Indonesia’s Green Economy: Who Bears the Burden?

By Eva Fauzyah Rahmah

“A just transition begins with consent, not displacement.” 

Indonesia has positioned itself as a global leader in the green economy. From its net-zero pledge to the expansion of electric vehicle (EV) production and biomass co-firing programs, the country has embraced the language of sustainability. But beneath the surface, a troubling question remains: who bears the burden of this transition?

Energy transitions are not just technological shifts—they are political, ecological, and deeply social. If done too hastily, without safeguards and inclusive planning, they risk reproducing extractive logics and environmental injustices under the banner of progress.

A Green Economy Built on Extractive Foundations

Nickel plays a central role in Indonesia’s transition strategy. The country is the world’s largest nickel producer, and the government has aggressively pursued downstream industrialization to become a hub for EV battery manufacturing. Yet this ambition comes at a steep cost.

In resource-rich regions like Morowali and Halmahera, communities are experiencing the downside of this “green” boom. A 2023 report by Satya Bumi found that heavy metals such as arsenic, cadmium, and mercury have contaminated local water sources at levels up to 7,000% higher than safety thresholds set by the WHO and U.S. EPA. Residents report increased respiratory issues, skin diseases, and damage to farmland.

Moreover, working conditions in these zones have drawn national concern. In the Indonesia Morowali Industrial Park (IMIP)—a flagship nickel complex—over 81,000 workers are employed under grueling conditions. According to official reports and statements, workers face long shifts, low pay, and inadequate safety protections, leading to multiple deaths and repeated strikes between 2020–2023. A senior official from the Ministry of Manpower acknowledged the government has “little power” to enforce safety regulations in certain industrial parks.

Many of these smelters are powered by captive coal plants, whose growth is accelerating. Between July 2023 and July 2024, captive coal capacity surged by over 7.5 GW, driven largely by nickel and industrial demand—undermining Indonesia’s clean energy commitments.

What’s unfolding is not a just transition—but a carbon trade-off. Emissions are reduced in urban centers and international markets, while rural communities bear the environmental and health costs.

Biomass Co-Firing: Deforestation in Disguise

Another key component of Indonesia’s decarbonization plan is biomass co-firing, which blends wood-based biomass into coal-fired power plants. The state utility PLN aims to implement this in over 50 plants to reduce coal dependency.

On paper, this seems reasonable. In practice, it risks driving large-scale deforestation.

A 2024 analysis by Earth Insight warned that meeting PLN’s biomass demand—over 10 million tons annually—could require converting more than 2 million hectares of land per year. Trend Asia estimates over 400,000 hectares of tropical forests lie within government-designated energy plantation zones.

Worse, official energy data confirms that biomass co-firing only reduces coal emissions by 1.5–2.4%, while allowing continued emissions of hazardous pollutants like mercury.

Recently, President Prabowo Subianto revoked nickel mining permits in Raja Ampat—an ecologically vital zone—citing community pressure and ecological protection. Minister of Environment and Forestry Hanif Faisol Nurofiq pledged to prevent further damage, while promising ecological restoration. However, government officials noted that operations could still resume in other zones, exposing a gap between policy intent and systemic reform.

The Social Cost: An Official Reckoning

Indonesia’s green ambitions have profound social consequences:

• Labor Exploitation: The government recognizes safety gaps in industrial parks like IMIP, where fatal accidents and harsh conditions are documented.

• Land Dispossession: Rural and Indigenous communities face displacement for mining and energy projects. Customary rights are often ignored, and FPIC mechanisms are weak.

• Public Health Impacts: Heavy metal contamination in mining zones has forced communities to rely on costly bottled water. Healthcare access remains limited.

• Coal Dependency: Despite climate pledges, captive coal plants continue to power nickel smelters—constituting over 75% of such capacity.

• Policy Retreat: The Ministry of Energy recently revised the national renewable energy target for 2025 from 23% down to 17–19%, weakening the country's clean energy momentum.

What’s Driving the Rush?

Much of this haste is politically understandable. The government faces international pressure to meet climate goals, attract foreign investment, and maintain growth. Programs like the Just Energy Transition Partnership (JETP) offer financing and performance targets. At the same time, Indonesia is competing for dominance in the EV supply chain.

But these incentives have resulted in top-down planning that often bypasses local realities. Environmental Impact Assessments (AMDAL) are inconsistently enforced. Public participation remains limited. And in extractive zones, meaningful redress mechanisms are rare.

As the case of Raja Ampat shows, government intervention is possible—but often reactive, not preventive. Without structural reform, Indonesia risks replicating the very model of development it aims to escape: one that privileges output over equity, and speed over safety.

A Better Way Forward

To realign its transition strategy, the government must:

1. Prioritize Public Over Private Mobility
   Reframe EV policy to emphasize public electric transport—buses, rail, logistics—not just subsidized car ownership.

2. End Biomass Sourcing from Natural Forests
   Enforce a moratorium on using wood from primary or secondary forests. Focus only on agricultural and organic waste.

3. Enforce Transparent Environmental Governance
   Make AMDAL results publicly available. Mandate community involvement in all energy and mining projects.

4. Guarantee Labor Rights in Green Industry Zones
   Apply strict safety standards, prohibit exploitative outsourcing, and enable union representation in industrial parks.

5. Adopt Adaptive, Regional Policy Testing
   Pilot energy transition models in select areas, monitoring ecological and social impacts before scaling nationally.

Not Just Low-Carbon—but Low-Conflict

Indonesia has the potential to lead the Global South in pioneering an energy transition that is not only fast, but fair. It already has the resources, geopolitical influence, and a rising generation that understands the stakes.

But the future depends not only on reducing emissions—but also on who is protected, who is heard, and who is harmed.

This is not merely a technological shift. It is a question of justice. And justice begins with listening—to people, to forests, and to the future we are building.