Environmental activists are sounding the alarm over a new trade agreement between the US and Indonesia that they warn could accelerate mining expansion, fossil fuel dependence and forest loss, while offering only weak, nonbinding environmental safeguards.
Critics say the deal risks reshaping Indonesia’s development trajectory by prioritising resource extraction over ecological protection, shifting environmental and social costs onto vulnerable communities.
The agreement was signed on Feb. 19 after months of negotiations triggered by the Trump administration’s “Liberation Day” tariffs, which imposed a 32 per cent levy on Indonesian exports.
However, a day after the signing, the US Supreme Court struck down the tariffs, raising questions about the legal and political basis of any deals negotiated in response to a measure that no longer exists.
Despite this, the Indonesian government is pushing ahead with the deal.
In a March 14 press statement, officials said the Agreement on Reciprocal Trade (ART) would remain the main reference point for bilateral trade ties, describing developments, including the Supreme Court ruling as domestic matters for the US
“At its core, this is a matter of administrative law in their country, so they must follow that investigation process. But our reference remains the Agreement on Reciprocal Trade, so we will simply proceed,” said Haryo Limanseto, a spokesperson for the Coordinating Ministry for Economic Affairs.
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This massive commitment to import fossil fuels undermines Indonesia’s climate commitments and may continue to prop up fossil fuel usage in Indonesia.
Krista Shennum, campaigner, Climate Rights International
The agreement is set to take effect 90 days after all legal processes are completed in both countries. In Indonesia, that includes consultation with the House of Representatives.
Framed in part around securing supply chains for critical minerals, the deal reflects Indonesia’s position as the world’s largest nickel producer and a major supplier of cobalt, bauxite and tin — materials central to electric vehicle (EV) batteries and the global energy transition.
Officials say the US$33 billion agreement will benefit both sides, giving Indonesia improved access to the US market while opening opportunities for US firms in sectors including energy and agriculture.
However, an analysis by mining watchdog Jatam argues that several provisions constrain Indonesia’s policy space, particularly in the mining sector, and could weaken state control over natural resources.
Extractive push
Article 6.1 of the ART requires Indonesia to grant US investors treatment no less favourable than domestic firms across the entire value chain of critical minerals and energy resources — from exploration and extraction to processing and export — under “minimum standards of international law.”
Analysts say the provision appears aimed at deepening access for US firms in a sector currently dominated by other foreign investors, particularly from China. Chinese companies dominate Indonesia’s world-leading nickel industry through their control of massive industrial parks that process the metal.
The agreement also calls on Indonesia to remove export restrictions. This runs counter to Jakarta’s current policy of banning exports of unprocessed ore, instated as a way to compel companies to build domestic processing capacity and retain more of the value from its mineral resources.
“To this end, Indonesia shall cooperate on the expedient development of its rare earth and critical minerals sector in partnership with US companies to ensure secure and diversified supply chains,” the agreement states.
Jatam has described the arrangement as “extractive colonialism,” referring to a model in which resource-rich countries supply raw materials to industrial economies while absorbing the environmental and social costs. In this case, critics point to asymmetries in investment access, pressure to liberalise exports, and limited safeguards to prevent environmental harm.
The expansion of nickel mining in Indonesia has already been linked to air and water pollution, land conflicts, and community displacement. In provinces such as Central Sulawesi and North Maluku, environmental degradation associated with mining has been tied to more frequent flooding and landslides, alongside longer-term damage to watersheds and coastal ecosystems.
Astuti Kilwouw, director of the North Maluku chapter of the Indonesian Forum for the Environment (Walhi), said the agreement risks intensifying these impacts.
“This agreement will only worsen ecosystem destruction. Recurrent flooding in Central Halmahera and Obi Island [in the Maluku archipelago] is an ecological crisis born from nickel mining and national strategic projects,” she said in a press release. “If investment accelerates, disasters will become routine. Women fishers are forced to go farther to sea due to pollution near concession areas. Costs rise, income does not keep pace, and many eventually stop fishing.”
