Green Initiatives in Indonesia: The Importance and Needed Legislative Framework of CCS/CCUS Technology Implementation
Hartuti Purnaweni (Universitas Diponegoro)
Imam Setiaji Ronoatmojo (Universitas Trisakti)
The continous development in Indonesia is related to the availabity and accesibility of natural resources. However, it must be admitted that the availabity of resources as the main pillar of development activities are decreasing in terms of quantity and quality. One among the main reasons for this condition is the use of resources which do not prioritize on its sustainability, causing the natural resources depletion is unavoided.
This behaviors leads to the increasing incidents of natural disaster related to environmental condition and especially hyrometeorology which more frequent to occur. This situation shows that policies in favor of environment has not become the main consideration in the preparation of policy, planning, and or programs in many sectors. The increasing and massive various development activities have been giving strong pressure to the environment. On the contrary, a strong pressure on the environment would give negative impact to the economic growth, which may lead to stagnant economic development. This condition has been worsened by the impacts of climate change which has been threatening people all over the world.
Climate change as the impact global warming, plastic waste management and environmental pollution have been a serous phenomenon in our globe. These things are threatening all creatures in the future. The declining environmental condition has been a very serious problem. Among the impacts which shows that environmental condition is worsened, especially their incidents in Indonesia are among others: (1) the decreasing area of forest coverage; (2) the decrease in animal habitat both in quality and quantity; (3) the coastal area are more prone to abrasion; (4) the hifger frequency of hydrometeorology-related disaster; (5) the decreasing quality of fresh water availability; (6) the increasing difficulty in the energy fulfillment based on the decreasing coal and oil availability.
Green Industry
The Indonesia government tries to fight these problem, by making policies for protecting the environment. Such as among others Ministry of national Development Planning set its commitment to make environment as the main consideration in composing programs and targets in various sectors in the National Middle Development Planning of 2020-2024.
The government policies are made to meet its people’s needs. The higher number of population, the more educated the public, the change in life style are all encouraging the public higher needs. These need are among others met by industries of all sorts. However, it is realized that one among the biggest contributors to enviromental problems are industrial activities. In this case that a green initiative of every company doing business activities is needed. In this case, these companies will be able to increase their green performance while at the same time also achieve financial performance, for the sake of achieveing sustainable development.
According to the Deputy for Natural Resources and Environment there are still two weaknesses in the sustainable development stage, which includes four aspects: economic, social, environmental and governance, namely: environmental aspects have not yet developed, such as social and economic aspects (in terms of size and indicators); and environmental aspects have not been properly internalized in social and economic aspects. This shows that the internalization or importance of environmental aspects into economic aspects still causes problems. The implication of the green industry needs to be carefully considered for its implementation, eventhough it is not easy for Indonesia which still depends on its natural resource commodities. For example, in the developed countries, its technology has succeeded in reducing the use of gases other than CO2 which damage the ozone layer, such as methyl chlorophorcarbons, halons, etc., from 338,117 tonnes in 1998 to 23,040 tonnes in 2021 (UN Environment Programme, 2023). On the other hand, the use of energy which relies on fossil fuels, tends to increase the emission value, i.e. 24.33 billion tonnes in 1998 to 37.15 billion tonnes. It has heavy burden implications for countries that rely on fossil energy (Global Carbon Budget, 2023). However, in terms of CO2 emissions, Indonesia has emissions of 728 million tonnes which is lower than China 11 billion tonnes in 2022, but globally CO2 emissions have increased sharply from 1998 of 24 billion tonnes to 2022 of 37 billion tonnes (Global Carbon Budget , 2023).
The Importance of Lowering Carbon Emission
The primary drivers of the global rise in temperatures right now conducted by carbon dioxide emission and other greenhouse gases. The connection between global temperatures and greenhouse gas concentrations – especially CO2 – has been true throughout Earth’s history. The global average temperature relative to a baseline, which is the average between 1961 and 1990. Average temperatures have risen by over 0.8°C since then. Temperatures in 1850 were around 0.4°C cooler than the baseline, giving us a total temperature rise of about 1.2°C compared to pre-industrial times (Met Office Hadley Center, 2023). This warming has not been equally distributed across the world. The Northern Hemisphere has warmed more than the Southern Hemisphere. Temperatures in some regions have risen by more than 5°C.
