China Is Still Far-off from Becoming Indonesia’s Partner in Energy Transition

A village by the sea in Morowali, Central Sulawesi. A nickel mining site is situated just beyond the hills in the background. This serenity may disappear in the next few years due to extraction activities and resulting pollution. Credit: documentation.


The good relationship between Indonesia and China, which have been on the upward trend in the past decade, manifests crystal clear in the investment sector.

China was christened as the second largest investor in Indonesia in 2022, with US$5.18 billion worth of realized investment recorded, just behind Singapore.

From a number of investments in Indonesia, the mining sector has contributed IDR 136.4 trillion in investment realization in 2022. Part of Indonesia’s appeal is the government’s focus on down streaming of mining products, which has attracted the attention of Chinese investors.

In the midst of growing investments, there is an increasing proposition that China could become Indonesia’s partner in renewable transition. Nonetheless, China’s investment in the mining sector and environmental destructions found in Chinese projects have hampered the realization of such proposition.

Indonesia’s Energy Transition Plan

A party to the Paris Agreement, Indonesia has committed to increase efforts to achieve the net zero emission target by 2060. In this regard, it has been argued that China, through its Belt and Road Initiative (BRI) scheme, could be a strategic partner to assist Indonesia in achieving this target.

To attain decarbonization, Indonesia needs a significant long-term investment of around US$ 1.3 trillion in various fields of technology. Here, China can play a role in facilitating energy transfers to Indonesia through cooperative efforts in manufacturing, research as well as investment, taking into account the market potential to increase Indonesia’s energy demand.

In Indonesia’s context, the BRI could facilitate investment in the renewable energy industry which can be done by increasing the complexity of the supply chain, targeting industries specializing in energy transition such as the manufacturing of solar panels, electric vehicles and energy storage.

Perhaps due to awareness of the environmental impacts, President Xi Jinping has made pronouncements to stop the development of coal-fired power plants overseas. Several Chinese companies have also started investing in the new and renewable energy sector, such as solar and wind power plants in South Sumatra and South Sulawesi.

Despite this, the amount of Chinese investment in the renewable energy sector is far less than investment in the mining sector and power plant construction, especially coal-fired power plants. Therefore, as the projects in the latter continue to run, a sufficient monitoring regime should be imposed to prevent further environmental destruction on areas and communities surrounding the sites.

China’s Investments in the Coal-Fired Power Plants

Majority of Chinese financing in Indonesia is still in non-renewable energy. As high as 86% of Chinese funding is channeled to the development of coal-fired power plants, mostly channeled through the China Development Bank (CDB) and China Export-Import Bank (CHEXIM). Curiously, these two banks also adopt a turnkey arrangement with local firms, requiring Chinese firms to provide technical expertise while denying local firms to participate in the engineering process. This means that technological transfer between Chinese and local firms remain at minimum.

Currently, there are three coal-fired power plant projects being constructed with funding from Chinese companies. These projects are also part and parcel of the BRI projects in Indonesia.

The first is a power plant with a capacity of 3×380 megawatt (MW) at the Morowali Industrial Park which began construction in December 2021. The power plant is a collaboration between PT. Bintang Delapan Indonesia (which also owns PT. Indonesia Morowali Industrial Park [IMIP]) and Tsingshan Holding Group of China.

The second is power plant with a capacity of 4×380 MW on Obi Island, North Maluku, a collaborative project between Harita Group Indonesia and Ningbo Lygend China.

The third is coal-fired power plant with a capacity of 380 MW in North Maluku, built by Weda Bay Industrial Park Indonesia (WBIPI) and three companies from China, namely China Tsingshan Group, Huayou Group and Zhenshi Group.

Apart from these three, other Chinese-funded power plants are also underway in Morowali, Southeast Sulawesi, Konawe and Teluk Weda.

Although the Chinese government has promised in 2021 to stop building new coal-fired power plants overseas, this has not inhibited opportunists to see commercial and legal loopholes to advance certain projects.

The concentration of these projects in Sulawesi and North Maluku means these two areas would be disproportionately affected by the attendant environmental damages. In a larger context, this could slow down Indonesia’s target of meeting 23% of primary energy from clean and renewable energy sources. As these areas are also peripheral (seberang), there is a possibility that any negative developments there would escape national attention, which remains Jakarta- and Java-centric.

To reiterate, despite China’s potential in assisting Indonesia’s transition to renewable energy, it is difficult to agree with such propositions given that it remains a major player in perpetuating non-renewable energy usage such as in coal-fired power plants. One cannot commit to cleaner energy and greener Earth while continuing operations that adversely impact the environment.

Environmental Impacts of Chinese Projects

Furthermore, China has an uphill battle to claim the title of Indonesia’s partner in clean energy due to environmental impacts of its existing projects in the country.

PT. IMIP’s activities in Morowali have caused seawater pollution to the point where it turns black in Kurisa Village, Bahodopi. This is presumably caused by excess from large coal deposits being flushed to the sea by rainwater. As a result, the livelihood of local fishermen is severely impacted, dramatically reducing the quantity of fish catch ever since PT. IMIP operated its coal-fired power plant. Products from fish farms also have also dropped as fish tends to die in hot-temperature seawater, a by-product of the power plant’s cooling system.

