This paper develops an AIM/Enduse model for Indonesia to analyze the implications of considering carbon tax on energy security in energy sector development of Indonesia during 2005-2035. This paper also analyzes the environmental implications of introducing carbon tax and the diversification of energy use in the power sector due to carbon tax. The result show that the energy security in Indonesia would increase with the introduction of carbon tax. The energy security index (i.e.,
Shannon-Weiner Index) at carbon tax rate of US$200/tC in year 2035 would be 1.473 which is higher than those at carbon tax rates lower than US$200/tC and the base case. In the power sector, the diversification of energy use in the power sector would fluctuate at selected carbon tax rates.