Confronting the Environmental Costs of the EV Revolution

Over the past five years, one goal has come to dominate among Indonesia’s economic policymaking elite: positioning the country at the forefront of the world’s electric vehicle (EV) revolution. In November, President Joko “Jokowi” Widodo announced his plans to build “an integrated EV ecosystem,” in which the country would be producing 600,000 electric cars per year by the end of the decade.

This ambition builds on the fact that Indonesia possess the world’s largest reserves of nickel ore, an important component in the manufacture of the lithium-ion batteries that power EVs. Indeed, in 2022, the country supplied fully 48 percent of global demand for nickel.

As James Guild writes in this edition of The Diplomat magazine, Jokowi’s government has introduced a number of policies designed to turn itself into “a global hub for battery production and, eventually, manufacturing of electric vehicles.” Most notably, Jokowi implemented a ban on the export of raw nickel ore, the explicit aim of which was “to force investors to refine nickel in Indonesian smelters.”

As Guild explains, this has prompted a flood of foreign money, mostly from deep-pocketed Chinese firms, into Indonesia’s nickel-rich eastern islands, particularly Sulawesi and the Maluku islands. Foreign investors have established giant smelters and industrial parks to process Indonesia’s nickel wealth.

But according to a report released last month by the U.S.-based organization Climate Rights International (CRI), Indonesia’s breakneck EV manufacturing push has come at a steep environmental and social cost.

In the 124-page report, CRI delved into the operations of the Indonesia Weda Bay Industrial Park (IWIP) in the Maluku region, one of the country's largest nickel processing hubs. The IWIP, a joint venture between three private Chinese companies – Tsingshan Group, Zhejiang Huayou Cobalt, and Zhenshi Holding Group – began operations in 2020, the same year that the Indonesian government designated it as a “national strategic project.”

Based on fieldwork and interviews with 45 people living close to smelting operations at the IWIP and nearby nickel mines on Halmahera island, the report concluded that the project has led to deforestation, and produced massive carbon omissions. It has also had severe impacts on the indigenous peoples living on Halmahera island, who due to the nickel operations “are experiencing serious and potentially existential threats to their traditional ways of life.”

“The transition from gas-powered cars to electric vehicles is an essential part of the global transition away from fossil fuels to renewable energy,” Krista Shennum, a CRI researcher, said in a statement accompanying the report’s release, “but the growing critical mineral industry must not perpetuate the same abusive and environmentally harmful practices followed for decades by extractive industries.”

According to CRI, nickel mining and smelting operations have been developed at such a rapid pace that social and environmental safeguards have been either overlooked or ignored. As the CRI report notes, the IWIP “was built at breakneck speed, beginning operations in 2020, less than two years after the project was announced.”

The IWIP project has had a number of direct and indirect impacts on the local environment. Citing geospatial analysis of satellite imagery conducted by the group and researchers at the University of California, Berkeley, CRI said that the construction of the industrial park has involved the removal of more than 5,300 hectares of tropical forest within the park’s concession since 2018. This has contributed to “biodiversity loss.”

These environmental impacts have in turn directly impacted the populations of Halmahera, many of whom rely on natural resources for their livelihoods. According to the report, the “destruction of forests, acquisition of farmland, degradation of freshwater resources, and harm to fisheries has made it difficult, if not impossible, to continue traditional ways of life.”

The report quoted Max Sigoro, a 51-year-old Sawai fisherman from the coastal village of Gemaf just outside of the IWIP zone. “Before the mining, the fish stock was abundant, the sea was clear,” he said. “Now, I can’t catch fish near [the IWIP]. The water is dirty, and the security chases us away. The water pollution is from mining. There is oil in the water from the machines.”

At one stage, the CRI report drew a direct parallel between the current developments and the history of Halmahera island. This was one of the Spice Islands, whose optimal climate for the production of nutmeg, mace, cloves, and other niche agricultural products helped drive European colonial interest in what would eventually become the Dutch East Indies. “As in the colonial era,” CRI wrote, “outside interests are again staking their claim on Halmahera’s natural resources.”

Jokowi has promised to improve the standards of Indonesia’s nickel mining and smelting operations, not least because it will be necessary if the country’s is to benefit from the inducements offered to EV producers under the Biden administration’s Inflation Reduction Act. In an interview with Reuters in March 2023, Jokowi said that his government would increase scrutiny of miners and other companies. “The most important thing is monitoring,” he told the news agency. “The management control system must be strengthened … Routine evaluations must be conducted.”

All this is true – but whether the government will allow these safeguards to supersede the economic and strategic imperative of shooting Indonesia to the front ranks of the regional EV race remains to be seen.