Indonesian Nickel Production Can Cause Spike GHG Emissions

As Indonesian nickel producers emerge as key global players, their greenhouse gas (GHG) emissions are expected to rise along with increased nickel production. A new report from the Institute for Energy Economics and Financial Analysis (IEEFA) examines the investment plans, financial performance, and the three scopes of GHG emissions for four major nickel companies listed in the country, PT Aneka Tambang (Antam), Merdeka Battery Materials (MBMA), Trimegah Bangun Persada (TBP Harita), and PT Vale Indonesia (Vale).

“In 2023, these four Indonesian nickel companies represented 26% of Indonesia’s primary nickel production with an output of 353,000 tonnes, and generated GHG emissions of 15 million tonnes (mt),” says Ghee Peh, report author and IEEFA’s Energy Finance Specialist, Asia Coal Markets.

In the same year, Indonesia contributed to 51% of the world’s nickel mine production, while nickel constituted 2.6% of the country’s total export value, compared to 13.4% for coal.

The revenue and net profit of the four nickel companies have grown significantly due to the increase in production and the high nickel prices (above US$16,000/tonne), making them comparable to the coal sector.

“As Indonesian nickel companies experience significant growth in profit and scale, with plans to more than double production in the next three to five years, now is the time to accelerate the transition from coal,” says Peh.

Possibility to lower GHG intensity

Among the four companies, Vale had the lowest GHG emissions at 28.7 tonnes of carbon dioxide (CO2) per tonne of nickel (tCO2/tNi).

“This is due to its three hydropower plants at Sorawako, with a total capacity of 365 megawatts (MW),” says Peh.

The other three companies also calculated CO2 emissions using similar methods but primarily relied on coal-fired power, resulting in GHG emissions ranging from 57 to 70 tCO2/tNi.

The report finds that in 2023, the four companies collectively produced 13.3mt of Scope 1 CO2 emissions and 16.9mt of CO2 emissions from Scope 1 to Scope 3.

Peh estimates that the four nickel companies could expand output to 1.05mt of nickel metal by 2028. He also projects the companies’ future emissions in 2028 under two scenarios. The first scenario assumes that their GHG intensity remains at 2023 levels, while the second assumes all four companies achieve the 28.7 tCO2/tNi level seen in Vale’s smelter process in 2023.

“Under scenario one, the total emissions for the four companies at their current rates of GHG emissions could reach 38.5mt, which is 4.5% of Indonesia’s 861.5mt of emissions in 2023. In the second scenario, if the three other companies also achieve 28.7 tCO2/tNi like Vale, total emissions would decrease by 43% to 22.3mt of CO2 by 2028,” says Peh.

Accelerating the adoption of renewables

In 2023, Vale’s use of hydropower and biodiesel advanced its renewables share to 30.1%, the highest among the four companies.

According to the report, the four Indonesian nickel companies will add 530,000 tonnes of new capacity by 2028. Peh warns that continued reliance on fossil-fuel power generation could result in significant environmental costs.

“IEEFA estimates that of the total 530,000 tonnes new nickel capacity, 51% will come from high-emission ferronickel production (around 60 tCO2/tNi), primarily powered by coal thermal. The remaining 49% will come from lower-emission production (around 13 tCO2/tNi) via mixed hydroxide precipitate (MHP) using the chemical-based high-pressure acid leach (HPAL) process,” says Peh.

According to TBP (Harita), HPAL is a low-carbon technology for MHP production, which is then refined into nickel and cobalt sulfate for battery value chains.

However, Wood Mackenzie has identified that the HPAL process can generate considerably more waste than nickel smelting, ranging from 1.4 to 1.6 tonnes per tonne of nickel produced.

“Companies should balance the economic benefits of increased downstream nickel exports with their environmental impact and reduce emissions by replacing coal-fired capacity with renewables,” says Peh.