Indonesia is the world’s largest nickel producer. According to the Ministry of Energy and Mineral Resources (ESDM), Indonesia’s nickel reserves account for 52% of the world’s nickel reserves, equivalent to 72 million tons of nickel. In 2022, Indonesia was recorded as the world’s largest nickel producer with a production of about 1.6 million metric tons and had nickel reserves of approximately 21 million metric tons. Indonesia plays a crucial role in the global supply chain for nickel and its derivatives, which are vital for the production of EV batteries.

Seeing the potential increase in global nickel demand, the Indonesian government is striving to seize this opportunity to boost the national economy. In this effort, the Indonesian government has banned the export of nickel ore and is promoting the growth of smelters not only to produce intermediate nickel products but also to produce battery-grade nickel. Huayou Indonesia, a battery component nickel producer in Indonesia, supplies its products to Contemporary Amperex Technology (CATL) in China. CATL is a battery supplier for BYD, Tesla, and Volkswagen, the top three EV manufacturers.

Nickel battery production must consider social and environmental aspects to ensure it benefits many parties and does not have negative social and environmental impacts. Internationally, there is ESG (Environmental, Social, and Governance) assessment that evaluates the business performance and sustainability of companies. Nationally, Indonesia has the PROPER assessment under the Ministry of Environment and Forestry to evaluate environmental management (wastewater, air emissions, and hazardous waste management).

Publicly listed companies on the Indonesia Stock Exchange are required to conduct and report their ESG, while non-listed companies are not obligated to do the same. For those non-mandated companies, the PROPER rating can be used to assess their environmental sustainability responsibility.

A study conducted by Aksi Ekologi dan Emansipasi Rakyat (AEER) found that nickel-producing companies listed on the Indonesia Stock Exchange (IDX) are not transparent about the risks of their activities on the environment, social, and governance. The public does not have access to information on each metric score in the ESG assessment. Additionally, what the public, especially the local community, experiences often does not align with what is reported by the companies. Furthermore, nickel battery smelters in Indonesia (Huayue NC, QMB NEM, and Halmahera PL) are not yet listed on the IDX and thus are not required to report their business practices according to ESG frameworks and standards.

In the PROPER assessment, 7 out of 15 companies in the IMIP area received a red rating, indicating that their environmental management does not meet the requirements set by legislation. It is also noteworthy that there have been no environmental improvement efforts by these companies, as evidenced by their red rating for two consecutive years. Companies with a red PROPER rating receive administrative sanctions in the form of improvement instructions and are required to undergo training within three months after the PROPER rating is established.

Additionally, the energy demand for nickel production in Indonesia is still supplied by captive coal-fired power plants, accounting for a large portion of 8,817 MW or 64.2% of total captive coal-fired power plant energy. In the IMIP industrial area, electricity is supplied by the Sulawesi Mining Power Station, a captive coal-fired power plant owned by PT Sulawesi Mining Investment, with a total capacity of 2,080 MW (or 2.08 GW). For illustration, producing 1 ton of nickel matte from converting nickel pig iron (NPI) emits 59 tons of CO2, and producing 1 ton of mixed hydroxide precipitate (MHP) with High Pressure Acid Leaching (HPAL) technology emits 19 tons of CO2. This activity is not in line with the global Net Zero Emission goal adopted by Indonesia as the Enhanced National Determined Contribution (ENDC) to reduce emissions by 31.89% (unconditional) or 915 MTon CO2-eq and 43.2% (conditional) or 1,240 MTon CO2-eq by 2030 with international assistance.
The increase in EV production aimed at reducing global carbon emissions becomes inconsistent if the nickel used is produced with coal energy and through practices that do not adhere to ESG standards. EV manufacturers, as recipients of nickel for batteries, have a role in influencing the market and nickel standards by ceasing to supply “dirty” nickel for their EV production.