As global demand for critical minerals grow, so too do standards and regulations to ensure the industry is more sustainable and transparent about its environmental impact on local areas and residents. The case of nickel mining in Indonesia highlights the serious damage and inconsistencies of applied policy, and how we must keep open dialogue, respect for rights and demand action.
In the last 15 years the race for critical minerals (CRMs, also known as critical raw materials) has been part of a global geopolitical contest mainly among the US, Japan, EU and China. The need for these materials was mainly triggered by the global agenda for the renewable energy and green technology transition, which proposes to address energy scarcity and the target of stabilizing global warming below 1.5 °C by 2030. Along with manganese, cobalt, graphite and lithium, nickel is the main CRM for batteries whose demand will continue to grow to meet renewable energy projections by 2040. Increasing commitments from countries to emission reduction targets are projected to create a market increase for nickel of 60–70% in 2040.
Among other producer countries for critical minerals, Indonesia is currently leading a massive effort to feed this global demand. As the main producer for nickel, Indonesia contributed almost 50% of global share in 2022. It is mainly exported to China with a trading value about USD 4.4 million. A smaller amount is destined for Germany, North Macedonia, Australia, and Japan. Export volume to China between January–November 2022 has reached 581,663.70 tons, while Japan, a close competitor, was left far behind at 71,249.99 tons. Indonesia has also mobilized domestic resources to build its own renewable technology by maximizing the use of CRMs at home. Similarly, the development has also invited foreign investment, where since 2013, China has been once more leading all minerals investment in the country.
Although claiming to promote sustainability, the race to accumulate critical minerals has been reported to inflict human rights abuses.The Business and Human Rights Resources Centre pointedly noted that 500 human rights allegations around the world between 2010–2021 have been linked to CRMs operations, including attacks on indigenous peoples and local communities, as well as civil society organizations and environmental destruction. Besides being linked to these issues, Indonesia has also been heavily criticized for a number of socio-environmental cases at the upstream operations of mining. The trigger is not just due to a recent move for critical minerals, but rooted in the history of mining operations.
This article argues that sustainability principles have to be applied along the CRMs supply chain, where market standards are needed in place to boost the global political processes. Considering the rush for CRMs is potentially mortgaging socio-environmental integrity – the government shouldn’t be alone in regulating these operations. Market players should also present in the standard arena since collaboration among the supply chain players would create greater strength to prevent the risks. The cases from nickel operations in Indonesia are provided here to contextualize this urgent task – market players have no reason to delay sustainability dialogues.
Stories from nickel operations
The main operating area for nickel permits in Indonesia are undertaken in several provinces (see map), including Southeast Sulawesi (198,624.66 ha), North Maluku (156,197.04 ha), Central Sulawesi (115,397.37 ha), West Papua (22,636 ha), Papua (16,470 ha), South Sulawesi (7,163 ha), and Maluku (4,389 ha). Sulawesi Island has the largest nickel deposit with approximately 84% of Indonesia’s reserve. Up to 2023, the government has issued 303 mining business permits in these regions covering an area of 520,877.07 ha across about 12 main companies. Currently supported by national policies to encourage the added value of mineral ore domestically, the government plans to develop 111 smelters where 37 are in operations and 15 are developed for nickel.
Nickel mines have come into public scrutiny after various cases of allegedly illegal and human rights violations have been reported in some operations. A notorious example is the companies operating in Wawonii Island, where indigenous peoples protested against its environmental devastation, ruining the traditional indigenous farming system, and also against instances of land grabbing. The operation was permitted by the government in 2017 through granting the company a mining business use permit issued by the Ministry of Energy and Mineral Resources and a forest lease issued by the Ministry of Environment and Forestry. Nevertheless, it undermined Law 27 of 2007 on marine coastal areas and small islands that prohibit mining operations within small islands. The law defines Wawonii Island as a small island since it has a total area of only 867.58 square kilometers (km2). The criteria for a small island according to the law is up to 2,000 km2. The Minister of Coastal Marine and Small Islands has even publicly said that the operations are not allowed by the law, indicating an inconsistency within government policies. The provincial spatial planning of 2018 also prohibited mining operations in the small islands, although the district has allowed some areas for mines.
This inconsistency amongst the laws and regulations was then used by the indigenous Wawonii to challenge the district spatial planning in the State Administrative Court, as it was against the provincial spatial planning regulation and Law 27 of 2007. The people won the case, and currently make use of this case to challenge the legality of the mining business permit of the operating company (PT GKP). They won at the first court and now the company is fighting back.
While the case is ongoing in the court, a series of environmental damages have been reported from the area, including freshwater pollution that is used daily as the main source for drinking water by people in Roko-Roko village of southeast Wawonii Island, Konawe Kepulauan district (see picture). Some other cases have been intensely reported, including river and marine pollution, and construction to prevent people from water access.
Moreover, the nickel operations have brought horizontal conflict among the people, between those who are pro and those contra. As Mongabay reported, in a moment, factions and fragmentation spread across the social fabric of their society. The memory of solidarity has evaporated and family ties and bounds have been evaded. Social harmony from years of maintaining the neighborhood has suddenly disappeared. All of these are immeasurable costs that even a trillion dollars cannot compensate for.
In another region of Indonesia at Halmahera, a similar story is also repeating. The indigenous people of central Halmahera Island were uprooted from their traditional farming land to pave the way for nickel operations. Meanwhile, the traditional fishermen had to go fishing further away since the area of operation has indicated serious pollution with the presence of hexavalent chromium, a heavy metal that is strongly prohibited by law.
