JAKARTA, 30 OCTOBER 2026 — Indonesia is stepping up efforts to develop internationally recognised industrial emissions measurement and verification systems after a government simulation indicated that using actual production data could reduce estimated European Union carbon-border costs by as much as 90% in a selected industrial case.
The findings were presented on 29 October by Mochamad Firman Hidayat, a member of Indonesia’s National Economic Council (DEN). They illustrate the potential financial exposure of Indonesian steel exporters under the EU’s Carbon Border Adjustment Mechanism (CBAM) when manufacturers cannot demonstrate their installation-specific emissions.
Speaking at a policy discussion organised in Jakarta by the Center for Indonesian Policy Studies (CIPS), Firman said the council had compared EU default emissions values with installation-level information provided by Indonesia’s Ministry of Industry. The exercise identified a substantial difference between estimated carbon costs calculated using default figures and those based on specific industrial emissions data.
The reported 90% reduction relates to a single simulation. It is not evidence of savings already achieved by exporters and cannot be applied uniformly across Indonesia’s industrial production. Nevertheless, the result supports the government’s position that credible emissions measurement and verification are becoming important factors in maintaining access to European markets.
Steel products face significant exposure to EU default values
Indonesia’s steel industry is among the sectors most directly affected by the EU’s carbon-border requirements. The government has identified hot-rolled coil and carbon-steel wire rod as products facing particularly substantial competitive risks when EU default emissions values are used.
In some scenarios assessed by the National Economic Council, carbon costs estimated with default figures could exceed the selling value of certain steel products. Such calculations could undermine export economics unless manufacturers demonstrate lower actual emissions, reduce the carbon intensity of production or renegotiate commercial terms with European customers.
For producers using energy-intensive processes, the difference between prescribed default values and verified installation-level emissions may therefore become a significant commercial consideration.
Actual emissions data do not automatically result in lower CBAM liabilities. The outcome depends on the emissions intensity of the production process, the applicable EU calculation methodology, the treatment of relevant precursors and any applicable carbon-cost adjustments.
Indonesia’s immediate task is to establish monitoring, reporting and verification procedures through which exporters can substantiate their production emissions for European importers.
DEN maps €2.08 billion in exports to the EU
The National Economic Council’s assessment of 2025 trade data identified approximately €2.08 billion in Indonesian exports to the European Union across CBAM-related product groups. These goods accounted for around 11.9% of Indonesia’s reported merchandise exports to the EU.
Indonesian exports worldwide in comparable product groups totalled approximately €29.92 billion, underlining the wider importance of preparing domestic industries for the potential expansion of carbon-related import requirements beyond the European market.
The figures were disclosed on 29 October 2026 and converted using the European Central Bank’s reference exchange rate for that date.
The government’s mapping covers relevant trade categories; it is not an independently reconciled dataset of imports across every legally covered EU eight-digit Combined Nomenclature (CN) code. Broader steel and industrial classifications can include products that are not currently covered by CBAM.
Assessing an individual exporter’s exposure therefore requires more detailed information, including product-level customs classifications, declared values, quantities and emissions associated with the relevant production process.
Verification affects supplier costs and purchasing decisions
For Indonesian steel producers, emissions verification is increasingly becoming a commercial consideration alongside environmental reporting. Under the EU framework, authorised CBAM declarants remain responsible for the relevant import declarations and certificate obligations. Producers outside the EU must supply compliant emissions information when importers intend to calculate liabilities using actual emissions.
Where manufacturers cannot provide the required verified information, calculations may rely on EU-prescribed default values. This can produce an unfavourable result when a plant’s actual emissions are materially lower than the applicable defaults.
The difference can affect supplier selection, export pricing, contract negotiations and investment decisions.
The European Commission has published a CBAM certificate price of €82.32 per tonne of CO₂ equivalent for the third quarter of 2026. This benchmark does not represent a uniform charge per tonne of Indonesian steel. The resulting liability depends on the applicable emissions calculation, relevant benchmarks and other adjustments.
Consequently, manufacturers need to assess the costs and potential commercial benefits of verification separately for each installation and product.
Indonesia works towards internationally recognised measurement
Developing a reliable system requires more than collecting emissions figures from individual factories. Indonesia must also ensure that its industrial monitoring arrangements are compatible with the requirements of international customers and regulatory authorities.
Andree Surianta, a senior researcher at CIPS, called for closer coordination between the Ministry of Industry’s emissions measurement framework 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 form part of broader efforts to improve energy efficiency, modernise industrial processes and prepare manufacturers for export markets increasingly influenced by carbon performance.
Research presented by CIPS on 29 October also found that industrial businesses attach considerable importance to predictable regulation when considering investment in lower-carbon production. This points to regulatory clarity and accessible verification arrangements as important factors alongside direct financial support.
Implications extend to other steel-exporting economies
Indonesia’s experience is relevant to other industrial exporters, including India, Turkey, China, Serbia and the Western Balkans. Producers supplying comparable goods can face different calculated carbon costs depending on production technology, actual emissions and their ability to provide evidence that meets EU requirements.
A manufacturer with complete, independently verified emissions records may be better positioned commercially than a competitor relying on default values, even where their conventional production costs are similar.
For European buyers, access to reliable supplier emissions information is becoming an increasingly relevant input in 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 even before manufacturers complete more capital-intensive emissions-reduction programmes. However, the potential benefit must be assessed at the level of individual installations and products; it cannot be extrapolated from the government’s single-case exercise.
The next step for Indonesia is to translate national emissions measurement initiatives into verified, product-specific evidence that is accepted under European requirements. The ability to demonstrate actual emissions could become an important factor in protecting exporters’ margins and maintaining relationships with European customers as CBAM financial obligations become operational in 2027.