The agreement contains no binding commitments to uphold human rights standards, such as process of obtaining the free, prior and informed consent (FPIC) of communities that could be affected by mining or other projects. This has raised concerns that Indigenous peoples and local communities could face increased land pressure without adequate protections or recourse.
Forests at risk
The deal includes provisions to combat illegal logging and strengthen timber legality systems. But while these measures appear to support improved forest governance, environmental groups say they do little to address the structural drivers of deforestation.
Walhi, Indonesia’s biggest environmental advocacy group, notes that nickel concessions already cover 1.03 million hectares (2.5 million acres) across the country, more than three-quarters of which lie within forest areas. As mining expands, forests risk being cleared not only for extraction sites but also for associated infrastructure such as roads, ports and industrial facilities, fragmenting habitats and undermining biodiversity.
“Large-scale extraction could damage forest cover as a major carbon sink, threatening the FOLU Net Sink 2030 target,” Walhi said, referring to Indonesia’s plan to turn its forestry sector into a net carbon sink by the end of the decade.
Coal dependence
Much of Indonesia’s nickel processing is powered by so-called captive coal plants, built specifically to supply industrial estates. A recent report by the Centre for Research on Energy and Clean Air (CREA) and the Global Energy Monitor (GEM) found that Indonesia’s captive coal capacity has surged to 31 gigawatts, triple the 2023 level.
These plants now account for about 80 per cent of new coal capacity, with growth concentrated in nickel hubs such as Central Sulawesi and North Maluku provinces.
Analysts say this expansion is closely tied to the growth of Indonesia’s downstream mining industry — an industry the agreement could further turbocharge.
Captive coal plants are a major source of greenhouse gas emissions and local pollution, affecting air and water quality in surrounding communities.
Fossil fuel lock-in
The agreement also commits Indonesia to importing around US$15 billion worth of US energy commodities annually, including liquefied petroleum gas, crude oil and refined fuels — more than five times what it imported in 2025.
Analysts say this could deepen Indonesia’s reliance on fossil fuels at a time when the country is trying to reduce oil imports, electrify its transportation system, and scale up renewable energy.
Indonesia aims to source 74 per cent of its energy from renewables and install 100 gigawatts of solar capacity by 2034. However, experts warn that long-term fossil fuel import commitments could pull policy in the opposite direction.
“It could also undermine Indonesia’s EV expansion strategy and its ambition to become a regional EV manufacturing hub if the domestic energy system does not align with global sustainability standards,” said Mutya Yustika of the Institute for Energy Economics and Financial Analysis (IEEFA).
Krista Shennum of Climate Rights International said the deal risks weakening Indonesia’s climate commitments under the Paris Agreement, including its pledge to cut emissions by up to 41 per cent by 2030 and reach net zero by 2060.
“This massive commitment to import fossil fuels undermines Indonesia’s climate commitments and may continue to prop up fossil fuel usage in Indonesia,” Shennum said.
Climate contradictions
Environmental groups also link the agreement to broader shifts in US climate policy under President Donald Trump, whose administration has taken steps to roll back international climate engagement.
Walhi highlighted provisions that would support export corridor development on the US West Coast to boost coal competitiveness, warning that such measures run counter to global decarbonisation efforts.
“This provision directly contradicts global decarbonisation efforts by expanding fossil fuel supply chains,” said Patria Rizky Ananda, a climate campaigner at Walhi.
Taken together, critics say the agreement exposes a deeper contradiction in the global energy transition: while demand for “green” minerals is rising, their extraction remains tied to coal power, land conversion and weak oversight.
They also point to an imbalance in the agreement itself. While environmental provisions focus on cooperation and capacity building, investment and trade liberalisation clauses are more concrete and enforceable.
Without stronger safeguards, they warn, the transition risks shifting environmental and social burdens rather than reducing them — particularly in biodiverse regions and Indigenous territories already under pressure from extractive industries.
Walhi said the Indonesian government should abandon the deal.
“Walhi calls on the President of Indonesia to cancel the Reciprocal Trade Agreement with the United States, while fulfilling the state’s obligation to protect and restore the environment domestically,” Patria said.
This story was published with permission from Mongabay.com.
