Indonesia’s aim to dominate the global nickel market is a key driver of its ambitious target to lead Southeast Asia with an economic growth rate of 8 percent. The world is going into overdrive developing clean technology and electric vehicles, and Indonesia is poised to lead this global green transition. But this could unravel if the nickel necessary is powered by coal.
Using coal to produce metals needed for a more sustainable future is environmentally reckless.
The global market is changing rapidly. International banks, automakers, and technology giants are tightening sustainability requirements across their supply chains. Markets are focused on reducing emissions and complying with international environmental standards. Green finance is no longer niche; it’s the new baseline.
Indonesia is at the coalface, experiencing among the highest rates of climate-related disasters in the world. And it’s getting worse.
More than 13 million people across Indonesia faced devastating climate disasters in 2023-2024, including deadly heatwaves, landslides and floods according to Global Climate Risk. Climate change impacts on Indonesia’s agricultural sector could cost between up to 7 percent of the country’s gross domestic product, slashing income, ramping up costs for consumers, and threatening food security.
Yet Indonesia’s industrial coal-fired power plant capacity – mainly to power the nickel and aluminum industries – has tripled in the last five years, according to the Centre for Research on Energy and Clean Air (CREA). By next year it will nearly double again, close to the size of Vietnam’s entire coal power fleet.
Let’s make no mistake: producing nickel is causing a staggering amount of climate pollution. Four major nickel companies in Indonesia spewed at least 15.3 million tons of greenhouse gas emissions and other toxic pollution across Southeast Asia, according to a recent report by Institute for Energy Economics and Financial Analysis (IEEFA). By 2028, these coal emissions harming our climate could more than double again.
Ironically, this nickel is marketed globally as a clean energy mineral. Nickel production must become genuinely clean and green.
Coal-fired nickel faces serious barriers. Financial institutions are unwilling to be associated with coal, considered the biggest driver of harmful global warming.
Governments are rolling out stricter climate policies such as the European Union’s Carbon Border Adjustment Mechanism, which will tax carbon-intensive goods like steel, aluminum, and soon, nickel.
Consumers, especially in high-income markets, are demanding more ethical and sustainable products. International nickel buyers are supercharging the shift to green production. Mercedes-Benz has committed to achieving carbon neutrality across its entire supply chain by 2039. Samsung is reducing emissions across its products. All nickel supplied must be produced with low or zero emissions.
China is the largest investor in Indonesia’s smelters and the biggest buyer of nickel. But China will soon only buy low carbon steel, aluminum and cement, as outlined in the International Carbon Action Partnership.
This action by dozens of governments worldwide is setting limits on greenhouse gas emissions and creating penalties for carbon-intensive production. Indonesia’s nickel production must meet these new standards on carbon pollution.
Major banks and investors across Asia and around the world are abandoning coal. More than 200 major financial institutions globally are dumping support for this polluting fossil fuel according to the IEEFA. Indeed 50 of the world’s biggest banks and pension funds have committed to stop backing coal developers altogether and are redirecting finance to clean technologies.
Investors are talking with their money. It’s high time Indonesian banks see the writing on the wall.
None of Indonesia’s state-owned banks have coal phase-out policies, lagging behind their peers in Singapore and Malaysia. Indonesia’s banks are bailing out the dying coal industry while international funding is drying up like a puddle baking in the hot Jakarta sunshine.
Indonesian banks pumped $7.2 billion into coal over the last four years according to the #BersihkanBankmu Coalition, hampering the green transition.
There is no clearer example than Adaro’s controversial North Kalimantan aluminum smelter project, powered by a new 1.1 GW “captive” coal power plant in a so-called green industrial park.
International banks and electrical vehicle manufacturers have cut ties with coal-fired aluminum production. Yet five Indonesian banks have provided 2.5 trillion Indonesian rupiah ($1.5 billion) to Adaro’s coal-powered aluminum smelter.
Indonesia’s banks must recognize coal-fired power is more expensive and risky than renewable energy as outlined by global energy think tank Ember. Indonesia mandates a 35 percent emissions reduction from industrial coal plants after 10 years and limits their operation to 2050. This causes the cost of electricity from industrial coal plants to be 1.5 times higher than Cirata solar plants and Tanah Laut wind projects.
Indonesian and other Asian banks must urgently end funding for carbon-intensive projects linked to Indonesia’s industrial coal power.
Financing must be aligned with net zero targets and global climate goals. Nickel projects need to be powered by renewable energy, respecting the wishes of local communities and they must meet credible environmental, social and governance benchmarks.
Indonesia cannot afford to continue greenwashing by claiming its nickel industry is playing a credible role in the transition to a clean energy economy while the world watches on. The expansion of coal-powered smelters is a dirty secret and the pollution threatens Indonesia’s economy and way of life, from Jakarta to every local village.