Assessing The Validity of Indonesian Electric Vehicle Subsidy Rules Under The WTO Regulations

Abstract

In achieving cooperation in green economic and infrastructure development within the ASEAN region, the Indonesian Government, through Presidential Regulation Number 79 Year 2023, has committed to accelerating economic transformation by implementing subsidies for the advancement of electric vehicles (EVs). This policy aims to enhance investment attractiveness within the EVs ecosystem, expand employment opportunities, expedite the transition from fossil fuel to electric energy use, and consequently accelerate emission reduction and energy subsidy efficiency. In international trade, subsidies are viewed as a form of unfair competition and therefore must be constrained. This study assessed whether Indonesia’s legal framework concerning the EV subsidy is consistent with the WTO regulations and what are the potential legal consequences for Indonesia arising from its BBEVs subsidy’s rules within the framework of WTO regulations. The study adopted normative legal research by analysing legal documents within the WTO, including GATT and SCM Agreement. Furthermore, it employed a statute approach, conceptual approach, and comparative approach to assess the implementation of subsidies for BEVs in Indonesia compared to other countries. To answer the problem formulations, the author used secondary data which gathered through a library research method, including legal texts, regulations, scholarly publications, research papers, working papers, official online databases and archives, and online news sources. The results showed that, firstly, Indonesian regulations pertaining to EVs are classified as an actionable-subsidies, often referred to as "yellow light" subsidies, which means they are not subject to legal challenges initiated by member states of the WTO. However, Indonesia could potentially encounter challenges within the WTO framework if the regulations associated with electric vehicles result in substantial adverse impacts on other WTO member states. Secondly, these challenges could materialize for Indonesia in the form of the imposition of countermeasures or even retaliatory actions. Therefore, the Indonesian government should enhance discernment when formulating policies pertaining to regulations governing EV subsidies, by evaluating the prior EV subsidy’s policies from Norway, Colombia, United States, and China. The government can effectively

support the deployment of EVs by transitioning from direct subsidies to market- based financial policy, such as EV feebates policy. Additionally, enhancing

environmental regulations such as imposing carbon taxation across all sectors and conducting immersive green campaigns are suggested measures that can positively shape public perception of EVs. This nuanced approach not only aligns with WTO regulations but also ensures sustainable development and maintains harmony with international trade norms.