Celios: Restrictions On Nickel Smelter Permits Must Be The Beginning Of Environmental Commitment, Not Just Administration

Photos of PT Vale Indonesia Tbk's smelter air in Sorowako, East Luwu Regency, South Sulawesi, Friday, July 28, 2023. (ANTARA PHOTO/Jojon)

JAKARTA - The government officially limits the new license for nickel smelters through PP No. 28 of 2025. This policy is considered a correction measure to the overexpansion of the nickel industry. However, research institute Celios emphasized that this restriction must be the beginning of real environmental commitment, not just administrative restrictions.

This permit restriction applies to new nickel processing companies that produce intermediate products, both with pyromethalurgy (RKEF) and hydromethalurgy (HPAL) technology. Currently, Indonesia already has 54 nickel smelters operating, 38 in the construction stage, and 45 are still under planning. This condition is considered to play a role in the oversupply of processed nickel production in the export market.

Executive Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira, said that restrictions on new nickel smelter permits should be followed by regulatory firmness, policy consistency and decarbonization roadmap that uphold environmental protection and community rights in mining areas.

"The moratorium decision on the new nickel smelter permit needs to be accompanied by a moratorium on nickel mining permits," Bhima said in an official statement, Sunday, November 9.

Furthermore, he said the number of Company Budget Financial Plans (RKAP) which this year was approved by the Ministry of Energy and Mineral Resources had 292 permits, with a total IUPK covering an area of 866,292 Ha.

"With such a large concession area and mining permits continuing to grow, although the new smelter permit in the moratorium but without control in the upstream sector will only move pressure from the manufacturing industry to the mining area, exacerminating ecological damage and social conflict," he said.

In a joint report, Celios and CREA recorded a potential loss in revenue of farmers and fishermen in nickel mining areas reaching US$234.84 million or around Rp3.64 trillion in the next 13 years. In addition, nickel industry activity also has the potential to cause more than 3,800 early deaths by 2025 and nearly 5,000 cases by 2030.

In addition, Celios also highlighted the government's contradiction that continues to encourage new smelter projects amid the moratorium. The government through Danantara plans to finance Vale Indonesia's (INCO) and GEM Co. Ltd. smelter projects from China.

The government's decision amid the policy of restricting smelter permits shows a serious contradiction in the policy direction of the national nickel industry. This contradiction shows policy inconsistencies: on the one hand the government is trying to contain expansion, but on the other hand it continues to encourage new investment through the state financing scheme, "said Bhima.

Meanwhile, Celios researcher Attina Rizqiana said restrictions on nickel smelter permits must also be followed up with restrictions on the company's IUPK, which in fact have mining permits, concessions, and nickel processing.

"Not to be missed, decisive steps must also be taken regarding companies that are still in the planning stage for the construction of facilities, as well as related to the limit on restrictions," said Kiki.

Kiki said the steps taken by the government had a strong impression that controlling the expansion of the nickel industry in Indonesia was still driven by economic considerations alone, not driven by commitment to decarbonization and environmental protection.

"Smelter projects that rely on fossil energy plants including PLTU on grid and PLTU captive, have the potential to increase the footprint of mineral sector emissions in the midst of claims for the green energy transition. Coupled with the expansion of concessions that have an impact on deforestation and loss of living space and community livelihood," said Kiki.

According to Kiki, without any parallel restrictions at the upstream (IUP) level, firm decarbonization roadmaps, and real environmental policy integration, the IUI restriction policy risks becoming a cosmetic step.

"It's like slowing down the expansion administratively, but not changing the structural direction of industrial development that is still based on high-emission and extivism," concluded Kiki.