In Indonesia, the European Union’s Carbon Border Adjustment Mechanism (CBAM) applies to only part of the nickel value chain. Ferronickel is included within the iron-and-steel products covered by the mechanism. Refined nickel and several battery intermediates are not covered under the current scope. As a result, the carbon-border treatment of Indonesian exports depends partly on product classification and processing route.
Indonesia’s export restrictions and industrial policies have attracted investment into ferronickel, nickel pig iron, nickel matte, and battery intermediates. New processing capacity in the sector relies largely on coal-intensive electricity. This creates a challenge for industrial decarbonisation while maintaining access to critical minerals. Differences in CBAM treatment can influence trade and procurement decisions across product forms.
Such differences may also create opportunities for regulatory arbitrage if products are restructured primarily to avoid carbon costs. Changes in product form can also reflect genuine industrial demand. At the same time, EU anti-circumvention measures could become relevant if authorities identify attempts to bypass CBAM requirements. The carbon-border outcome therefore varies with both how goods are produced and how they are presented for trade.
Emissions requirements for nickel used in batteries
European battery manufacturers require dependable nickel supplies while facing pressure to reduce supply-chain emissions. Because CBAM does not cover all nickel products, buyers rely on procurement standards rather than carbon-border treatment alone. Battery regulation, sustainability reporting, and customer requirements are used to encourage lower-carbon production. These buyer-driven requirements can apply even when CBAM does not directly cover a specific input.
In this context, buyers may set their own environmental standards as part of sourcing decisions. For Indonesia’s nickel industry, investment in renewable electricity, grid upgrades, and cleaner processing is positioned as a way to improve export competitiveness. International customers place greater weight on emissions performance when selecting suppliers. These changes target emissions from production regardless of whether a particular nickel product falls within CBAM coverage.
Carbon pricing limits and supply-chain dependencies
Indonesia’s nickel expansion highlights that carbon-border measures alone cannot restructure complex global mineral supply chains. Expanding CBAM coverage could narrow differences in treatment between products. However, broader coverage would not by itself create alternative supplies or reduce Europe’s reliance on established producers. The carbon-border approach therefore operates alongside other policy tools.
Europe needs to combine carbon pricing with battery regulation, raw-material partnerships, and supply diversification. Aligning these policies is described as important for securing nickel for industry and the energy transition while reducing emissions from production. The interaction between CBAM scope and downstream requirements shapes how emissions considerations carry through different stages of the supply chain. This includes both covered iron-and-steel products and uncovered refined inputs used in batteries.