Indonesia Steel Decarbonisation Report: Defining low-carbon steel and the global steel demand

Indonesia’s ambition for eight per cent economic growth by 2029 is being tested by a global market that increasingly demands low-carbon products, such as steel. The country’s steel sector is a major global player. As such, its high carbon intensity (1.6tCO2e/tonne) leaves it critically exposed to these shifting market trends. 

While Indonesia does not yet export large quantities of steel to Europe, the EU’s Carbon Border Adjustment Mechanism (CBAM) is set to shift the global market, and signals a future of broadening carbon regulation.

The challenge of global definitions for steel

There is not yet a universal or agreed upon definition or classification for low-carbon steel. This creates substantial hurdles for market transparency, investment and effective policy making. Indonesia’s Ministry of Industry established the Indonesian Green Industry Standard (SIH) as a policy framework to promote sustainable practices across the nation’s industrial sectors. While SIH applies broadly, it includes sector-specific regulations tailored to each industry.

In this report, we examine the alignment between the SIH and three three prominent international standards—ResponsibleSteel, the Global Steel Climate Council’s (GSCC) Steel Climate Standard, and the Low Emission Steel Standard (LESS).

A strategic opportunity

A strategically managed transition is our opportunity to unlock new competitiveness and market creation. Indonesia must align its policies and technologies. Crucially, the government must substantially strengthen and enforce the green steel standards. It can also leverage policies, like green public procurement, to create a domestic market for early-stage low-carbon steel. This is vital to de-risk the high capital expenditure for breakthrough low-carbon technologies.