Indonesia's Nickel Boom Faces a Carbon Problem
Indonesia’s Nickel Boom Faces a Carbon Problem
Jakarta. Indonesia’s nickel downstreaming boom faces a growing competitiveness challenge as the country’s dominant processing technology remains highly carbon-intensive, potentially putting access to global markets, investment and financing at risk.
The nickel industry has the potential to become greener, but achieving that will require significant decarbonization efforts, particularly in the energy-intensive processing of nickel ore, Indonesian Nickel Miners Association (APNI) advisor Joko Widajatno Soewanto said.
“One of the main challenges is how to reduce carbon emissions from the processing stage,” Joko said at the CERAH Expert Panel discussion in Jakarta on Thursday.
A major source of emissions comes from pyrometallurgical processing, particularly Rotary Kiln Electric Furnace (RKEF) technology, which is widely used to turn nickel ore into downstream products such as Nickel Pig Iron (NPI) and ferronickel.
Unlike many other industries, nickel processing requires a massive and stable supply of energy to keep production running, making a shift toward lower-carbon energy sources more challenging.
Natan Adhynagara, an expert at the National Economic Council’s Directorate for Synchronizing Priority Economic Policies, said RKEF-based nickel processing has a particularly high carbon intensity.
Producing one ton of nickel through the pyrometallurgical process can generate around 40–42 tons of carbon dioxide emissions, he said.
“If the question is whether nickel has the potential to become a green industry, I would say yes, it does. However, carbon emissions in the nickel industry are still quite massive, particularly in the RKEF pyrometallurgical process,” Natan said.
Decarbonization Challenge
Several technologies could help reduce the nickel industry’s carbon footprint, including carbon capture, which would allow emissions from industrial processes to be captured before they are released into the atmosphere.
Another option is to shift toward renewable energy. However, the transition remains challenging given the massive and continuous energy requirements of nickel processing facilities.
Natan said nuclear power could also be considered as a low-carbon energy source, although its deployment would face challenges related to safety, investment and technological readiness.
“The opportunity is there. A more moderate option would be carbon trading, such as purchasing carbon credits from mangroves or other sources,” he said.
Carbon trading could serve as a short-term option while cleaner energy technologies for heavy industries such as nickel processing continue to develop.
But technological solutions alone will not be enough. Indonesia also faces a governance challenge as global sustainability standards increasingly determine companies’ access to markets, investment and financing.
According to Natan, a gap analysis conducted with the Coordinating Ministry for Economic Affairs and the World Resources Institute (WRI) found that only two out of 42 international ESG parameters analyzed were aligned with Indonesia’s regulatory framework.
“The other 40 parameters are still not aligned with our regulations,” he said.
Indonesia already has around 117 regulations related to sustainability, ranging from laws and government regulations to presidential, ministerial and ministerial decree-level rules.
However, the large number of regulations has yet to make Indonesia’s regulatory system fully compatible with international ESG standards.
The gap could become increasingly important as sustainability requirements evolve into a factor shaping global competitiveness.
The European Union’s Carbon Border Adjustment Mechanism (CBAM), for instance, could create additional barriers for carbon-intensive products entering the European market.
Mining and mineral producers are also increasingly expected to comply with international standards such as the Initiative for Responsible Mining Assurance (IRMA), the Responsible Minerals Initiative (RMI), Copper Mark and Nickel Mark.
“To enter the European market, industries have to meet those standards,” Natan said.
Beyond Export Value
Indonesia has significantly expanded its position in the global nickel supply chain in recent years, moving beyond raw ore exports to produce higher-value products such as NPI, steel, Mixed Hydroxide Precipitate (MHP), Mixed Sulfide Precipitate (MSP) and battery materials.
The government ultimately aims to deepen the downstream industry further by producing lithium batteries and electric vehicles.
The strategy has delivered significant economic gains. Indonesia’s nickel product exports have increased around 12-fold since 2014, rising from about $3 billion annually to approximately $37 billion in 2025.
Cumulative foreign direct investment in the base metals sector also exceeded $71 billion between 2015 and 2025.
However, Natan said the economic gains from downstreaming should not be measured solely through export revenues or fiscal receipts.
Indonesia instead needs to strengthen the concept of benefit sharing to ensure that the gains from nickel industrialization are distributed more broadly.
“So we should not focus only on the value, but on how the benefits are shared,” he said.
The benefits, he added, should include government revenue, local job creation, greater use of goods and services from communities surrounding mining areas, community empowerment and infrastructure development.
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