Industrial Decarbonization: Indonesia’s Strategy to Reduce Emissions in 5 Key Sectors

Jakarta, February 15, 2024 – Indonesia, as the largest economic power in Southeast Asia and one of the most populous countries in the world, has a major challenge in reducing greenhouse gas (GHG) emissions from the industrial sector. With a rapidly growing economy, mainly driven by a young workforce, abundant natural resources, and rapid technological advancements, measures to decarbonize industry are crucial in maintaining environmental balance and sustainable economic growth.

Deon Arinaldo, Program Manager of Energy Transformation, Institute for Essential Services Reform (IESR) explained, based on the Climate Action Tracker (CAT) report, Indonesia’s current ranking is critically insufficient to limit the earth’s temperature below 1.5°Celsius. This position is down compared to 2022, which placed Indonesia in the highly insufficient ranking.

“In fact, Indonesia has set an Enhanced-Nationally Determined Contribution (ENDC) containing an increase in carbon emission reduction targets from 29% or 835 million tons of CO2 to 32% or 912 million tons of CO2 by 2030. Reflecting on the ENDC target and CAT status, Indonesia needs to push to strengthen its commitment to achieve net-zero emission (NZE) by 2060 or sooner,” said Deon during the launch of an IESR study in collaboration with Lawrence Berkeley National Laboratory (LBNL), titled “Industry Decarbonization Roadmap for Indonesia: Opportunities and Challenges to Net-Zero Emissions”. 

Farid Wijaya, Senior Analyst, IESR, explained that the total contribution of GHG emissions from the industrial sector is expected to double from 2011 to 2022, reaching more than 400 million tons of CO2e. Around 60-70% of these emissions come from energy use in the industrial sector (both heat and electricity), mainly due to fossil fuel consumption.

“Based on the IETO 2024 study, GHG emissions from the industrial sector are expected to reach 430 MtCO2e in 2022, a 30% increase from the previous year. This increase in the share of energy combustion indicates the growth of industrial processes that require high heat energy. Unfortunately, the need for these processes causes an increase in coal consumption which contributes to emissions of 174 MtCO2e,” said Farid.

Farid said that industry contributes to economic growth, therefore, decarbonization efforts need to be made to accommodate this growth. This study takes five major industrial sectors that need to be focused on decarbonization on social, economic, and emission parameters, namely cement, iron and steel, textiles, pulp and paper, and ammonia.

“Industrial decarbonization efforts can actually be encouraged in Indonesia based on the existing regulatory framework. However, the government needs to be encouraged to include stronger and more binding regulations in the future, including support and incentives for industry and ensuring that producers, consumers and markets are protected by product controls that support industrial decarbonization,” Farid said. 

According to Farid, for industrial decarbonization to be achieved in Indonesia, many stakeholders need to work together, especially to build a green industrial ecosystem that supports the NZE concept. In addition, several general strategies need to be implemented to achieve industrial decarbonization. First, implementing an ISO 50001:2018 energy management system. Second, the utilization of alternative fuels, such as biomass and hydrogen. Third, the utilization of renewable energy such as solar power and hydropower.

“Fourth, maximize energy efficiency, materials, and process optimization and use highly efficient equipment. Fifth, regular monitoring and measurement of emission process control. Sixth, utilizing carbon emission capture and storage technology (CCS/CCUS) for the cement, iron & steel, and ammonia industries,” Farid said. 

Not only general strategies, Indonesia also needs to implement specific strategies based on the five major industries. For example, for the cement industry, it needs to replace clinker and use alternative raw materials, promote hydraulic cement standards with lower clinker factors, and distribute cement using trains as an alternative to trucks.


“Based on our survey results, the five major industries in the cement, iron and steel, textile, pulp and paper, and ammonia sectors have high motivation to decarbonize.  However, costs, competitive value, and regulatory obligations for businesses and consumers still face challenges and obstacles that must be resolved together,” Farid explained.

Indonesia Towards the Green Hydrogen Era

Bogor, February 6, 2024 – In facing the increasingly urgent challenge of climate change, one of the crucial steps that must be taken is to accelerate investment in clean energy technologies. One of the most prominent recent innovations is the development of green hydrogen. Based on data from the Ministry of Energy and Mineral Resources (MEMR), Indonesia has a renewable energy potential of around 3,686 gigawatts, which makes it possible for the country to produce green hydrogen.

Farid Wijaya, Senior Analyst at the Institute for Essential Services Reform (IESR), explained that, unlike fossil fuels, hydrogen energy generates only water, electricity, and heat when converted, it does not leave any trace of greenhouse gas emissions or fine dust. The production process is also environmentally friendly, particularly when using the electrolysis method to separate hydrogen from water compounds, where an electric current is used to break down water molecules into oxygen and hydrogen gas. This makes green hydrogen a way to respond to the need for environmental balance and offers opportunities to create new markets and value for industries around the world. 

“According to the IESR study conducted with the Ministry of Investment / Investment Coordinating Board (BKPM), green hydrogen has several significant benefits. These include reinforcing national energy security, accelerating decarbonization, promoting a sustainable economy, storing excess electricity, and enabling fair access to renewable energy. It is an efficient alternative to fossil fuels that can be converted into NH3, alcohol (such as methanol and ethanol), methane, and synthetic fuels. Additionally, its energy density is higher than batteries while being equally practical to fuel oil (bahan bakar minyak, red)” Farid said in the Stakeholders Consultation Forum on the Development and Utilization of Hydrogen and Ammonia on Tuesday (6/2/2024). 

Furthermore, Farid highlighted several factors that support the commercialization of green hydrogen. First, the advantages, benefits, and obligations in use. Second, the availability and accessibility of technology, time, and safety. Third, affordable and competitive prices are accompanied by investment and operations. Fourth, user, environment, and community friendliness.

“Reflecting on this,  we need cooperation and innovation from both the private sector and government, when it comes to meeting the demand for green hydrogen. This involves transformation and transition of economic values to environmentally friendly and green, high market demand to encourage investment, as well as a direction map and regulatory policies to support national transformation and transition,” Farid said. 

Indonesia, said Farid, can learn from other countries that have implemented green hydrogen. For instance, Fortescue Australia faced challenges in funding 550 MW electrolyzer capacity on Gibson Island due to high investment and electricity costs for utilizing hydrogen as an ingredient of ammonia. Some of the issues encountered include high investment and operational costs, limited government subsidies, and the high price of ammonia as a fertilizer.

“To minimize the occurrence of unwanted events in the use of green hydrogen, we need to take strategic steps. First, standardization and certification, which is important to maintain the value of a safe and controlled supply chain. Second, the establishment of policy direction maps and regulations that support the development of green hydrogen in Indonesia. Third, access to resources, especially related to defense, determines the cost efficiency of investment, energy, and mobility. Fourth, the availability of hydrogen utilization technology, in building a domestic market for sustainable utilization. Fifth, potential markets, especially for global export markets, have high selling points and domestic markets. Sixth, financial support such as the provision of binding incentives and disincentives,” Farid explained.

Kata Data | IESR: Indonesia Needs US$25 Bln to Produce 52-GW Green Hydrogen Plant

The Institute for Essential Services Reform (IESR) revealed to meet the target of generating 328 megawatts (MW) of electricity from green hydrogen plants by 2030, Indonesia would need around US$800 million worth of investment. Meanwhile, to boost the generating capacity of green hydrogen plants to 52 gigawatts (GW) by 2060, Indonesia would need up to US$25 billion.

Read more on Kata Data.