Financial incentives will be critical to persuading Indonesia’s fast‑growing nickel industry to switch to cleaner energy, according to industry and policy experts.
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Speaking at the Unlocking Capital for Sustainability forum in Jakarta on 24 June, Muchtazar, sustainability chief at Nickel Industries, said many producers are interested in using cleaner power and greening their supply chains, but face weak price signals from buyers.
“Customers, especially from the Western world, want the low-carbon nickel but there is no premium pricing [for cleaner products]. [Instead] they ask for discounted prices even when requiring lower carbon footprints, and it makes things difficult,” Muchtazar said in a panel about navigating artificial intelligence (AI) and environmental, social, governance (ESG) risks in a global critical minerals market.
Muchtazar said companies recognise that renewables can improve long‑term energy resilience and reduce pollution, but emphasised that they are still judged primarily on short‑term financial performance.
The main objective of a business is to generate profit, Muchtazar argued, adding that chief executives must show that investments in renewable energy and responsible supply chains translate into stronger financial results within the time horizons of annual shareholder reviews.
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Customers, especially from the Western world, want the low-carbon nickel but there is no premium pricing [for cleaner products]. [Instead] they ask for discounted prices even when requiring lower carbon footprints, and it makes things difficult.
Muchtazar, sustainability chief, Nickel Industries
This tension is particularly acute for Indonesia’s nickel sector, which has expanded rapidly over the past decade, but many firms remain like “teenagers” in terms of both ESG practices and business maturity, Muchtazar said,
”[The nickel industry] cannot be expected to perform like our brothers in the coal or in the gold companies, who have been around for decades. We are still young, still learning, but at the same time we are trying to achieve higher ESG expectations from the investors and the financiers,” he said.
For younger sectors like nickel, Muchtazar previously said that Nickel Industries has been increasingly looking to leverage emerging technologies like AI, real-time data analytics, and automation to support its ESG objectives and transition towards sustainable production.
Panelists from left: Tiza Mafira, director of Climate Policy Initiative (CPI) Indonesia, Danita Setyawati, senior energy analyst for Ember, Muchtazar, sustainability chief for Nickel Industries, moderated by Asvi Hanifah, Indonesia Officer at the United Nations Environment Programme Finance Initiative (UNEP FI). Image: Eco-Business
Tiza Mafira, director of the nonprofit Climate Policy Initiative (CPI) Indonesia, said innovative finance could help close the incentive gap for industries like nickel.
CPI is working on ways to use carbon credits as a “sweetener” for economic zones and captive coal power plants that want to transition but struggle to secure financing or price premiums for cleaner electricity, Mafira said at the panel, adding that the organisation and its partners are developing methodologies with carbon credit verifiers, and see this approach as a promising tool over the next five to 10 years to accelerate the nickel industry’s clean energy transition.
CPI has already been designing a carbon‑credit methodology to incentivise early retirement of coal plants and replacement with renewables in emerging economies.
Where emissions cuts from shifting to renewable energy can be measured, the additional climate benefit could justify carbon finance to help make projects bankable, Mafira said.
Meanwhile, the lack of clear penalties and consistent rules remains a major barrier to decarbonising Indonesia’s nickel industry, said Danita Setyawati, senior energy analyst for climate and energy thinktank Ember.
With regulations “keep changing,” investors worry that policies could shift again within a few years, she noted, raising the risk profile of clean energy projects at smelters.
The government has repeatedly adjusted mining production quota rules, making long‑term planning difficult for miners and energy providers, as companies see quota and licensing changes as a source of “regulatory risk” that must be factored into investment decisions, based on a forum discussion last year.
Setyawati added that off-takers still have little obligation or incentive to sign up for renewable power, and companies face few consequences if they exceed emissions limits.
“In terms of greening nickel smelting resources, and other critical mineral industries, there needs to be a lot of regulations that ensure environmental compliance and just transition for the communities living in the surrounding areas,” she said at the panel.
