Five downsides to Indonesia’s rapid coal expansion

Over the last decade, Indonesian coal production has risen dramatically. The country is now one of the world’s largest exporters of coal, and the largest exporter of steam coal.

This expansion comes at a time of transition for the international coal industry. Renewable energy costs are becoming competitive with coal-based electricity, the international community is ramping up ambition to tackle climate change, and financial institutions (especially international banks and pension funds) are showing a weakening appetite for coal assets.

Within Indonesia, coal’s expansion come with a raft of problems. Here are five of them, as detailed in a new SEI working paper that explores the deep intertwining of coal mining within Indonesia’s political landscape.

1. Deforestation

Mining permits cover roughly 6.3 million hectares of Conservation Forest and Protected Forest areas, despite laws against such activities, according to Indonesia’s Corruption Eradication Commission. This situation could worsen with the development of a new Russian-financed railway that will open up new areas of Kalimantan for coal and palm oil activities.

 2. Displacement

Mining concessions are not supposed to be issued inside residential areas, but district regents (bupatis) nonetheless have issued such permits, sometimes displacing residents. In one case, an entire village was allegedly moved for one mine; in another, local Dayak people in Kalimantan claimed to have lost community forests and other land to mining.

3. Illegal mining

Indonesia has seen a proliferation of illegal mining, both outside permitted areas and with inactive permits. Such mining accounts for as much as 80 million tonnes per year, according to some estimates.

4. Abandoned mining pits

More than 20 people – mostly children – have drowned in abandoned mining pits in East Kalimantan. Though companies are required to perform mine reclamation, implementation and enforcement has been weak. In 2016, the government established a commission in East Kalimantan to review reclamation implementation and make recommendations to the Province.

5. Corruption

Corruption is rampant in the coal mining sector, with companies paying government officials to use unauthorized waterways for transport and obtain mining permits.

The Indonesian government has tried to address these problems through a number of policy and regulatory changes, including a policy to improve land permitting regulation and a program to screen mining licenses for compliance. But there are no clear signs that coal production will stop expanding anytime soon.