The global transition to a circular economy (CE) is a critical environmental management objective. Yet, in many emerging economies, implementation is stalled by institutional fragmentation, limited fiscal capacity and policy incoherence. This study introduces the lifecycle fiscal governance for circular economy (LFG-CE) model, a framework designed to guide policymakers in systematically designing and managing tax reforms that support CE principles.
This study employs an integrative research design focused on Indonesia as a representative case study. The methodology triangulates evidence from three sources: a qualitative literature review, national policy documents and empirical insights derived from expert interviews with key fiscal and industrial stakeholders. This combination allowed us to map tax instruments directly to product lifecycle stages, creating a policy framework grounded in local realities.
The study presents the LFG-CE framework, a strategic tool for environmental and fiscal management. The framework organizes tax instruments across upstream, midstream and downstream lifecycle stages. Beyond simple categorization, the research identifies and integrates solutions for overcoming context-specific institutional barriers, and advances three formalized theoretical propositions concerning policy sequencing and effective revenue recycling. The findings culminate in a phased, narrative reform roadmap (short, medium and long term) for public sector managers.
The paper's originality lies in two areas. Theoretically, this paper refines the double dividend hypothesis into a socio-fiscal double dividend concept for emerging economies, and operationalizing the Polluter Pays Principle as a dynamic policy sequencing guide. Practically, it delivers an actionable roadmap that directly addresses the policy incoherence and capacity gaps identified in the Indonesian context, moving beyond high-level theory to implementation.
