The world’s largest exporter of thermal coal, Indonesia plans to tighten restrictions on coal miners and build an industrial park that generates energy from renewables. What does the Widodo administration expect?

Indonesia’s two transition plans to green energy

Last month, one of the main Indonesian coal mining companies, Adaro Energy, announced plans to develop an aluminium smelter project worth US$728 million, as well as separate plans to develop a “new energy battery factory”  to switch away from coal energy.

The two plans aim to combat the worsening climate situation and pressure from investors and lenders from restricting coal miners in Indonesia, including regulation on business licensing and foreign ownership restrictions.  

As the world’s largest exporter of thermal coal, Indonesia plans to have an “economic transformation” from heavy dependence on raw commodities to industrialization. It now requires that mining companies develop downstream industries in exchange for extension of their mining permits.

Adaro Aluminium Indonesia, a subsidiary of Adaro Energy, has signed an agreement to invest and build an aluminium smelter in the new industrial park that is funded by the government in North Kalimantan Province. 

President Joko Widodo said Adaro expects the industrial park will attract industries such as solar panel and electric vehicle producers that require aluminium.  Though its production requires a lot of energy, releasing a lot of carbon, aluminium is highly recyclable and is often used as an environmentally friendly alternative to plastics.

This is also part of the government’s “industrial downstreaming program” where the imports of aluminium, with the main portion from China, the US and Malaysia are expected to go down. 


Why are Thais opposed to this China-funded climate project?

A new water diversion project in Southeast Asian nation Thailand funded by China has alarmed environmentalists. Critics say that the Chinese state-run company has made a deal with the Thai government without any public engagement, particularly with public participation by local residents at a hearing process.

The military-dominated government is currently preparing the way for an unidentified Chinese enterprise to land the project, and possibly become a foundation for China’s Belt and Road Initiative. 

Environmentalists expressed concerns that the environmental impact assessment (EIA) was approved with an unusual process in which residents are not informed sufficiently. 

A water resources expert explained that the effort of this Chinese-funded project to meet the growing water demand could be achieved through a cheaper alternative – stopping massive leaks in the existing water system that farmers and others in the central plains rely on. 

Chinese developers are expected to find the resistance challenging, and will face intense competition in Thailand’s infrastructure market, which has been occupied by Japanese and European projects.

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