Improving Competitiveness and Economic Benefits from Industrial Decarbonization

Analis Energi IESR, Muhammad Dhifan Nabighdazweda
Analis Energi IESR, Muhammad Dhifan Nabighdazweda

Jakarta, June 20, 2024 – The industrial sectors contribute significantly to Indonesia’s carbon emissions. Based on data in the Indonesia Energy Transition Outlook (IETO) 2024, 2022 industrial sector emissions rose 30 percent compared to 2021, reaching more than 400 million tons of carbon dioxide equivalent. Implementation of the five pillars of industrial decarbonization is necessary to reduce emissions, limit global temperature rise beyond 1.5 degrees Celsius, and reap other benefits such as increasing competitiveness, reducing operational costs, and opening up green job opportunities.   

Head of the Center for Green Industry, Ministry of Industry, Apit Pria Nugraha, at the workshop “Capacity Building of Industry, Academia and Government Towards Green and Sustainable Industry,” revealed that the industrial sector plays a crucial role in the economy, but also produces significant greenhouse gas (GHG) emissions. For this reason, he emphasized, industrial sector emission reduction policies need to be implemented consistently, inclusively, and firmly. 

“One of the efforts to reduce industrial sector emissions is by applying the value of carbon economy. We are currently making various preparations for decarbonization, such as formulating a road map for carbon trading for industry, Minister of Industry Regulation (Permenperin) on Carbon Trading, carbon trading ceiling, carbon trading governance and carbon trading integrated information system,” Apit said at the event organized by the Institute for Essential Services Reform (IESR) in collaboration with the Ministry of Industry (20/6/2024). 

Program Manager of Energy Transformation, IESR, Deon Arinaldo, mentioned that the dominant industrial sector emissions come from the use of energy that uses coal. Based on the IETO 2024 study, in 2022, energy consumption at least contributed to more than 60 percent of industrial greenhouse gas (GHG) emissions, while the rest came from industrial process emissions and waste.

“Industrial decarbonization can be an opportunity for Indonesia to move towards sustainability and a strategy to achieve the Golden Indonesia 2045 and become an effort to mitigate rising temperatures. The commitment to decarbonize the industry will open up new target market opportunities and increase product competitiveness, especially looking at the future which will move towards more sustainable products,” Deon said. 

Energy Analyst, IESR, Muhammad Dhifan Nabighdazweda, suggests three steps to reduce emissions and encourage industrial decarbonization through low-carbon technology. First, clear and specific emission reduction targets for all industrial sectors should be set. Second, develop certification regulations for green products and new technologies such as hydrogen and CCUS. Third, cooperation between industry, government, and academia should be strengthened for low-carbon technology research and human resource development.

The IESR study revealed five pillars of industrial decarbonization, namely resource efficiency, energy efficiency, industrial electrification, using low-carbon fuels, raw materials, and energy sources, and utilizing carbon capture and storage technology (CCS/CCUS), significantly reducing emissions from processes that are difficult to decarbonize technically.

“The industrial sector is very diverse, requiring a variety of solutions. The implementation of the decarbonization pillar needs to consider both economic and technical aspects. The government can encourage the use of renewable energy for industry, such as through the installation of rooftop solar power plants, provide incentives for industries that implement low-carbon technologies, and support research and development of low-carbon technologies that are still in the commercialization stage,” Dhifan explained.

IESR’s analysis shows that the industrial sector can grow and develop by implementing the five pillars of decarbonization. The industry can save up to 30 percent of production costs by implementing energy and resource efficiency. In addition, costs for production materials that cannot be reused can be reduced by 66 percent. Other benefits of industrial decarbonization include potential carbon tax cost savings, environmental impact control cost savings, improved environmental quality and biodiversity, green job opportunities, and lower health subsidy requirements.

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