(November 10, 2023) — Indonesia should prioritize the early retirement of coal-fired power plants, including captive coal plants used to power nickel industrial parks, as part of its commitment to address climate change, Climate Rights International and Trend Asia said today.

Indonesian President Joko (Jokowi) Widodo and U.S. President Joe Biden will meet at the White House on November 13 in advance of the Asia-Pacific Economic Cooperation (APEC) summit in San Francisco. In their meetings, the two heads of state are expected to discuss the trade in critical minerals and support for Indonesia’s transition from fossil fuels to renewable energy.

“Because of its huge use of coal, Indonesia’s nickel industry is a climate bomb, but it can still change course and set a strong example for other countries by transitioning to renewable energy instead,” said Krista Shennum, researcher at Climate Rights International. “President Jokowi and President Biden should work together to decarbonize the nickel industry and retire both on and off-grid coal plants in Indonesia to avoid climate catastrophe. Jokowi should also take the opportunity to tell Biden that the U.S. should end regulatory approval of and tax subsidies for new oil and gas projects.”

The meeting between Presidents Jokowi and Biden is coming at a time when demand for critical minerals, including nickel, is increasing dramatically for batteries for electric vehicles.

Indonesia has proposed a limited free trade agreement or critical minerals agreement with the United States to allow companies in the electric vehicle supply chain in Indonesia to benefit from tax credits under the U.S. Inflation Reduction Act (IRA). Yet, growing concerns that nickel mining and smelting projects are contributing to human rights, worker accidents, and environmental harms may pose hurdles for a deal.  In October, nine U.S. Senators expressed concern regarding the potential trade agreement due to weak labor protections, environmental impacts, and a lack of community engagement.

Notably, the growth of nickel smelting in Indonesia is leading to a growth in fossil fuel use, making some critical mineral supply chains carbon-intensive and polluting. For example, a recent expansion of the Indonesia Morowali Industrial Park, one of the world’s largest nickel smelting areas, is leading to the construction of nine new coal plants, totaling a whopping 3,360 megawatts of coal capacity. By 2030, Indonesia may have more than 30 gigawatts of captive coal plants, roughly the amount of coal used in Poland each year. Processing critical minerals using fossil fuels runs counter to the need to decarbonize.

One opportunity to decarbonize Indonesia’s energy sector, including off-grid coal plants at industrial areas, is through the Joint Energy Transition Partnership (JETP), a US$20 billion plan between Indonesia and ten countries plus the European Union, who make up the International Partners Group (IPG), to support Indonesia’s energy transition. The United States and Japan are co-leaders of the IPG.

Unfortunately, the current draft version of Indonesia’s JETP Comprehensive Investment and Policy Plan, released in early November, excludes captive coal plants from its analysis, relies on false solutions, has insufficient human rights safeguards, and would lock Indonesia into high levels of national debt. For example, the plan proposes emissions reduction technologies and fuels, like biomass, ammonia, and hydrogen, could pose additional threats to human rights and the climate. Burning biomass emits carbon dioxide and air pollutants, including particulate matter, that threaten human health, and the use of agricultural products, like palm oil, rice husks, and corn, as bioenergy sources may contribute to deforestation, a key driver of the climate crisis. The plan also relies on fuels, including ammonia and hydrogen fuels, which are both currently produced using fossil fuels.

Under the current JETP plan, only US$153.8 million of the JETP $20 billion proposal would be allocated as grant funding. Most of the $10 billion in funding would be disbursed as loans. $10 billion in private finance would include market interest loans, equity investments, and other capital market instruments.

Due to the global nature of the climate crisis, the current and historical responsibility of the donor group for global emissions, and the international importance of a successful energy transition in Indonesia – one of the world’s biggest emitters – donor countries, including the U.S., should leverage additional grant funding. President Jokowi made this point himself recently, saying, “Don’t question Indonesia’s commitment towards [the] energy transition. What I’m questioning is the commitment of the developed states.”

It is critical that the energy transition respects the rights of local communities, and any international funding for Indonesia’s energy transition should incorporate robust human and environmental safeguards for renewable energy projects, including mandates for public participation, transparency, an accessible grievance mechanism, and independent auditing.

“Plans to support the decarbonization of Indonesia’s power sector must take into account all sources of emissions in the energy sector, including captive coal plants,” said Zakki Amali, research manager at Trend Asia. “It must include respect for the rights of local communities and not lock Indonesia into decades of debt.”