To mitigate climate change problems, a low-carbon renewable energy policy is needed. Evaluating the impact of these problems on global value chains is essential to ensure an effective transition to sustainable economic development. This study analyzes the impact of emission reduction policies on Global Value Chains (GVC) using the Global Trade Analysis Project-Energy (GTAP-E) model by addressing three fundamental research questions. First, how does the implementation of B40 renewable energy policy combined with carbon tax affect Indonesia’s energy sector output and carbon emissions? Second, to what extent does this policy influence Indonesia’s participation in GVC, particularly in the crude palm oil (CPO) industry? Third, what are the implications for economic growth and social welfare? Our analysis focuses on the CPO sector, considering Indonesia’s position as the world’s largest producer and its potential for sustainable biofuel production through clean technological processes. The results of this study show that the policy effectively reduces carbon emissions through decreased fossil fuel production while promoting renewable energy adoption. It significantly increases Indonesia’s forward GVC participation in the CPO sector, enhancing value addition and international competitiveness. Furthermore, the policy generates positive impacts on economic growth and social welfare. This study emphasizes the importance of international policy coordination and the crucial role of technological innovation in achieving sustainable economic development for a low-carbon economy and strengthening Indonesia’s position in the global value chain.