Nickel is a chemical element essential for the transition to “green” energy. However, its extraction is often associated with environmental issues, as recently highlighted in Indonesia.
The World Bank has released a report with specific figures: to achieve global zero-emission targets, the annual supply of nickel must increase by 28 percent, and the annual supply of copper by 156 percent by 2050 compared to 2020 production levels. Additionally, at least 15 other minerals and metals must be exploited at similar rates, according to the report.
Some analysts believe this is simply impossible. Others think the growing demand for these minerals cannot be sustainably met.
“It is not possible to change the way we supply energy and at the same time replace one ‘exploitative raw material industry’ with another ‘equally dirty, equally exploitative’ one,” stated UN Secretary-General António Guterres in April. “The race for zero-emission energy supply must not come at the expense of the poor.”
EU legislation supports this goal. A recently adopted directive requires European companies to demonstrate by 2029 that they are taking measures to protect the environment and human rights throughout their supply chains.
“Relevant regulations and rules apply to European companies, as well as to foreign companies wanting to sell goods or services in the EU,” Chris Humphrey, Executive Director of the EU-ASEAN Business Council, told DW.
Withdrawal from an Indonesian mine
In July, German BASF and French Eramet withdrew from the $2.6 billion (2.4 billion euros) “Sonic Bay” nickel and cobalt refinery in Indonesia. The reason: the mine from which the refinery sources its raw materials threatens the forest area of an indigenous people living in isolation.
Had this not happened, the exploitation of these metals in the “Weda Bay Nickel” mine, the world’s largest nickel mine and part of the IWIP industrial park in Indonesia, would have significantly increased. According to data from the US Geological Survey, nearly half of the world’s nickel was produced there in 2022. It is largely used for the production of electric vehicles and batteries.
The Critical Raw Materials Act, adopted by the European Council in April, lists about 50 minerals necessary for the “green transformation” (including nickel). The legislation facilitates the EU’s acquisition of necessary materials through agreements with “friendly third countries.” However, according to current reports, nickel exploitation is one of the main causes of deforestation in Indonesia. Additionally, the use of coal to operate nickel smelters pollutes the water.
EU companies stated that they are withdrawing for commercial reasons. A BASF spokesperson said the company needs “secure, responsible, and sustainable supply of key raw materials.”
“The Indonesian government should do more to mitigate the impacts of nickel extraction and refining on communities near IWIP and other similar industrial parks,” wrote Krista Shenum from the campaign group “Climate Rights International” on the “Diplomat” website this month.
Limits of the “Green Deal”
Most EU companies do not employ some of the undesirable methods associated with raw material exploitation in Asia. However, this does not mean that companies, for example from China, are not willing to do so, Frederick Clem from the S. Rajaratnam School of International Studies in Singapore told DW.
The EU Green Deal has mostly been made possible by third parties willing to subsidize their industries and cause environmental and social harm to enable the energy transition in their country and elsewhere, Clem said. “This is a contradiction we have not been able to resolve so far.”
Similar accusations concern the recently introduced EU tariffs on electric vehicles produced in China, which followed complaints from Brussels about unfair trading practices.
“The EU complains about alleged Chinese dumping regarding solar cells, wind turbines, and electric cars, but at the same time is happy with the ridiculously low price of solar energy, which is solely the result of Chinese mass production combined with subsidies,” Clem said. “The energy transition and the electrification of the economy would not be possible without these Chinese products.”
Outgoing Indonesian President Joko Widodo has tried to turn Indonesia into a global hub for electric vehicle battery production. He has therefore increased metal mining capacities, particularly nickel. Additionally, Jakarta banned the export of unprocessed nickel in 2014. This means that raw materials must be processed in the country.
Since then, China has invested more than $30 billion in Indonesian nickel processing, including smelting and battery production for electric vehicles.
Depleting reserves
In Indonesia, high-quality nickel reserves are depleting, leaving only mines with lower-quality ores. These contain only a small portion of nickel. To extract it, high-pressure acid leaching (HPAL) is used. However, this process produces a large amount of toxic waste.
There are promising alternatives to HPAL, Kevin O’Rourke, an analyst from Jakarta, told DW. He works for the consulting firm “Reformasi Information Services,” which deals with political risks. He added that these alternatives face resistance from local Indonesian regulators, who stick to the cheap and well-known HPAL process.
“If developed markets, like the EU, limit the import of dirty nickel, it will incentivize responsible producers to supply ethically acceptable material,” O’Rourke said. “If Indonesian producers cannot penetrate lucrative Western markets, they might start exploring options to reduce or avoid emissions and waste from HPAL.”
The European Union’s goal should be “to make dirty work less dirty,” said Bridget Welsh, an honorary research associate at the Institute of Asian Studies at the University of Nottingham in Malaysia.
Source : DW