It should be noted that PT. IMIP depends on coal-fired power plants for its electricity supply. The construction of three power plants with a capacity of around 1,180 MW has exposed residents of surrounding Fatufia Village to coal dust which has invaded their homes. As if this was not enough, PT. IMIP plans to construct seven more of such power plants.

If no action is taken, this project would inevitably cause further environmental damage and threatens the livelihood and wellbeing of the communities attached to the area. The thought experiment that we must all face is whether mining nickel – an integral component of rechargeable batteries for computers and electric vehicles – is worth the destruction of surrounding ecosystem and communities.

The impact is expected to compound following the government’s Deep Sea Tailing Placement plan, which would allow the dumping of waste in Morowali’s deep sea. More than 7,000 fishermen and 3,000 hectares of coral reefs are projected to be affected. Sea pollution of such scale would certainly damage Indonesia’s diverse ecosystem, as well as the livelihood of those who depend on sea products.

Another affected location is Obi Island in North Maluku as a result of Harita Group’s operations in collaboration with China’s GEM and CATL. This project focuses on nickel processing for supplies of electric vehicle batteries. However, akin to Bahodopi, the Harita Group’s activities here have created a plethora of environmental concerns that are impossible to ignore.

Obi Island has a sizable population working as fishermen. Pollution from the project’s power plant has turned seawater red and reduced fishermen’s catch. The Harita Group reportedly has also indirectly intimidated the small fishermen, forcing them to operate in areas 20 miles further from their usual location to meet daily needs.

Sadder still, fresh water for consumption is also polluted, imposing further public health risks. One of the water sources near a nickel mine has been contaminated with high levels of hexavalent chromium (Cr6) which can cause liver damage, reproductive disorders and developmental problems when ingested or inhaled. For long-term exposure to this can cause stomach cancer. This doom and gloom picture is not very far off from what was depicted on Erin Brockovich.

Additionally, a fountain in Kawasi, located less than 200 meters from the mining site, tests for a high contamination of Cr6, with 60 parts per billion (ppb). This is in violation of an Indonesian law that allows the maximum contaminant level at 50 ppb. The bad news is that for the residents of Kawasi village, the fountain is the only source of water to meet their daily needs for cooking, drinking and washing. There is evidence showing an increase in the rate of lung infection in villagers living around the mine, many of whom have fallen ill since operations on the mine started. The village’s midwives have also found more than 900 cases of potentially lethal acute respiratory infection (ARI) among the 4,000 Kawasi residents in 2020 alone. Of these total cases, half of cases were reported in newborns or toddlers aged four years or below.

Other Chinese-funded energy projects that do not specialize in mining impose stress on the environment as well. The construction of the Batang Toru hydropower plant in Tapanuli, North Sumatra, has eroded the natural habitat of the endangered orangutans, with only 800 of them remaining in the wild. Worse, the hydropower plant is believed to have reduced the volume of water of the Batang Toru River, on which locals depend for their daily supply.

The above depictions of the environmental impacts of China’s projects in Indonesia simply shows that these projects run counter to Indonesia’s commitments to reduce carbon emission before 2030 and both countries’ pledge on the Paris Agreement. China, especially, has also signed a memorandum of understanding (MoU) with the International Renewable Energy Agency (IRENA) to promote carbon neutrality through renewable energy in 2021 but its commitments are not demonstrated in its projects in Indonesia. Clearly, more needs to be done by both countries.


Indonesia and China should work hand-in-hand to be more environmentally responsible for these kinds of projects. The latest Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report paints a really grim picture for the future of the planet and it is on all the countries to strive harder to reduce carbon emission and reverse environmental degradation. This exposition on what occurs on the ground is a warning sign that neither Indonesian nor China can ignore.

Basically, the implementation of these BRI projects demonstrates that Indonesia needs China and vice versa. The BRI is envisioned, among other things, to encourage China’s domestic economic growth such as by job creation abroad, a role that Indonesia can facilitate due to its ever-growing economic space. Nevertheless, Indonesia should take a firmer stance and force China to fulfill its commitments to the environment and renewable energy. Should China find this difficult to achieve, Indonesia should consider looking at other investors with deep commitments to the sustainability cause. The onus is now on the Indonesian government, which must demonstrate whether all of its international commitment to reverse climate change are truly valued or simply declared to increase its international stature.

In the current context, the Indonesian government must adopt a resolute position in terms of regulations surrounding Chinese investments. The government should review the coal projects and force companies to adopt Environment, Social, and Governance (ESG) aspects in their operations in metal mining. Indonesia should also accelerate its process in adopting energy transition and double down its collaboration with China in new and renewable energy sector.

Not less crucial is to identify the domestic actors who crave for Chinese investments, especially those who prioritize capitalistic pursuit over environmental protection. After all, Chinese investment is not the exclusive domain of the government, but also business actors with certain economic interests.

The views expressed are those of the authors and do not necessarily reflect those of STRAT.O.SPHERE CONSULTING PTE LTD.

This article is published under a Creative Commons Licence. Republications minimally require 1) credit authors and their institutions, and 2) credit to STRAT.O.SPHERE CONSULTING PTE LTD  and include a link back to either our home page or the article URL.