Indonesia has rapidly become the fulcrum of the global energy transition. Its vast nickel reserves — essential for electric vehicle (EV) batteries — have turned the archipelago into a cornerstone supplier of the green economy. Yet behind the triumphalist narrative of industrialisation lies a harsher truth: the country’s nickel boom has entrenched extractive dependency, wrought environmental devastation, and imposed crushing social costs.

The Nickel Crown — and Its Fragile Base

Indonesia now produces more than 2.2 million metric tonnes of nickel annually, representing over 50% of the global supply. Projections suggest that by 2027, as much as 80% of the world’s EV battery nickel could originate here. This dominance is the fruit of a nationalist policy shift: in 2020, Jakarta banned raw ore exports to compel foreign firms to establish refining and smelting plants inside the country. The government hailed the move as an “OPEC for minerals,” imagining that downstream industrialisation would finally allow Indonesia to climb the value chain.

The surge in revenues has been undeniable. Nickel exports were worth just US$2 billion in 2016; by 2022, they approached US$20 billion. But the foundations are brittle. Much of the infrastructure is financed, owned, or operated by Chinese firms, who now control an estimated 75% of refining capacity. While headline figures suggest industrial growth, profits largely flow outwards, leaving Indonesia with environmental liabilities and communities bearing the true cost.

Nor are reserves infinite. Indonesia holds about 21 million tonnes of nickel in known deposits. At current extraction rates, geologists warn that easily accessible reserves may be exhausted within two decades. For a country staking its industrial strategy on resource nationalism, the risk of a rapid depletion cycle looms large, threatening to transform today’s bonanza into tomorrow’s bust.

Environmental Ruin and Human Displacement

The boom has left ecological scars across Indonesia’s islands. In Sulawesi, once-fertile rice fields are poisoned by runoff from mines. In Halmahera, rivers run warm and brown from tailings, while mangrove forests are razed for industrial zones. Coastal communities have watched fish stocks collapse. Bajau fisherfolk — long known as “sea nomads” — complain that fish now “come home with blackened stomachs.” Marine biologists have confirmed that heavy-metal contamination has disrupted local ecosystems.

Displacement is widespread. Families once sustained by farming and fishing have little choice but to migrate toward mines. Supervisors at smelters may earn US$800 a month, but they often share cramped dormitories and remit most earnings to sustain relatives back home. Instant noodles and processed food have replaced traditional diets. Teachers in affected regions have abandoned classrooms for mining work, while in some towns, sex work has proliferated around industrial compounds.

The waste footprint is staggering. Processing 8.3 million tonnes of ore annually produces an estimated 55.3 million tonnes of slurry waste. Much of this is dumped into the ocean through “deep-sea tailings disposal,” a practice banned in many countries but quietly tolerated in Indonesia. Areas like Morowali, Pomalaa, and Wawonii are ecological sacrifice zones, with reefs suffocated and coastlines collapsing. Yet the Ministry of Environment routinely dismisses complaints, claiming smelters “follow the recommendations.”

Labour Exploitation and Deadly Workplaces

If the environment is collateral damage, labour is an expendable input. Mines and smelters are plagued by deadly accidents. China Labor Watch reports dozens of worker deaths; miners themselves describe fatalities as “weekly occurrences.” Between 2015 and 2023, over 90 deaths were officially recorded — a figure likely undercounted given the opacity of reporting. In January 2023, violent clashes at a Morowali smelter left two dead and several injured, underscoring tensions between underpaid local workers and higher-paid Chinese supervisors.

Wages, while higher than rural incomes, reveal stark inequities. Indonesian workers typically earn US$300–800 a month, depending on seniority, while expatriates from China often earn several times more for similar tasks. Labour rights are minimal: unions are weak, collective bargaining is virtually absent, and overtime is rampant. Many miners work 12-hour shifts, six days a week, with little regard for safety standards. Families of dead workers rarely receive compensation beyond token sums.

This exploitation is structural. Indonesia courts foreign investment by promising “flexible labour regulations,” effectively sidelining worker protections. Local communities are trapped: the mines destroy their environment, then become their only source of employment — a cycle of dispossession and dependency.