Related to energy use, population size might be considered as the main factor which will produce higher emissions. Emissions per capita are often considered as a fairer way of comparison. Historically – and this is still true in low and middle income countries today – CO2 emissions and income have been closely linked. It means that low per capita emissions are an indicator of low income and high levels of poverty. It puts more emphasis on countries with high emissions per capita – who are typically much richer – to reduce their emissions quickly, to ‘make space’ for poorer countries to grow. Many richer countries are achieving this (although not fast enough). China and Indonesia in the chart appear to have dropped in position when compared to the annual CO2 emissions. For example, Indonesia had a CO2 emissions per capita 2.23 tonnes per capita in 2020 with energy use per capita 11,500 kwh per capita and energy production per capita 11,700 kwh per capita, meanwhile GDP per capita USD 11,515. Compare thiese withricher country such as United States, in the same year CO2 emissions per capita was 14 tonnes, with energy consumption per capita of 97,300 kwh, energy production per capita of 86,700 kwh, and GDP per capita of USD 60,167 (it was calculated by Viktoras Kulionis based on the EXIOBASE v3.8.2 database; World Bank 2023, Note: USD is expressed at 2017 prices). In fact, based on the latest data states that coal and oil are ranked highest in Indonesia as CO2 gas producers, i.e. 50% for coal and 32% for oil of total CO2 emissions in Indonesia (Global Carbon Budget, 2023).
The Importance of Carbon Capture and Storage
Basically, CO2 emissions handling consists of natural and technological treatments. Natural treatment of forest adsorber requires quite large area and fairly integrated forest maintenance. Regarding to the GFW’s (Global Forest Watch) data, Indonesia had primary forest 93.8 million ha in 2001, extending over 50% of its land area. In 2023, it lost primary forest 292,000 ha, equivalent to 221 million tonnes of CO₂ emissions. 144,000 ha of this loss was found to be within Indonesia’s official forest land cover classes and with a patch size larger than two hectares according to MoEF-WRI analysis. According to the GFW (Global Forest Watch) analysis, much of the primary forest loss in Indonesia is within areas that Indonesia classifies as secondary forest and other land cover (e.g., mixed dry land agriculture, estate crop, plantation forest, shrub and others). This is because the GFW primary forest definition is different than Indonesia’s official primary forest definition and classification. GFW’s statistics on loss of primary forests in Indonesia are therefore considerably higher than the official Indonesian statistics on deforestation in primary forest. In this chart, between 2001 and 2023, forests in Indonesia emitted 963 million tonnes CO₂e/year, and removed -617 million tonnes CO₂e/year. This represents a net carbon source of 347 million tonnes CO₂e/year.
In this case, the loss of forests in Indonesia has reduced ability to adsorb CO2 emissions, due to deforestation which according to Pendrill et al (2019) in an Environmental Research Letters published by Our World in Data (Oxford University), Indonesia is in the Early Stage Transition category which is rapidly falling forest cover due to the increase of deforestation rate. Therefore, it cannot be expected to be a source of adsorption of CO2 emissions. Forests in Indonesia are in deficit for carbon removal. In order to the return of forests as subject to inhibit CO2 emissions, it is necessary to return forest land fastly. Ironically, deforestation activities, right now, are accelerated by coal mining activities, opening palm plantation land, downstream nickel mining, and administrative province expansion.
CCS or CCUS technology which is an effort to handle CO2 emissions, had begun to be developed worldwide, it is also expected to be applied in Indonesia. In this case, Indonesia is listed as one of the countries chosen to develop this technology, at least 7 hubs planned in Indonesia. Carbon capture, utilisation and storage (CCUS) can be an important technology to reduce CO2 emissions while advancing energy security and employment outcomes. It is set to play diverse roles in supporting Indonesia’s energy transition. In March 2023, the Indonesian Ministry of Energy and Mineral Resources (MEMR) finalised Ministerial Regulation MEMR 2/2023, establishing the first CCUS regulatory framework within the Association of Southeast Asian Nations (ASEAN). The regulation sets the stage for upstream oil and gas companies to undertake CCUS activities, including developing CO2 storage resources.
