Reports show new Indonesian industrial park on Borneo, feted as 'green,'' will be powered by coal

An industrial park being built in Indonesia on the tropical island of Borneo that has attracted billions of dollars in foreign and domestic investment is damaging the environment in an area where endangered species live and migrate

A vast industrial park being built on the tropical island of Borneo that has attracted billions of dollars in foreign and domestic investment is damaging the environment in an area where endangered animals live and migrate.

The showcase Indonesian project also initially will be partly powered by coal, according to an environmental impact assessment ordered by one of its developers and reviewed by The Associated Press, but not yet made available to the public.

The project championed by President Jokowi Widodo reflects Indonesia’s struggle to balance profiting from its rich natural resources and meeting its environmental goals.

The environmental impact assessment commissioned by PT Kalimantan Industrial Park Indonesia, which operates a large part of the current development, describes what is happening in the 15,000 hectare (32,100 acre) area, where plumes of dust mushroom into the sky along the Celebes Sea as heavy equipment fells trees and razes paddy fields.

It says the project's coastal zone is a conservation and migration area for green turtles, hawksbill turtles and killer whales. Hawksbill turtles are listed as critically endangered by the International Union for Conservation of Nature, while green turtles are considered endangered.

His wooden boat rocking as excavators and construction trucks roar nearby, fisherman Erwin laments the constant ship traffic delivering supplies to the remote area.

“We are looking for fish further and further away from the beach because there are lots of ships in the area driving fish away,” said Erwin, who like many Indonesians uses only one name. “If (the industrial park) is built, I don’t know what the future holds but it's clear that it will definitely have an impact (and) hurt my income.”

The Kalimantan Industrial Park is a “national strategic project" meant to make Indonesia a major producer of strategic resources. Plans call for eventually doubling its size to some 30,000 hectares (74,130 acres), making it one of the world’s biggest industrial zones.

“This is the largest green industrial park in the world and this is the future of Indonesia,” Indonesian President Joko Widodo said during a Feb. 2 visit to the project. “If this is realized well, everyone will flock here, any industry related to green products will definitely look to this area.”

Indonesia is the world’s largest nickel producer and has major reserves of aluminum, tin and copper. All are used in technologies vital to the green energy transition, such as electric vehicle batteries and solar panels.

To build its own industrial base, the country has phased out exports of most raw materials for processing and downstream manufacturing. The government has banned nickel ore exports, requiring it be processed domestically. The Green Industrial Park is an extension of that ambition.

As demand for critical materials soars in the transition to cleaner energy, many countries are torn between reaping their natural wealth and meeting environmental goals, said Aimee Boulanger, executive director of the Initiative for Responsible Mining Assurance.

“We see this stress and tension in Chile, the United States, Brazil and other countries where these materials are mined,” she said. “In a world already living with climate stress, each of these countries is grappling with how to be part of the solution while also protecting clean water, healthy fisheries, Indigenous people’s rights and habitat for other species pushed to the edge.”

The project's blueprint includes a smelter to make aluminum for electric vehicles and other factories to produce petrochemicals, batteries for EVs and polycrystalline materials used in solar panels. A port will accommodate ships hauling materials and goods to and from the zone.

About $132 billion is needed to develop the park, according to Luhut Binsar Pandjaitan, the coordinating minister for Maritime Affairs and Investment. He and other Indonesian officials have done roadshows in the United States, European Union, United Arab Emirates and China to court investors. Pandjaitan did not respond to questions sent by AP.

Several companies that have invested in the project or committed to participating have pledged to end reliance on fossil fuels such as oil and coal and to eliminate carbon from their supply chains.

South Korean automaker Hyundai has signed an memorandum of understanding to buy aluminum from Adaro Minerals Indonesia, part of the coal-mining Adaro Group, which has pledged $728 million to build the smelter.

Australia-based Fortescue Future Industries has agreed to study the possibility of producing ammonia and hydrogen, according to a report by an Indonesia-based think tank, the Center of Economic and Law Studies (CELIOS).

China-based battery maker CATL has invested $5.1 billion, while several other Chinese manufacturers have invested in petrochemical plants, the CELIOS report says.

The environmental, social and governance policies of companies involved in the project, including Hyundai, CATL, Fortescue and Adaro, all include commitments to decarbonization.

Adaro and Fortescue did not respond to questions or requests for comment sent by AP. AP was unable to locate contact information for CATL.

In an email, Hyundai said it signed a non-binding agreement with “the intention of solely procuring low-carbon aluminum using hydroelectric power generation.”

The industrial zone will eventually run on hydro and solar power, government officials say.

But CELIOS's analysis says coal-fired plants will provide a significant amount of the power it uses, including some 1,425 to 1,900 MW for the aluminum smelter that is advertising “green aluminum.”

A hydropower plant along the Kayan River in North Kalimantan is due to be finished in 2030. The smelter is expected to go online in early 2025.

Indonesia is receiving billions of dollars in international support for meeting its climate change commitments, including a $20 billion Just Energy Transition Partnership deal with the U.S., Japan and other major economies.

Construction of new coal plants is allowed under a presidential decree for national infrastructure projects like the Kalimantan industrial park. But it's contrary to those goals, critics contend.

“A lot of the world is still reliant on coal-fired power plants. But I wouldn’t call it ‘green’ and I wouldn’t call it a best practice. It’s certainly something that we should be moving away from, not building more of,” Boulanger said.

According to Market Forces, an Australia-based financial watchdog tracking climate finance, two major banks, DBS Singapore and Standard Chartered, have withdrawn funding for Adaro's smelter project.

“We are unable to discuss any specific names or transactions. Since 2019, the bank has committed to stop financing any new coal-fired power assets,” DBS said in a statement.

Adaro is a client, Standard Chartered said, but the bank “no longer finances new or expanding coal-fired power plants, coal mines or dedicated coal infrastructure.”

“We have established a detailed pathway including interim 2030 targets for the most carbon-intensive sectors, with a particular focus on supporting clients in transition,” spokesperson Piers Townsend wrote in an email.

Industrial parks should not rely on new power generation using fossil fuels, said Binbin Mariana, a campaigner at Market Forces in Indonesia. The withdrawal of funding for the smelter was a "strong signal that this project is not green,” she said. “All investors must be concerned that a smelter marketed as ‘green’ and ‘low-carbon’ for aluminum is relying on new coal fired power plants for its early stage.”

The project has raised other concerns. Some people living in the area told The AP their land was seized or they were facing pressure from PT KIPI and local officials to move, and offered unfair prices. PT KIPI did not respond to a request for comment.

Residents hope the project may bring jobs, but worry they will lose their traditional livelihoods as fishermen, farmers and increasingly, eco-tourism hosts as dust and ash smother their fields. An analysis by CELIOS of PT KIPI’s environmental impact assessment forecasts the the problems will worsen once the project begins operating.

“The effects of hot water waste contamination, coal-fired power plant fly ash, rising air temperatures, project smoke, noise, sea dredging, and spilt coal/fuel spills will cause the sea to become murky, which will cause tourism (industry) to decrease and the quality and quantity of (fish) catches to significantly decrease,” it said.

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Associated Press reporter Edna Tarigan and AP video producer Olivia Zhang contributed to this report.

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