Driving Low-Carbon Industry Through an Industrial Decarbonization Roadmad

Jakarta, October 25, 2023 – The Institute for Essential Services Reform (IESR) and the Lawrence Berkeley National Laboratory (LBNL) have released a roadmap and policy recommendations for industrial decarbonization to achieve net zero carbon emissions (NZE). This report focuses on five industrial sectors: cement, iron and steel, pulp and paper, ammonia, and textiles, which are expected to experience a significant increase in GHG emissions if no decarbonization measures are taken. According to the Ministry of Industry, from 2015-2022, the industrial sector contributed 8-20% of national emissions. Referring to IESR’s modeling, total industrial GHG emissions are predicted to continue to increase by 3-4 times by 2060 without any intervention (Business as usual, BaU).

Deon Arinaldo, Energy Transformation Program Manager at IESR, stated that implementing decarbonization in the industrial sector, as the main driver of the Indonesian economy, is a precondition to ensure high economic growth and to make Indonesia an advanced yet low-emission country. Industries with low-carbon products will become the most competitive industries.

“Indonesia can implement the pillars of industrial decarbonization, which include improving energy efficiency, electrifying energy needs, transitioning to low-carbon fuels such as renewable energy, and enhancing material usage efficiency. Each industry is unique, so it’s necessary to anticipate the specific situations and contexts when developing the roadmap and supporting regulations,” Deon said in his address at the Dissemination Workshop of Indonesia Industry Decarbonization Roadmap and Policy Recommendations organized by IESR in collaboration with LBNL and supported by the ClimateWorks Foundation.

IESR and the Lawrence Berkeley National Laboratory (LBNL) view that decarbonizing the industrial sector can be achieved before 2060. According to IESR’s data, among the total of 17 business entities analyzed in these five sectors, each company has set different proportions of decarbonization targets, although only the pulp and paper industry has specific decarbonization targets.

“Large-capacity industries such as cement, iron and steel, textiles, pulp and paper, and ammonia have a strong motivation for decarbonization. There are still challenges regarding high energy consumption, dependence on fossil fuels, waste management, and GHG emissions in processes and value chains, as well as the high costs and economic benefits of decarbonization efforts. Furthermore, the existing regulations have not improved much for the industry, advanced industry, and consumers to drive industrial decarbonization,” explained Farid Wijaya, Senior Analyst at IESR.

Hongyou Lu, Environmental/Energy Technology Researcher at LBNL, emphasized that the Indonesian government needs to develop different national strategies for each type of industrial sector. For example, the iron and steel industry can focus on implementing electric arc furnaces as a process electrification step for a short-term strategy, along with energy and material efficiency. Meanwhile, in the cement industry, decarbonization strategies could include increasing the use of substitute materials for clinker materials (supplementary cementitious materials), implementing material efficiency and energy efficiency measures (short term), and switching to low-emission fuel sources (medium-long term). Furthermore, the government should also create a national strategy for green energy production, such as hydrogen and ammonia, cross-sector technologies like heat pump applications, and Carbon Capture Storage (CCS) for residual emissions that cannot be decarbonized.

“To implement these various industrial sector decarbonization strategies, the Indonesian government needs to coordinate planning with various stakeholders in the development of low-carbon infrastructure, such as pipeline networks, storage facilities, and electricity transmission and distribution systems, enabling industries to access renewable energy,” explained Hongyou.

Furthermore, Hongyou Lu added that industrial decarbonization is unavoidable and involves many aspects. Decarbonizing the industry has the potential to develop new industries, boost the local economy, reduce air pollution, and enhance Indonesia’s competitiveness in the international market. This is necessary to ensure that Indonesian industrial products can still comply with stricter environmental regulations for imports and effective carbon pricing mechanisms in some export destination countries, such as the European Union.

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