The CCS / CCUS technology that is currently widely used to reduce the problem of CO2 emissions is using separation technology including air capture, carbon capture and storage (CCS), and CCUS technologies. Particularly, carbon capture technologies can be operated using several methods: post-combustion, pre-combustion and oxy-combustion. Those three CO2 capture processes, while the last technology i.e. chemical looping is still under-development and inadequate large scale operation experience. In addition, the CO2 capture technologies are ready in the market but the cost accounts about 70–80% of the total cost of a complete CCS system including capture, transport and storage. Based on the fact, therefore, it is seen that a hard work in R&D which are focused on the reduction of operating costs and energy consumption is needed.
Regulation for Carbon Capture and Storage
The only regulation regarding CCUS (Carbon Capture Utilization and Storage) that can be referred to is the Minister of Energy and Mineral Resources Regulation (Permen ESDM) Number 2 of 2023 concerning the Implementation of Carbon Capture and Storage, as well as Carbon Capture, Utilization and Storage in Business Activities Upstream Oil and Gas. Thus, with the finalisation of the Ministry of Energy and Mineral Resources Regulation Number 2 of 2023 (MEMR 2/2023) in March 2023, Indonesia became the first country in Southeast Asia to put a CCUS framework in place. MEMR 2/2023 covers many of the areas commonly found in other frameworks which are crucial to ensuring the safe and secure storage of CO2, such as establishing detailed monitoring and reporting requirements. It also covers several financial and business model considerations that are not commonly found in other frameworks, including potential pathways for a project and its partners to monetize carbon credits. There are dozens of issues that can affect the legal oversight and regulation of CCUS activities, the majority of which focus on the regulation of CO2 storage. Indonesia’s MEMR 2/2023 covers several of these issues; however, other issues such as one-off legislation for a specific project are not necessarily applicable to Indonesia.
The Regulation Needed
In terms of Ministerial Regulation MEMR 2/2023, establishing the first CCUS regulatory framework within the Association of Southeast Asian Nations (ASEAN). The regulation sets the stage for upstream oil and gas companies to undertake CCUS activities, including developing CO2 storage resources. Currently, it has limited scope for CCUS activities beyond the oil and gas sector. Opportunities exist – particularly in industry, electricity generation and fuel transformation. The Indonesian Minister of Energy and Mineral Resources (“MEMR”) has issued MEMR Regulation No. 2 of 2023 on the Implementation of Carbon Capture and Storage (“CCS”) and Carbon Capture, Utilization, and Storage (“CCUS”) in Upstream Oil and Gas Business Activities (“MEMR Reg 2/2023”). CCS and CCUS are both promising technologies that have the potential to play a significant role in reducing carbon emissions. Currently, there are 15 CCS/CCUS projects in Indonesia that are still in the study and preparation stages. Most are targeted to operate before 2030. The 15 projects are as follows: (i) Arun (CCS); (ii) Gemah (CCUS, EOR); (iii) Ramba (CCUS, EOR); (iv) Jatibarang (CCUS, CO2, EOR); (v) Central Sumatra Basin (CCS, CCUS Hub); (vi) Sakakemang (CCS); (vii) Gandih (CCUS, EOR); (viii) RU V Balikpapan (CCU, Methanol); (ix) Kutai Basin (CCS, CCUS Hub); (x) Sunda Asri Basin (CCS, CCUS Hub); (xi) Sukowati (CCUS, EOR); (xii) East Kalimantan (CCS, CCUS Study); (xiii) Blue (Ammonia, CCS); (xiv) Abadi (CCS, CCUS); (xv) Lapangan Tangguh (CCUS, EOR).MEMR Reg 2/2023 supports Indonesia’s commitment to achieve carbon neutrality by 2060 by allowing upstream oil and natural gas contractors to store, utilize, and/or monetize carbon emissions. CCS and CCUS are similar but have distinct characteristics. CCS reduces carbon emissions by capturing, compressing, and permanently injecting the captured carbon into a specific location. In contrast, CCUS would use the captured carbon to create products such as plastics, concrete, or biofuel.
