From Captive Coal to Green Nickel: Securing Indonesia’s Future Competitiveness

The report examines the paradox of Indonesia's nickel sector, where a critical mineral for the clean energy transition is processed using carbon-intensive captive coal. It identifies a significant expansion of captive coal capacity, projected to exceed 32 GW by 2031, driven by resource nationalism and the need for stable power in remote regions. The document contrasts 'Green Opportunism' (short-term gains via coal) with 'Green Developmentalism' (long-term competitiveness via decarbonisation) and proposes specific roles for Chinese stakeholders to support a sustainable transition through technical assistance, green finance, and market-shaping rules.

• Indonesia's captive coal capacity reached 15.5 GW in 2024, with over 65% serving smelters. Projections from the National Electricity Master Plan (RUKN) suggest this could more than double to over 32 GW by 2031, a scale nearly equivalent to Germany's entire coal fleet.
• The reliance on captive coal is rooted in Indonesia's 'downstreaming' strategy and resource nationalism, which mandated domestic processing. Coal became the preferred energy source due to its reliability, short construction time (2-3 years compared to up to 10 years for hydropower), and the weakness of national grids in remote nickel-rich areas of Sulawesi and Halmahera.
• Chinese companies are the dominant investors in Indonesia's nickel sector; by the end of 2023, they accounted for approximately 75% of smelting capacity and produced over 85% of battery-grade nickel.
• Current policy gaps hinder decarbonisation, specifically exemptions for captive coal plants classified as National Strategic Projects in Presidential Regulation (PR) No. 112/2022 and the Green Finance Taxonomy, which labels coal power for critical minerals as 'transitional' investment.
• The report identifies two strategic paths: 'Green Opportunism,' which prioritises immediate growth while locking in coal dependence, and 'Green Developmentalism,' which uses decarbonisation as a lever for competitiveness to avoid exclusion from premium markets like the EU due to the Carbon Border Adjustment Mechanism and battery passports.
• China can support Indonesia's transition by co-developing park-level transition plans for hubs like Morowali and Weda Bay, championing 'green minerals' tracks in RCEP, and encouraging buyers to sign offtake MOUs indexed to declining emissions intensity.

APA

Yang, M., Yang, B., & Setyawati, D. (2025). From Captive Coal to Green Nickel: Securing Indonesia’s Future Competitiveness. Ember. https://ember-energy.org/app/uploads/2025/10/Policy-paper-From-Captive-Coal-to-Green-Nickel_-Securing-Indonesias-Future-Competitiveness-2.pdf

Chicago

Yang, Muyi, Biqing Yang, and Dinita Setyawati. From Captive Coal to Green Nickel: Securing Indonesia’s Future Competitiveness. Ember, 2025. https://ember-energy.org/app/uploads/2025/10/Policy-paper-From-Captive-Coal-to-Green-Nickel_-Securing-Indonesias-Future-Competitiveness-2.pdf.

Wikipedia

{{cite report |last1=Yang |first1=Muyi |last2=Yang |first2=Biqing |last3=Setyawati |first3=Dinita |title=From Captive Coal to Green Nickel: Securing Indonesia’s Future Competitiveness |publisher=Ember |date=22 October 2025 |url=https://ember-energy.org/app/uploads/2025/10/Policy-paper-From-Captive-Coal-to-Green-Nickel_-Securing-Indonesias-Future-Competitiveness-2.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{yang2025from, author = {Yang, Muyi and Yang, Biqing and Setyawati, Dinita}, title = {{From Captive Coal to Green Nickel: Securing Indonesia’s Future Competitiveness}}, institution = {Ember}, year = {2025}, month = oct, url = {https://ember-energy.org/app/uploads/2025/10/Policy-paper-From-Captive-Coal-to-Green-Nickel_-Securing-Indonesias-Future-Competitiveness-2.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }