Indonesia is developing internationally recognised systems for measuring and verifying industrial emissions after a government simulation found that using actual production data could reduce estimated European Union carbon-border costs by up to 90% in a selected industrial case. The work was presented in Jakarta on 30 October 2026, following findings released on 29 October.
The results were presented by Mochamad Firman Hidayat, a member of Indonesia’s National Economic Council (DEN). The analysis highlights potential exposure for Indonesian steel exporters under the EU’s Carbon Border Adjustment Mechanism (CBAM) when manufacturers cannot demonstrate installation-specific emissions.
DEN compares EU default factors with installation-level emissions
At a policy discussion in Jakarta organised by the Center for Indonesian Policy Studies (CIPS), Firman said the council compared EU default emissions values with installation-level information supplied by Indonesia’s Ministry of Industry. The exercise showed a substantial gap between carbon costs estimated using default figures and those based on specific industrial emissions data.
The 90% reduction figure comes from a single simulation. It does not indicate savings already achieved by exporters and cannot be applied uniformly across Indonesia’s industrial production. The government nevertheless used the result to support its view that credible measurement and verification can affect access to European markets.
EU default values raise CBAM risks for specific steel products
Indonesia’s steel sector is among the industries most directly affected by the EU’s carbon-border requirements. The government identified hot-rolled coil and carbon-steel wire rod as products facing particularly significant competitive risks when EU default emissions values are used.
In scenarios assessed by DEN, carbon costs calculated using default figures could exceed the selling value of certain steel products. Such outcomes could affect export economics unless manufacturers show lower actual emissions, reduce production carbon intensity, or renegotiate commercial terms with European customers.
For producers relying on energy-intensive processes, differences between prescribed defaults and verified installation-level emissions may become a commercial factor. However, lower reported emissions do not automatically translate into reduced CBAM liabilities because outcomes depend on emissions intensity, the applicable EU calculation method, treatment of relevant precursors, and any carbon-cost adjustments.
Exports mapping links CBAM-related trade to 2025 data
DEN also assessed 2025 trade data and identified about €2.08 billion in Indonesian exports to the European Union across CBAM-related product groups. These goods represented roughly 11.9% of Indonesia’s reported merchandise exports to the EU.
Indonesian exports worldwide in comparable product groups totalled approximately €29.92 billion. The figures were disclosed on 29 October 2026 and converted using the European Central Bank reference exchange rate for that date.
The government’s mapping covers relevant trade categories but is not an independently reconciled dataset covering every legally covered eight-digit Combined Nomenclature (CN) code. Broader steel and industrial classifications can include products not currently covered by CBAM, so individual exporter exposure requires product-level customs classifications, declared values, quantities, and associated emissions tied to the relevant production process.
Verification requirements shape costs for declarants and suppliers
The CIPS discussion also addressed how verification affects supplier decisions in Indonesia’s steel supply chain. Under the EU framework, authorised CBAM declarants remain responsible for import declarations and certificate obligations tied to CBAM reporting.
Producers outside the EU must provide compliant emissions information when importers plan to calculate liabilities using actual emissions. If verified information is not available, calculations may rely on EU-prescribed default values, which can be unfavourable when a plant’s actual emissions are materially below applicable defaults.
The resulting differences can influence supplier selection, export pricing, contract negotiations, and investment decisions. The European Commission published a CBAM certificate price of €82.32 per tonne of CO₂ equivalent for the third quarter of 2026, which serves as a benchmark rather than a uniform charge per tonne of Indonesian steel; liabilities depend on calculation details, benchmarks, and other adjustments.
Indonesia aligns measurement systems with international oversight
CIPS said developing a reliable system requires more than collecting factory emissions figures. Indonesia also needs industrial monitoring arrangements compatible with requirements from international customers and regulatory authorities.
Andree Surianta, a senior researcher at CIPS, called for closer coordination between Indonesia’s Ministry of Industry framework for emissions measurement and the Ministry of Environment’s oversight of the carbon market. Without coordination, separate national systems could lead to duplicated administrative procedures, inconsistent datasets, and additional compliance costs for manufacturers operating in international markets.
The Ministry of Industry is developing decarbonisation programmes for nine priority industrial subsectors including steel, cement, chemicals, and fertilisers. The initiatives are linked to efforts to improve energy efficiency, modernise industrial processes, and prepare manufacturers for export markets increasingly influenced by carbon performance.
CIPS research points to predictable rules alongside verification access
CIPS research presented on 29 October found that industrial businesses place considerable importance on predictable regulation when considering investment in lower-carbon production. The findings cited regulatory clarity and accessible verification arrangements as factors alongside direct financial support.
Regional relevance extends to other steel-exporting economies
The analysis said Indonesia’s experience is relevant to other industrial exporters including India, Turkey, China, Serbia and the Western Balkans. Producers supplying comparable goods may face different calculated carbon costs depending on production technology, actual emissions levels, and their ability to provide evidence meeting EU requirements.
A manufacturer with complete independently verified emissions records may be positioned commercially compared with a competitor relying on default values even where conventional production costs are similar. For European buyers, access to reliable supplier emissions information is increasingly relevant for procurement decisions and landed-cost calculations.
Banks and investors are also incorporating carbon accounting into assessments of future cash flow, export competitiveness, and the commercial viability of production upgrades. Indonesia’s simulation indicates that investment in measurement and verification systems could have commercial value before manufacturers complete more capital-intensive emissions-reduction programmes.
The potential benefit must still be assessed at the level of individual installations and products rather than extrapolated from a single-case exercise. The next step described is translating national emissions measurement initiatives into verified product-specific evidence accepted under European requirements as CBAM financial obligations become operational in 2027.