MEMR Reg 2/2023 requires the contractor of an oil and gas project to submit an initial development plan for the CCS/CCUS implementation to the MEMR, through the Special Working Unit for the Organization of Offshore Oil-and-Gas Business Activities (Satuan Kerja Khusus Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi or “SKK Migas”) or the Aceh Oil-and-Gas Organizational Body (Badan Pengelola Migas Aceh or “BPMA”). If the CCS/CCUS implementation plan is a subsequent development plan, then it is submitted to the SKK Migas or BPMA. It must provide studies on geology, geophysics, reservoir, transportation, storage, injection operations, economy, engineering, safety, environment, evaluation and risk mitigation, monitoring, and Measurement, Reporting, and Verification (“MRV”), where the studies must be performed in accordance with relevant standards for respective assessments. Furthermore, the development plan will then be submitted to obtain approval from relevant bodies. If the development plan is an initial plan, then it will be assessed by MEMR, while also considering the suggestions from SKK Migas or BPMA. 5 If the development plan is part of a subsequent plan, then it will be assessed by the SKK Migas or BPMA.
A contractor is allowed to commence CCS/CCUS after the approval of the development plan. MEMR Reg 2/2023 requires the implementation of CCS/CCUS to be carried out as follows: (1) Providing documents on the mitigation and handling of environmental impact, social, and public involvement; (2) The process of engineering, procurement, and construction; (3) Commissioning and CCS/CCUS operations; (4) Implementation of health and safety during the operation of CCS/CCUS; (5) Environmental management; (6) Implementation of emergency response activities; (7) Implementation of service and maintenance; (8) Implementation of monitoring and MRV; and (9) Closure of CCS/CCUS activities.
CCUS is set to play important and diverse roles in supporting Indonesia’s clean energy transition, in particular in industry, electricity generation and fuel transformation. For Indonesia to meet its carbon neutrality goal by 2060, the IEA has assessed CCUS deployment needs to pick up quickly to reach over 6 Mt annually captured in 2030, and around 190 Mt annually in 2060. Projects are currently in development in low-emission ammonia, power, refining, and dedicated storage, reflecting opportunities beyond the oil and gas sector. To enable CCUS to play its full role in Indonesia’s decarbonisation, subsequent ministerial regulations would be needed to expand Indonesia’s CCUS framework beyond the oil and gas sector. At a minimum, these regulations should address: (1) The development of CO2 storage outside of oil and gas working areas; (2) CCUS activities of non-oil and gas companies; (3) International implications.
If we look to the previous paragraph, Indonesia is a country that still depends on non-environmentally friendly energy commodities, i.e coal and oil which produces CO2 gas. Meanwhile, the forest status is in the early transition which deforestation rate increasing or rapidly falling forest cover, so that adsorption from the forest cannot be expected, to restore the proper condition, it will take a long time. Thus, the alternative of reducing CO2 emissions with CCS /CCUS technology cannot be avoided.
Regulation for the application of CCS/CCUS technology in Indonesia must be carried out with several considerations, considering GDP per capita is still relatively low, in contrast to the GDP of developed countries, hence if CCS/CCUS technology is implemented, it should not be a new problem for the economy in Indonesia. Therefore, integrated regulations are needed to regulate its implementation. The regulations needed start with mapping the TRL (True Readiness Level) at each stage of CCS/CCUS technology, both post-combustion, pre-combustion and oxy combustion, as well as chemical looping which is currently under-development status. This mapping also assesses, how it is implemented for each industrial cost components, to suppress cost optimally. Thus, if there are costs that must be charged, it needs to be compensated for these cost components, such as sales taxes or permiting costs. The conveniences in the industrial business scheme will be able to reduce the increase of sales pricing as an impact of these technology being implemented.