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Decarbonising the steel sector in Indonesia
Steel production in Indonesia is expanding rapidly to meet infrastructure and development needs, and with it its emissions. But with global demand on low carbon steel rising, and the fact that most of its production uses carbon intense technology, the industry is at risk of falling behind. The country must navigate a complex path towards green steel that balances economic growth, job creation, public health and climate commitments.
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Why is it important?
17Mt
Indonesia’s steel production capacity nearly reached 17 million tonnes in 2023
2.5X
Indonesia’s steel sector emissions could rapidly increase by 2060, threatening to derail the country’s net-zero ambitions
8%
Indonesia has an ambitious target of achieving 8% GDP growth by 2029
US$26 bn
Indonesia ranks 4th among the world’s largest iron and steel exporters. With US$ 26 billion worth of exports in 2023
The Challenges
- Almost 80 per cent of Indonesia’s steel production is powered by coal. With demand projected to triple by 2050, Indonesia faces the risk of locking in high-carbon infrastructure for decades.
- The industry is facing significant challenges due to global overcapacity and ultra-cheap products coming into the country.
- International market access is increasingly at risk without immediate action. The EU’s Carbon Border Adjustment Mechanism, taking effect in 2026, threatens Indonesian steel exports unless the industry reduces its carbon intensity.
- There is minimum to no domestic demand for low carbon steel.
- The scrap supply which is an important material for reducing emissions, is mostly informal and has high uncertainty in supplying decarbonisation needs.
From our learning content
Learn more about reducing climate pollution in steel
Ways to get involved
Want to better understand the economic case for steel decarbonisation, or contribute to making the case for greener steel? Contact petra@climatecatalyst.org
Keen to collaborate on building a positive narrative around the role of green steel in delivering Indonesia’s development goals? Contact faya@climatecatalyst.org
Interested in the role of industry and the financial sector in driving Indonesia’s steel transition? Contact arief@climatecatalsyst.org
