Building Indonesia’s ‘green’ new capital could see coal use surge (analysis)

Building Indonesia’s ‘green’ new capital could see coal use surge (analysis)

  • Indonesia is planning to construct a new capital city, known as Nusantara, in the Bornean province of East Kalimantan.
  • Authorities promote Nusantara as a “green city,” but discussions of the city’s carbon footprint overlook key factors, notably the use of coal to manufacture the building materials required to construct a completely new city.
  • With the new city being built in the country’s coal-mining heartland, coal is the most likely energy source for such manufacturing, putting Indonesia’s emissions reduction targets at risk, as well as casting doubt on the green commitments of funders like Japan and China.

Indonesia’s planned new capital city on the island of Borneo, Nusantara, is being touted by the government as a “green” city. However, its construction may lead to a surge in carbon emissions, putting the country’s climate goal at risk.

East Kalimantan province, the site of the new capital, is the coal-mining heartland of Indonesia. Alongside the massive oil palm expansion of the 2000s, coal mining has been booming in Indonesian Borneo in the past 20 years, especially in East Kalimantan and South Kalimantan provinces, where it has become an economic mainstay.

The two major cities in East Kalimantan, Samarinda and Balikpapan, which will form a metropolis with Nusantara, are currently home to about 2 million people. The population relies almost solely on coal power for its daily activities.

Indonesian authorities often promote Nusantara as a “green” city despite its proximity to coal resources. The alternatives to coal proposed include not only solar and wind energy but also hydropower generated from mega dams located on the Kayan River in the north. The hydropower from Kayan, transmitted through an ultra-high-voltage system over a long distance, may effectively replace coal to meet the demand of the metropolis.

While associated with other social and environmental issues, the astounding 9,000 megawatts of power it will produce when fully completed could satisfy the need of more than 30 million Indonesians if the average level of consumption remains as of today, effectively reducing coal power use.

Coal mining has been booming in Indonesian Borneo in the past 20 years, especially in East Kalimantan and South Kalimantan provinces, where it has become an economic mainstay. Image by Mokhamad Edliadi/CIFOR via Flickr (CC BY-NC-ND 2.0).

Coal for construction materials

What remains overlooked when citing Nusantara’s green credentials is the energy- and process-related emissions that will be created by constructing a completely new city on what is currently an uninhabited plateau.

In 2020, about 16% of global CO2e greenhouse gas emissions came from manufacturing materials like cement, iron, steel and glass.

The construction of Nusantara will greatly increase the demand for these materials and thus the country’s total emissions. Shaohui Zhang, an associate professor at Beihang University in China and an expert in cement and steel manufacturing, estimates that for a new city with 10 million residents, the demand for cement in residential housing could be as high as 60 million metric tons. The amount of cement needed will be much higher when non-residential buildings and other infrastructure are included.

Coal is the major fuel consumed in cement and steel production. “Theoretically, coal as fuel may be replaced by natural gas in cement and steel production, but the manufacturing cost will also skyrocket looking at the current price trends,” Zhang says.

A map of East Kalimantan province, in light red, and the two districts of North Penajam Paser and Kutai Kartanegara. Indonesia’s new capital city will straddle the border area between the two districts. Image courtesy of President Joko Widodo’s Twitter account.

Zhang, who also holds a position at the International Institute for Applied Systems Analysis (IIASA) in Austria, predicts coal will be the key energy source used in manufacturing building materials for Nusantara, particularly given the city’s proximity to coal resources.

Firly Rachmaditya Baskoro, of Indonesia’s Bandung Institute of Technology (ITB), says construction of Nusantara might increase demand for cement by one-third, or about 21 million metric tons per year for the next 20 years. “For this, the government has increased the coal domestic market obligation [DMO] for cement manufacturing from 4.5 million [metric] tons in 2021 to 15 million [metric] tons in 2022-2025, just to ensure coal supply for the growth in cement industry,” Firly says. This represents an additional 9% of the total coal consumption in the country, which currently stands at about 115 million metric tons per year. The trend will likely continue depending on the design of the city and the population it will accommodate.

A cement plant with an annual capacity of 10 million metric tons, owned by China’s Zhejiang Hongshi Cement Group, was just established near the new capital. Considering a utilization rate of 80%, the plant could produce up to 160 million metric tons of cement over a period of 20 years, which Zhang describes as “a reasonable lifespan for such an investment.” Operating on this scale, the plant could easily consume 5 million metric tons of coal annually.

