While standing on the banks of the Mahakam River in Samarinda on the island of Borneo, I watched an unending parade of coal barges sail slowly down the river. I was here in East Kalimantan to give a presentation at the Vulnerable Deltas Workshop—a joint project of the East-West Center and the Wilson Center’s China Environment Forum.

An Indonesian colleague said the barges were heading to China—or to Chinese-owned nickel smelters in Sulawesi. Samarinda is Indonesia’s “coal capital,” and this archipelago nation is the world’s largest producer of coal. But Indonesia is also the global leader in mining nickel, which is vital for EV batteries and other low-carbon technologies.

Because nickel is energy-intensive to smelt and process, China had long-standing agreements to import Indonesian nickel to process within its own borders. But in 2020, outgoing President Joko Widodo (popularly known as “Jokowi”) banned raw nickel exports to add value to the country’s domestic nickel supply chain and build new capacity to make clean energy technologies. 

Clean energy is a priority for Indonesia, which is Southeast Asia’s leading greenhouse gas (GHG) emitter. The country has goals to reach net-zero targets by 2060, and President-elect Prabowo Subianto aspires to build on Jokowi’s desire to make Indonesia a green energy superpower. To ensure the country’s build out of its nickel supply chain protects both people and planet, Indonesia’s new administration must improve regulations and increase community participation at all stages of the supply chain.

Passing the Captive Coal-Fueled Torch 

Over his near-decade tenure in office, Jokowi leveraged Indonesia’s rich natural resources to boost its economy. These policies—including export restrictions on bauxite, palm oil, and coal, as well as his signature “downstreaming” initiative for nickel processing—made him a popular president. The nickel export ban, for instance, caused the metal’s value to surge fivefold and boosted employment in the country. 

Alvin Camba, a critical materials specialist at the Association Universities Incorporated, observed that the export ban also created an “oligopsony that gives pricing control to smelting companies” that are overwhelmingly Chinese-owned. “This pressures Indonesian extraction firms to keep prices low,” Camba continued. The ban also has led to environmentally harmful corner-cutting practices that generate water pollution and undermine GHG reduction goals.

Another cornerstone of Jokowi’s administration was the creation of the Just Energy Transition Partnership (JETP) to attract $20 billion from developed nations and multilateral finance institutions to support Indonesia’s decarbonization efforts. However, Indonesia’s JETP roadmap, the Comprehensive Investment and Policy Plan, has major loopholes and exceptions for captive, off-grid, coal-fired power plants (CFPP), dubbing them as “contributors to the low-carbon transition” for their role in processing nickel. Ember, a Jakarta-based energy think tank, warned that captive power plant emissions could exceed Indonesia’s power sector cap of 290 metric tons, thus jeopardizing its net-zero target. 

Despite initial concerns about the long delay in JETP funding, money began flowing in July 2024—mainly in the form of loans. The fact that only $295 million dollars (or 1.37% of the JETP total) will be grants has created “negative sentiment” among Indonesians, according to Raden Raditya Yudha Wiranegara, Research Manager at the Institute for Essential Service Reform (IESR). 

While the IESR believes that $20 billion dollars is insufficient to fund Indonesia’s clean energy needs, the Jakarta-based NGO views the JETP as a critical first step. Initial funding will support pilot projects to showcase on-grid renewable energy potential—primarily in Java, where energy demand is high. Wiranegara noted that “most of the potential for renewable energy is located outside of Java,” however, so a crucial next step will be to build grid transmission infrastructure on Sulawesi for nickel processing and in other areas with energy-intensive industries. 

A New Less-Than Green Agenda

President-elect Prabowo Subianto owns or controls over 57,000 hectares of coal-mining land, but he has vowed to support a transition away from coal, a continuation of nickel downstreaming, and other Jokowi policies. 

Yet how will these policies actually fare in a new administration? Current targets to double Indonesia’s captive coal capacity to fuel greater nickel processing clashes with Prabowo’s goal to reduce coal. At the 2024 Mandiri Investment Forum, Prabowo offered a bold assertion: “Don’t let anyone lecture Indonesia about climate change.” But Prabowo’s desire to protect mining companies is not just a matter of potential personal gain. Camba explained that these incentives are built into Indonesian politics. Many extraction companies are often “joint ventures with Indonesian business leads and Chinese financiers.” These relationships maintain an alignment between business and political interests which ensure both profit and job creation, which in turn help to legitimize the regime. 

Gibran Rakabuming, Prabowo’s running mate and Jokowi’s son, also champions his father’s downstreaming policy—and boasts that their plan could “generate 5 million green jobs.” Gibran also envisions a “self-sufficient” Indonesia that can lead the world’s clean energy race with nickel and biofuels from palm oil and sugar cane. Yet critics have pointed out the Prabowo-Gibran green energy plan will continue to degrade the country’s water, air, and land. Plans to lean heavily on nickel to support the country’s energy future will also mean more pollution from coal-fired power plants (CFPPs).

While Jokowi envisions Indonesia as a “global player in the EV and battery cell ecosystem, the near-term outlook for the country’s nickel tells a different story. The vast majority of its nickel is used for stainless steel at present, and not for EV technology. Such overstatements of Indonesia’s EV potential can be misleading in discussions about how to promote mining that protects local communities and the ecosystem. 

Protecting the “J” in JETP

As Indonesia prepares for another administration that will prioritize the nation’s economic growth, the question of whether the energy transition will be truly “just” or “green” remains uncertain. As we have seen, the nation’s investment plan leaves loopholes for CFPPs—and fossil fuel subsidies remain.  Coal-mining communities worry that they will be left behind once their main income stream is phased out. Also, scant government funding in Indonesia is allocated towards social support programs (such as upskilling coal workers) that are necessary for a just transition. 

Martha Jesica Solomasi Mendrofa, Social, Policy, and Economic Research Coordinator at IESR, emphasized that “diversifying the economy is crucial,” especially in coal-producing areas where local communities have little work experience beyond that industry. Government funds could support reskilling these communities, rather than protecting diesel subsidies for middle and upper-class Indonesians. 

Greening the nickel sector itself also will be necessary for a sustainable energy transition. The Conversation Indonesia outlined 8 pathways that can do so, including being realistic about the country’s nickel industry capacity, limiting the industry expansion to minimize deforestation, and increasing (and answering to) consumer demand for sustainable nickel. 

The recent cancellation of a $2.6 billion nickel-cobalt refining project in Indonesia with Eramet by German chemical company BASF demonstrates that Indonesia’s nickel industry will face risks, as market prices drop with oversupply and the global demand is increasingly focused on cleaner supply chains. A growth-focused Prabowo administration should understand that being more competitive also means being more sustainable—otherwise, Indonesia risks being left behind in the global clean energy race.