"Indonesia’s president-elect should get real on nickel" 14 August 2024

For the past few years, Indonesia has made regulatory changes to try and capture more value from its natural resources, particularly nickel and aluminium ores. Rather than continuing to sell the ores to be processed abroad, there has been a push to refine them in domestic facilities for export, or for use in making more valuable products like EV batteries. Most of Indonesia’s refining facilities are based in industrial parks, largely owned by Chinese companies. As these parks are usually powered by “captive” coal-fired power stations, which are operated off-grid specifically for industrial use, they cause air pollution and emit a lot of CO2.

This plan to add value has faced several other challenges... environmental and labour practices in Indonesia have been subject to criticism... Concerns have arisen due to numerous incidents involving environmental pollution, worker safety issues and social conflicts with local communities and Indigenous peoples...

A recent study estimates that by 2025, emissions from nickel smelters and the captive coal-fired power plants that supply them will cost the provinces of Central Sulawesi, Southeast Sulawesi, and North Maluku approximately USD 2.63 billion...[The] research also indicates that if the nickel industry continues to expand without increased regulation, there will be more than 3,800 excess deaths in 2025 and nearly 5,000 in 2030...

China can play a major role in improving the situation by increasing its labour and environmental standards. The question remains as to whether Prabowo will encourage this by revising regulations...

Another challenge is the environmental damage caused by smelters and nickel mining such as in Morowali Regency, Central Sulawesi. Waste from the smelter company warms coastal waters, pushing fish further out to sea, consequently increasing fuel costs for fishers...

Indonesia’s relatively low standards and poor record on environmental safeguards will make accessing global markets difficult... In June, the European companies BASF and Eramet cancelled a USD 2.6 billion joint investment to build a nickel-cobalt refining complex in Weda Bay, North Maluku...

To attract more foreign investment, the Prabowo government can take steps to prevent environmentally damaging nickel practices:

1. it should stop permitting new nickel smelters and stop the construction of new captive coal-power plants. For smelters that already exist, the transition to clean-power generation should be supported.
2. it should make a concrete plan to close all existing captive coal-power plants belonging to smelter companies within five years.
3. mining-free areas should be encouraged, where Indigenous peoples and biodiversity can thrive.

To achieve premium nickel prices, the government must be able to guarantee the traceability of nickel products that are free of conflict with Indigenous communities...