Carbon Tax and Emission Trading System in the Perspective of Islamic Economics Eva Fauziah (a), Atih Rohaeti Dariah (b), Asni Mustika Rani (b*)
a) Faculty of Sharia, Universitas Islam Bandung, Bandung, Indonesia
b) Faculty of Economics and Business, Universitas Islam Bandung, Bandung, Indonesia
*asnimustika[at]unisba.ac.id
Abstract
The Emission Trading System (ETS) has been adopted by 13 countries and the European Union as a market-based mechanism to reduce greenhouse gas (GHG) emissions. In the United Kingdom, ETS has replaced the carbon tax, while Indonesia is preparing to implement a hybrid model that combines both ETS and carbon taxation. This study explores the compatibility of these two mechanisms with Islamic economic principles, particularly focusing on the concepts of justice (adl), stewardship (khalifah), and public welfare (maslahah). Using a qualitative approach, the research draws on content analysis of Islamic legal sources-including the Quran and Hadith-supported by focus group discussions (FGDs) with Muslim scholars. The analysis reveals that carbon emissions, as intangible and abstract entities, do not meet the criteria of a shariah-compliant tradable asset (mal). Therefore, ETS involves elements of uncertainty (gharar) and speculation (maysir), which are prohibited in Islamic commercial transactions. In contrast, a carbon tax is considered more acceptable within Islamic jurisprudence, as it is based on the principle of fiscal responsibility and aims to internalize environmental externalities in a fair and transparent manner. The study concludes that from an Islamic economics perspective, carbon taxation is a more equitable and legitimate policy instrument than emissions trading, offering a viable path to achieving sustainability without compromising ethical standards.
