressed through tools used to model emerging ph enomena, such as the Causal Loop Diagram (CLD). The CLD depicts the dynamic interactio ns among the system's variables, thereby explicitly revealing the system's structure (Prahast a, 2018). The utilization of system thinking serves as a foundational conceptual study to add ress complexities, particularly concerning carbon tax policy in Indonesia. This approach ena bles the clear identification of influencing factors and allows for further analysis based on th e developed Causal Loop Diagram model.

The introduction of a carbon tax in Indonesia constitutes a pivotal element in the na tion's strategy to lower greenhouse gas emissions and address climate change. By assignin g a monetary value to carbon emissions, the tax is intended to encourage both businesses and individuals to shift toward cleaner energy sources and adopt environmentally friendly technologies. Nonetheless, the effectiveness of this policy is influenced by several factors, s uch as the appropriateness of the tax rate, the accessibility of alternatives to coal, and the implementation of complementary supporting policies.

Economically, the carbon tax holds the potential to generate significant government revenue and foster investments in renewable energy and other environmental projects. At the same time, it poses challenges, particularly for coal-dependent industries and low-inco me households that may experience increased energy expenses. To mitigate these challeng es, the government should consider enacting measures that protect vulnerable groups and assist industries in adopting cleaner technologies.

From environmental and social standpoints, the carbon tax may help decrease air p ollution, enhance public health, and raise awareness about the necessity of sustainable en ergy practices. However, public support is essential for the policy's success, requiring the government to engage in open communication and educational initiatives to build public t rust and acceptance.

In summary, while the carbon tax offers a promising pathway for emission reductio n and sustainability promotion, it should be integrated into a broader policy framework th at includes additional environmental regulations and strategies. The government must en sure that the generated revenue is utilized effectively to facilitate the transition toward a l ow-carbon economy, while regularly reviewing and adjusting the policy to ensure its long-t erm effectiveness. This approach will enable Indonesia to advance toward its climate objec tives and contribute meaningfully to global climate change mitigation efforts. Future stud ies may explore combining the Causal Loop Diagram method with quantitative System Dy namics or Agent-Based Modeling to conduct more detailed simulations and policy analyse s, offering deeper insights into the long-term consequences of carbon tax implementation.