A coal mine site being cleared with dynamite to access the vein of coal
A coal mine site being cleared with dynamite to access the vein of coal in East Kalimantan, Indonesia. Image by Cassidy K. / ILO via Flickr (CC BY-NC-ND 2.0).

Challenges to ‘no-coal’ policies

Guanie Lim, an assistant professor at Japan’s National Graduate Institute for Policy Studies (GRIPS), says analyses or studies on coal power financing in Indonesia typically do not cover coal consumption in cement and steel production. This missing link may lead to a situation where discussions about no-coal policies overlook this aspect of coal consumption.

Lim recently found that Indonesia’s two major financiers, Japan and China, have been investing more in coal than renewables in Indonesia despite their claims to shift to “green” investment. Moreover, this has not yet considered their role in financing cement and steel production, which rely heavily on coal.

When asked if Japan or China have been financing cement and steel plants in Indonesia, Lim explained that the modern businesses are typically operated on a “turnkey” basis, meaning that the foreign firms own the technologies and design and build the projects, while local companies or governments either wholly own the plants or form joint ventures with the technology suppliers or other investors. In the past, turnkey firms came mainly from the U.S., the EU and Japan, but in recent years Chinese companies have been expanding their market share rapidly.

The aforementioned China-backed cement plant near Nusantara will likely have a strategic role in the construction of the new capital. Lim says that cement is not so easy or lucrative to trade across borders: “It is usually more cost-effective to establish cement plants near the construction sites.”

Aerial views of Buluq Sen village, Kutai Kertanegara District. East Kalimantan on December 18, 2017. Image by Nanang Sujana/CIFOR

Pollution and health impacts

To date, Indonesian officials have not discussed the potential environmental impacts associated with the construction materials for the new capital. It seems that, at the moment, there is no official stance on the emissions and harmful impacts that could be incurred from the construction phase of Nusantara.

A surge in local coal demand may exacerbate pollution issues in East Kalimantan. Air pollution from coal power plants has been a detrimental issue for Indonesia, especially prominent in its current capital, Jakarta. “What concerned me more is the pollution and health impacts caused by such a large-scale coal burning,” Zhang says. “We should not forget the substantial costs associated with air pollution-induced health issues, as seen in China.”

Furthermore, the province’s coal-mining sector has a notorious track record of abandoning mining pits without proper rehabilitation and restoration. These pits turn into lakes after being filled with rainwater, polluting water sources and creating safety issues for local communities.

Firly also predicts that Nusantara may still require coal power despite hydropower playing a significant role. “The new capital likely still needs coal power at least for the first few years before a full transition to renewable energy,” he says, “although natural gas can also serve as a cleaner option, given the fact that Balikpapan is also a major oil and gas hub in the region.”

Modern coal plants that co-fire with biomass or use “ultra-supercritical” technologies designed to reduce emissions could reduce the new city’s carbon footprint, Firly says. “But more comprehensive studies using system dynamics approach would be needed to understand the overall impacts.”

Close scrutiny of construction materials manufacturing and associated coal consumption will be needed before proclaiming Nusantara a “green” city. This could be built upon previous works like Firly’s analysis of potential scenarios of coal consumption in Indonesia and Zhang’s model on health impacts and co-benefits of different technology pathways.

Indonesian officials portray plans to build a new, green capital in Borneo as a project with greater significance than ordinary city building. It carries the country’s hopes to transform from an exploitative economy to a prosperous and sustainable one. If the country is keen to achieve this goal, a strong knowledge base that considers all factors in the construction of Nusantara is needed.

Banner image: A coal mine in Borneo. Image by Parolan Harahap via Flickr (CC BY-NC 2.0). 

Chun Sheng Goh is a researcher at Sunway University and Harvard University. His research interests lie within the intersection of bio-economy development and environmental restoration, with a special focus on both Malaysian and Indonesian Borneo. The most recent work by Chun Sheng is a monograph co-authored with Lesley Potter, namely ‘Transforming Borneo: From Land Exploitation to Sustainable Development’, scheduled to be published in late 2022. He is also Programme Leader for Master’s in Sustainable Development Management at Sunway’s Jeffrey Sachs Center.


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