Indonesia’s captive coal: How to decarbonise its biggest growth sectors?

Nature & Climate Perspective

**Captive coal expansion for nickel smelting directly threatens terrestrial carbon sinks and accelerates industrial emissions, undermining regional ecological integrity. **

• Deforestation and land clearing for dedicated captive coal power plants and industrial nickel estates degrade critical LULUCF baseline sinks and localized biodiversity hotspots.
• Intensive flue-gas emissions, acid deposition, and heavy metal run-off degrade soil stability and suppress long-term biomass carbon sequestration in surrounding tropical forests.
• High-volume thermal pollution and marine tailings deposition disrupt nearby coastal ecosystems and mangrove-based Blue Carbon reservoirs.

Market & Policy Outlook

**Unabated captive coal locks in high-carbon intensity, exposing Indonesian nickel to severe cross-border carbon penalties, SBTi non-compliance, and ICVCM transition scrutiny. **

• Impending border carbon adjustments (e.g., EU CBAM) and Article 6.2 bilateral transfer frameworks increase financial liabilities for fossil-heavy supply chain inputs.
• Surging corporate demand for verifiable green power necessitates large-scale deployment of I-RECs and grid-interconnection infrastructure to maintain market liquidity and avoid stranded asset risk.
• Global EV manufacturers bound by SBTi Scope 3 decarbonization commitments face compliance friction, contrasting starkly with ICVCM Core Carbon Principles regarding real and verifiable emissions reductions.