As Indonesia wins cautious praise from some green groups for ambitious plans to cut carbon emissions, the world's biggest exporter of thermal coal is grappling with its commitment to a greener future.
Indonesia, the eighth-biggest carbon emitter, recently brought forward its goal for net zero emissions from 2070 to 2060 or sooner, ahead of the United Nations Climate Change Conference in Glasgow in November, and joined a U.S.-led Global Methane Pledge.
Indonesia is wrestling with how to balance its environmental targets with the cost of pulling the plug on an industry that contributed $38 billion in export earnings in the first seven months of 2021.
It also plans to stop commissioning new coal-fired power plants and phase out coal for electricity by 2056 under a new, greener,Ìýlong-term economic vision.
"We are phasing out coal power plants. But if you ask whether we're closing down mines, we have the coal and there are other utilisation options," Dadan Kusdiana, the energy ministry's head of renewable energy, told Reuters.
Indonesia is exploring ways to keep consuming and extracting value from coal by using carbon capture and storage (CCS) technology, although environmentalists say CCS is unproven and expensive.
COAL GASIFICATION
With nearly 39 billion tonnes of reserves, coal remains the economic backbone of parts of Indonesia and miners are among the biggest taxpayers.
The government has been encouraging miners to invest in production of dimethyl ether (DME) from coal. Under new laws passed in 2020, it no longer requires them to pay royalties to the government on such processes, and their mine permits can be extended.
It has touted DME as a replacement for imported liquefied petroleum gas and a feed stock for chemicals and fertilizer.
Making DME requires burning coal, so it needs to be paired with CCS to be environmentally friendly, Dadan said.
However, if Indonesia can adopt CCS more widely and cheaply, the technology could also be applied to coal power plants, extending their usage, he said.
He said that although using CCS technology is feasible, there is risk of leakage in trying to capture emissions from burning and mining coal.
RECORD PRICEÌý
Coal power generation is Indonesia's second-biggest emissions source after deforestation, contributing 35 percent of its 1,262 gigatonnes of CO2 equivalent a year, government data showed.
Indonesia consumes about 130 million tonnes of coal annually to fuel 60% of its 73 gigawatt (GW) electricity capacity, and exports about three times that amount.
Renewable sources like solar, hydro and geothermal make up just 11 percent of its energy mix, even though experts say Indonesia has 400 GW of renewable potential.
The government has pledged to increase the renewable share to 23 percent by 2025.Ìý
Coal power remains the cheapest option.ÌýÌýCoal prices hit all-time highs this year, helping Indonesia book record exports and a trade surplus in August. The government raised its 2021 coal output target by 14 percent to 625 million tonnes to cash in.
Cerah and other green groups have campaigned to retire coal plants early, but officials have said this could trigger fines for breaching contracts with independent power producers.
On the flip side, parliament is reviewing a government-proposed carbon tax, and Indonesia has ambitious plans to use its nickel reserves to become a production hub for batteries and electric vehicles.
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