A Comprehensive Environmental Taxation Framework for Carbon Pricing in the AFOLU Sector

The Agriculture, Forestry, and Other Land Use (AFOLU) sector represents a significant share of national greenhouse gas emissions and plays a critical role in climate and environmental governance. However, the biogenic and spatially diffuse nature of AFOLU emissions presents major challenges for applying conventional carbon tax mechanisms. This study proposes a comprehensive carbon taxation framework that adopts an activity-based environmental accounting approach aligned with the Intergovernmental Panel on Climate Change (IPCC) guidelines. Instead of taxing direct emissions, the framework uses measurable proxy variables— such as nitrogen fertilizer consumption, livestock population, rice cultivation area, and land-use change—to calculate emissions through activity data and emission factors. This method enhances feasibility and transparency while reducing monitoring burdens. However, the implementation of this framework requires addressing key technical, economic, and regulatory challenges, including data reliability, carbon leakage risks, and potential impacts on smallholder livelihoods. The study emphasizes the need for legal and market classification of carbon units— either as financial securities or tradable commodities—to ensure robust integration with carbon markets. Establishing this regulatory clarity is essential for policy coherence, environmental effectiveness, and long-term investment in sustainable land-use practices.