Iron and steel are vital materials for global infrastructure and the\ntransition to clean energy. In the context of heavy industry, the iron\nand steel sector as a whole accounts for around 6-7% of global CO2\nemissions (\u00c5hman et al., 2023). The iron and steel sector also\ncontributes about one-third of emissions from materials used in\nconstruction (around 1.2 gigatonnes of CO2 per year). This makes the\niron and steel sector one of the highest-emitting industrial\nsectors.<\/p>\n
According to the International Energy Agency (IEA, 2020), the steel\nindustry accounts for about 7% of total global CO2 emissions. In\nIndonesia, the Bappenas (2021) study shows that the iron and steel\nindustry contributes significantly to the national carbon footprint.<\/p>\n
Indonesia is the world\u2019s fourth-largest exporter of iron and steel\nwith exports valued at around US$27.5 billion \u2014 up 3.5 times since 2019\nand twelve times higher than in 2015 (CREA, 2024).<\/p>\n
This growth has resulted in the iron and steel industry contributing\nnearly 40% of Indonesia\u2019s trade surplus in 2023 (CREA, 2024). Meanwhile\ninvestments in the iron and steel sector have risen significantly,\nreaching US$37.7 billion in 2023, up from US$14.8 billion in 2020,\ndriven by financing from domestic and foreign sources (CREA, 2024).<\/p>\n
With these facts, decarbonisation of the iron and steel industry\nbecomes essential given the strategic role of these commodities in both\nemissions reduction and international trade. Green iron and steel, which\nare outputs of decarbonisation efforts in the industry, can contribute\nto emission reductions and hold economic value that could unlock new\neconomic opportunities.<\/p>\n
However, as a note, it is necessary to identify when green iron and\nsteel are sold to the domestic market whether there are potential\nbuyers, particularly in Indonesia, given that the price of green iron\nand steel is higher than that of conventional iron and steel.<\/p>\n
By comparison, the price of iron and steel produced conventionally is\naround 30-60% cheaper than green iron and steel (Agora Industry and\nWuppertal Institute, 2023), so green iron and steel is not yet\nprice-competitive.<\/p>\n
Therefore, to create a market for green iron and steel in Indonesia,\none of the efforts undertaken is through the implementation of Green\nPublic Procurement (GPP).<\/p>\n
According to the EU Commission (2016), GPP is the process by which\npublic authorities or government procure goods, services and works with\na negative environmental impact that is lower than that of goods,\nservices, and works procured if the policy had not been implemented\nwhere the public authorities operate.<\/p>\n
As a demand-side policy instrument, public procurement policy can\ninfluence industry players\u2019 behaviour through standardised and\nmeasurable environmental criteria, thereby spurring the adoption of\nlow-carbon technologies in high-emitting sectors (Krieger &\nZipperer, 2022; SEI, 2023).<\/p>\n
GPP specifically integrates green guidelines into public tenders as a\nmechanism to promote the production and use of sustainable products and\nservices (L\u0103z\u0103roiu et al., 2020). GPP requires environmental impact\nassessment of products, services, or works across their life cycle, from\nprocurement of raw materials to end-of-life disposal.<\/p>\n
In Indonesia, the government has initiated the GPP framework through\nPresidential Regulation No.\u00a016 of 2018 on Government Goods\/Services\nProcurement and its amendments in Presidential Regulation No.\u00a012 of\n2021.<\/p>\n
This regulation asserts that public procurement should consider\nsustainability aspects across economic, social, and environmental\ndimensions, and refer to green certification for sustainable\nprocurement. Given that the government is the largest procurement actor,\nparticularly through infrastructure projects, this policy has\nsignificant potential to shape demand for green steel in the domestic\nmarket.<\/p>\n
However, although Indonesia has shown regulatory progress and\nincreasingly recognises the strategic role of GPP in driving industry\ntransformation, its realisation of implementation remains uneven and\nfaces various structural obstacles as well as institutional capacity\nconstraints (Wirahadikusumah et al., 2020). As a result, the potential\nof GPP as a lever for transforming the iron and steel industry has not\nbeen fully exploited.<\/p>\n
LKPP (Lembaga Kebijakan Pengadaan Barang\/Jasa Pemerintah), as the\ngovernment\u2019s Non-Ministerial Body directly responsible to the President\nin developing and setting government procurement policy in Indonesia,\nissued the Head of LKPP Decree No.\u00a0157 of 2024 on Guidelines for\nSustainable Government Goods\/Services Procurement, which is the most\nspecific regulation to operationalise the concept of green\nprocurement.<\/p>\n
In this document, it is stated that sustainable procurement comprises\nthree main dimensions: economic, social, and environmental, with the\nenvironmental focus aimed at the use of environmentally friendly\nproducts or services. One concrete form of support for green procurement\nis the clause that procurement of goods\/services may prioritise products\nwith environmental labels or ecolabels regulated by KLHK.<\/p>\n
Therefore, there are several things that can be done to strengthen\nthe implementation of GPP to support the national green iron and steel\necosystem. The experience of imposing mandatory use of Domestic Content\n(TKDN) and UMKM products in government procurement as regulated by a law\nsuch as the Omnibus Law (UU Cipta Kerja) shows that strong political\ncommitment only arises when policies have<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/green-public-procurement-and-the-transformation-of-indonesias-green-steel-industry-1772997350", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }