Workshop tackles transition to low-carbon steel in Indonesia
How can Indonesia’s growing steel sector go green, while staying competitive?
With global steel production already accounting for 8 per cent of worldwide emissions, there is an urgent push to decarbonize the production of this critical building material. This is particularly true in countries like Indonesia, where a growing steel industry is increasingly vital to the national economy. Earlier this year, a high-level workshop in Jakarta explored how Indonesia’s steel industry can transition to a low-carbon future while maintaining its competitiveness.
Organized by the Ministry of Industry, the United Nations Industrial Development Organization (UNIDO), and Agora Industry, the one-day event brought together policymakers, industry leaders and experts.
“The workshop provided an important opportunity for all stakeholders to familiarize themselves with the latest trends, policy and finance options as well as technical developments,” said Tomasz Pawelec, a policy expert with UNIDO’s Net Zero Partnership for Industrial Decarbonization (NZP-ID).
Building a more robust market for green steel
The format was interactive, with participants identifying key challenges and solutions through a mix of technical sessions, group discussions and Q&As.
A key topic of discussion was the need to foster a more robust market for green steel in Indonesia. “Right now the demand and market acceptance for green steel is low and we need to change this,” said Mr. A. P. Nugraha, Head of the Green Industry Centre at the Ministry of Industry. “During the workshop we discussed various ways of addressing this and, from the government side, one of these is through green public procurement,” he said.
With the Indonesian government’s ongoing infrastructure building push spurring increased steel consumption, leading industry players see green public procurement as a key way to stimulate sustainable steel production. “This is an example of an important lever because it drives a predictable demand for greener steel, encourages innovation, and in turn, helps reduce the sector’s carbon footprint, supporting broader climate goals. A well-implemented green public procurement policy will also give industry players greater confidence to expand and invest in decarbonization efforts, accelerating the transition to a more sustainable steel sector,” said Sheren Omega, Head of Sustainability, at one of Indonesia’s steel producers, PT Gunung Raja Paksi.
Another challenge for local producers considering investing in green steel production is the need to compete with cheap, high-emissions steel that is imported. To make the high capital investment required for green steel technologies worthwhile, participants identified the need for clear policy and regulatory support, including tax reductions and regulations like Carbon Border Adjustment Mechanisms (CBAM) as critical for protecting and incentivizing local producers.
“The workshop highlighted that policy clarity, financial incentives, and international cooperation are essential for Indonesia’s steel transition,” said Kajol, Project Manager for Climate Neutral Industry at Agora Industry. “Support from policymakers, industry collaboration and innovation will be key drivers in achieving a sustainable and competitive low-carbon steel sector,” she said.
Participants also had the opportunity to explore the latest technologies in green steel production, discussing hydrogen’s role in decarbonizing production, alongside advancements in clean energy, and opportunities for international collaboration in hydrogen infrastructure.
Indonesia produces around 1 per cent of the world’s steel and this industry is growing fast. The country is emerging as a major player in both steel production and consumption, with rapidly increasing demand driven by industrialization and infrastructure development. The country’s steel production is expected to double by 2030. With Indonesia aiming to reduce its carbon emissions by 31 per cent by 2030, while still maintaining its economic growth, green steel will play an important role.
Leading local steel producer shows the way
Participants also had the chance to see green steel technologies in action with a visit to a production plant run by leading steel producer, PT Gunung Raja Paksi Tbk (GRP).
With an eye on long-term growth, in 2023, GRP announced its low-carbon steel strategy. “Our strategy focuses on reducing the carbon footprint of our steel production process because that’s where the market is heading,” Ms. Sheren from GRP said. The company is doing this by optimizing their electric arc furnace efficiency, using renewable energy sources, and prioritizing the production of low-carbon steel products with a higher recycled content, she explained.
“The visit was a good way to wrap-up a fruitful workshop,” Mr. Pawelec said. “Overall, the interactive nature of the forum encouraged active participation, fostering meaningful exchanges of ideas and perspectives. Many attendees appreciated the opportunity to discuss key challenges and solutions related to steel decarbonization, policy frameworks, and financial incentives,” he concluded.