In a bold display of ambition and diplomacy, Indonesian President Prabowo Subianto stood beside Chinese executives last week to break ground on what is touted as Asia’s largest integrated electric vehicle (EV) battery ecosystem.
Backed by $5.9 billion in investment, much of it from Chinese battery giant CATL and its subsidiaries, this project represents a high-stakes pivot in Indonesia’s national industrial strategy—an audacious attempt to move from exporting raw materials to commanding a foothold in the global EV supply chain.
But beneath the celebratory headlines and promises of energy independence lies a more complex, and perhaps inconvenient, truth: the success of this Chinese-Indonesian battery alliance depends not just on economics and geopolitics, but on whether Jakarta is willing to prioritize sustainability, restraint, and accountability over short-term industrial symbolism.
At the heart of this initiative is nickel—Indonesia’s crown jewel in the global EV race. The archipelago holds the world’s largest nickel reserves, essential for lithium-ion battery production. To maximize value, successive governments have doubled down on a policy of “hilirisasi,” or downstream industrialization, which bans the export of unprocessed minerals and promotes refining and manufacturing at home.
Theoretically, this is a sound move. In practice, however, the path has been anything but clean.
Indonesia currently operates 44 nickel smelters—many built using China’s favored Rotary Kiln Electric Furnace (RKEF) technology, which produces nickel pig iron. These smelters are already straining to secure enough nickel ore. Adding another massive RKEF facility, as proposed in the new CBL-led project in Halmahera, risks exacerbating this imbalance. Overbuilding could drive inefficient resource extraction, distort market dynamics, and leave the country locked into low-value outputs while chasing high-tech dreams.
President Prabowo’s vision of energy self-sufficiency within five to seven years is commendable. But industrial policy without environmental planning is a recipe for future crisis, not resilience.
There’s also an urgent environmental question that President Prabowo’s ceremony left conspicuously unanswered: What kind of energy will power this so-called green revolution?
Past smelters—many Chinese-financed—have relied heavily on captive coal-fired power plants, undermining any claim to sustainability. Unless Indonesia demands a hard pivot toward renewable energy, especially in new projects, this battery ecosystem will be built on carbon, not clean energy. The potential deployment of yet more coal infrastructure would directly contradict the very rationale for EV adoption.
Instead, the government must ensure that these battery supply chains—mining, smelting, and manufacturing—are powered by renewables or through Indonesia’s existing electricity grid, which includes increasing shares of geothermal, solar, and hydropower. Transmission access via the state-owned State Electricity Company (PLN), rather than private coal dependencies, should be the default energy route for all new industrial parks. And China, as a key partner and technology provider, must be held to these standards as well.
This is not just an Indonesian concern. Global markets—especially the EU and U.S.—are crafting policies to trace and regulate the carbon footprints of imports. Batteries made with coal-fired nickel could soon be shut out of premium markets. For China’s CATL, which aims to expand its EV empire beyond its own borders, the reputational risks are enormous. It is in Beijing’s strategic interest to support a cleaner, more forward-looking approach in Indonesia.
This brings us to the role of finance. With so much capital flowing into Indonesia’s nickel and EV sectors, it is time for financial institutions, especially Chinese banks, to adopt rigorous environmental and social safeguards before funding smelters and associated infrastructure. “Green finance” must mean more than a label; it should be backed by verifiable emissions targets, land-use transparency, and credible community impact assessments.
And Jakarta must lead here, too. While it welcomes Chinese capital and expertise, it should also enforce stringent permitting rules and actively discourage dirty, short-sighted projects. The allure of fast growth must not blind policymakers to the long-term costs of environmental degradation and resource exhaustion.
President Prabowo’s vision of energy self-sufficiency within five to seven years is commendable. But the foundation for such independence must be stable, ethical, and genuinely sustainable. Industrial policy without environmental planning is a recipe for future crisis, not resilience.
This is a historic moment for Indonesia. With China at its side, it stands at the frontlines of the global EV transition. But the choice before both nations is clear: Will this partnership drive clean innovation, or replicate old, extractive habits under a new banner?
The world is watching. The planet and future generations are counting on the former.
This article was co-authored by Yeta Purnama, a researcher at the Center of Economic and Law Studies (CELIOS), and Muhammad Zulfikar Rakhmat, Director of the China-Indonesia Desk at CELIOS.