The EV Paradox

Indonesia promotes nickel as the backbone of a green transition. Jakarta commuters spend nearly 200 hours per year in traffic, and policymakers argue that EVs — particularly electric motorcycles — will reduce congestion and cut emissions. Subsidies aim to boost production to 5,000 motorcycles a month, with tax incentives for local plants. Officials tout the goal of reducing CO₂ emissions by two-thirds.

Yet this green promise rests on a paradox. Nickel smelters run overwhelmingly on coal. According to the International Energy Agency (IEA), producing a tonne of Indonesian nickel emits nearly 10 tonnes of CO₂, making it among the dirtiest nickel globally. EVs may reduce tailpipe emissions in Jakarta, but their batteries are forged in toxic furnaces that deepen Indonesia’s carbon footprint.

Meanwhile, oversupply is distorting global markets. Nickel prices have dropped nearly 40% since 2022, undermining smaller producers and destabilising regional trade. What Jakarta presents as a green industrial revolution increasingly looks like a race to the bottom: cheap, dirty, and socially corrosive.

ASEAN’s Fractured Risk

Indonesia’s dominance reverberates through Southeast Asia. ASEAN’s combined US$4.3 trillion GDP depends heavily on intra-regional trade. Yet Indonesia’s export bans and its flood of cheap nickel disrupt that balance. Vietnam and the Philippines are now considering their own resource restrictions, threatening to unravel ASEAN’s integrated trade regime.

The geopolitical stakes are high. Chinese investment dominates Indonesia’s smelters, raising unease in neighbouring states wary of Beijing’s growing influence. Some policymakers fear Jakarta’s strategy could entrench a two-tier ASEAN: one dependent on resource nationalism, the other oriented toward diversified trade. This tension risks fracturing the bloc’s cohesion at precisely the moment it seeks to present itself as a unified counterweight in the US–China rivalry.

The Western Dilemma

For the West, Indonesia is both lifeline and liability. The IEA projects global nickel demand will reach 5–6 million tonnes by 2040, driven largely by EV adoption. Without Indonesia, automakers cannot meet their climate pledges. Yet reliance brings reputational and ethical risks.

Europe has challenged Indonesia’s export bans at the World Trade Organization. Washington, through the Inflation Reduction Act, demands cleaner and more diversified supply chains, but U.S. firms have struggled to compete. Japan’s state-backed JOGMEC is investing in alternative sources, but Indonesia’s low costs and vast reserves remain irresistible. The collapse of the US$2.6 billion BASF–Eramet refinery plan highlights how even Western giants cannot profitably refine nickel outside Chinese-dominated structures.

With 57% of global refining capacity concentrated in Indonesia, Western automakers are trapped in a supply chain they cannot fully endorse yet cannot escape.

Green Dreams, Grey Realities

Indonesia’s nickel rush is heralded as vital infrastructure for a clean future. But it is built on poisoned rivers, dead seas, and sacrificed workers. The paradox is stark: in trying to escape the environmental costs of fossil fuels, the world is replicating the same extractive injustices under the banner of green energy.

At The State of the Mind, we contend that the global transition cannot be credible if it relies on exploitation and ecological destruction. Unless Indonesia — and the investors who bankroll its boom — institute transparency, enforce labour standards, and adopt genuine sustainability, the so-called “green century” will be remembered as another age of betrayal.

The question is not whether Indonesia will dominate the nickel era. It already does. The real question is whether the world can afford the cost of that dominance in lives, ecosystems, and the fragile trust underpinning the energy transition.

Key Figures at a Glance

• Nickel output: 2.2 million tonnes annually (over 50% of global supply)
• Projected share: Up to 80% of EV battery nickel by 2027
• Reserves: 21 million tonnes (could be exhausted in ~20 years)
• Export revenue: US$2 billion in 2016 → US$20 billion in 2022
• Foreign control: Chinese firms own 75% of refining capacity
• Waste: 55.3 million tonnes of slurry annually from 8.3m tonnes of ore
• Worker deaths: Over 90 recorded (2015–2023), likely undercounted
• Price collapse: Nickel down 40% since 2022
• Carbon footprint: ~10 tonnes CO₂ emitted per tonne of nickel