Government alone is not enough
A number of laws have been issued to prevent environmental devastation and social risks from mining operations. The environmental law of 2009 regulates how natural resources use have to protect the environment by imposing some requirements, inter alia:
- not exceeding the environmental quality standards, including water, air, soil
- carrying out environmental impact assessments to protect critical ecosystems such as natural forest, river and lake banks, endangered species, catchment area, settlement area, and cultural values
- monitoring the impact and regularly report to the environmental agency regarding the environmental management of the operations
The mining law itself requires mining operations to comply with environmental requirements. Recently, the Ministry of Energy and Mineral Resources, which has the power to regulate mining operations, issued Ministerial Regulation 26 of 2018 to guide good mining practices. It provides mining operations with obligations to maintain social and environmental responsibilities and carry out social mapping to understand the socio-cultural context of the prospective area and design a plan.
In reality, aforementioned reports testify to legal infringements. Recently, some nickel operations such as those in Mandiodo and Wawatu village, North Konawe district, have been filed as criminal cases by a legal enforcement unit in the Ministry of Environment and Forestry for illegally clearing forest areas for mines. Similarly, other operations in Wawonii Island have been given sentences for violations against spatial planning, but no legal actions have been pursued to stop the actual operation. Overall, the nickel mines keep operating without proper legal sight for environmental evaluation or audit.
Meanwhile, indigenous peoples and local communities experience the direct impact of water pollution, horizontal conflict/tension, and massive limitations to access common resources (forests, hunting area, materials for traditional medicine). It is clear that the law has not been implemented well.
The need for public-private market standards
The lack of legal enforcement as indicated through these cases should be a pretext for an urgent call to market players to define sustainability criteria for the critical minerals (CRMs) supply chain. However, the global consensus for that priority is very minimal. Among the few that have recently occurred include north-south dialogue. For instance, the Minerals Security Partnership (MSP) initiative has gathered producer countries (Australia, Canada, Finland, France, Germany, Japan, Italy, the Republic of Korea, Norway, Sweden, the United Kingdom, the United States, and the European Union) together. Additional countries in attendance included Angola, Botswana, the Democratic Republic of the Congo, South Africa, Tanzania, Uganda, and Zambia to require CRMs supply chains to apply ESG (environmental, social and governance) criteria. The initiative took the perspective of equitable and just transition as a stance to control CRMs operations.
Another initiative was declared by the Paris Peace Forum in 2022, which launched Acting Together for a Responsible Critical Minerals Sector. The move was driven by concerns around geopolitical, ecological, and social risks along the value chain of CRMs. The initiative called for five priorities for action, such as strengthening relevant norms and standards and fostering cooperation within and between states. A number of leading figures signed the initiative and called for global cooperation to consider the solutions seriously, including Rohitesh Dhawan, President and CEO of the International Council on Mining and Metals (ICMM), Ilham Kadri, CEO of Syensqo and formerly Solvay, and Chairman of the World Business Council for Sustainable Development (WBCSD), and Maros Sefcovic, Vice President of the European Commission.
Furthermore, the International Energy Agency (IEA) recently (28 September 2023) organized the first ever summit on critical minerals and clean energy. The stakeholders at the meeting agreed upon six key actions to improve the CRMs supply chain, among them are sustainable and responsible production, transparency in the markets, and global collaboration. The IEA has committed to address these recommendations by continuing existing initiatives that address these concerns. For instance, the IEA has developed the critical mineral policy tracker to detect policies around the world and encourage sustainable and responsible practices on CRMs operations.
One of the main tasks for market sustainability dialogue is reaching out to the main player, which is China. The CRMs could look into the existing standards of other commodities such as palm oil, cocoa and rubber that have all been successfully applied by market players along the supply chains. Currently, the public can trace the operations of these companies along the supply chain. Seemingly, these initiatives are also targeting China for dialogue. For instance, the leading initiative for sustainable palm oil, RSPO (Roundtable on Sustainable Palm Oil), opened a dialogue with China in 2019, where a forum for sustainability was established. It is important for CRMs to build on this wave and take the advantage of current political awareness, rather than reinventing the wheel.
Essential principles from the ground up
Pervading existing market initiatives from public-private collaborations are definitely a starting point for dialogue on CRMs sustainability. To strengthen this, reflections on current cases and operations as mentioned in this article is necessary to address critical issues, particularly at the upstream of each project.
To ensure sustainable and solid CRMs supply chains, the following are key points of actions to incorporate:
- respect the rights of indigenous peoples and local communities to basic human rights, including a healthy environment, rights to land, rights to traditional and cultural systems, uninterrupted access to common resources and livelihood, and rights to free prior informed consent
- provide fair and just access for impacted communities to raise complaints and grievances in an accountable and transparent process to provide a mechanism to restore and rehabilitate the rights of rights holders.
Bernadinus Steni is a legal advocate for indigenous peoples and local communities, particularly working on the rights to land, natural resources, and healthy environment. He has been advocating to address climate change, free prior consent, conflict resolution, and sustainability standards for commodities. He is currently doing a PhD on environmental management at IPB University in Bogor, Indonesia.
Steni wishes to extend his gratitude to Saharuddin for providing the accompanying photos and additional ground information.
The views expressed in this article are not necessarily those of Heinrich Böll Stiftung.