East Kalimantan Environmentally Sustainable Development Strategy

74
Exhibit 48
75% of the abatement potentials come from the 3 Kutai districts
Balikpapan
Berau
Bontang
Bulungan
Kutai Barat
Kutai Kartanegara
Kutai Timur
Malinau
Nunukan
Paser
Paser
Penajam
Utara
Samarinda
Tana Tidung
Tarakan
Total
Mining Abatement Potentials by lever
Million ton CO2e 2030
Stopping Enforcing Encouraging Minimizing
illegal
mining
post mining
reclamation
process
efficiency
methane
release
-
0.91
-
0.41
2.37
3.04
2.88
0.05
0.70
0.57
0.26
0.10
0.02
-
11.32
-
0.17
-
0.08
0.46
0.59
0.41
0.01
0.14
0.09
0.05
0.02
0.00
-
2.01
-
0.16
-
0.03
0.19
0.30
1.50
0.00
0.06
0.26
0.02
0.04
0.00
-
2.56
Total
Abatement
Note: The model assumes no new exploration permits would issued beyond year 2008
1 KP = Kuasa Pertambangan (Mining Rights); licenses given to small companies with average size of 1,000 ha
2 PKP2B = Perjanjian Karya Pengusahaan Pertambangan Batubara (Working Contract for Coal Mining); contract between Government of Indonesia and
big mining companies with average size of 30,000 ha
SOURCE: Distamben; Indonesia Abatement Cost Curve; Interviews; Simulation; Team analysis
GDP Potential
Improving the productivity of coal miners could increase the sector’s contribution to
GDP in the order of IDR 10 trillion by 2030. In a business-as-usual scenario, 88 percent of the
new production concession areas would be dominated by small companies. However, most small
companies are far less productive than the big ones due to differences in mining tools, production
equipment, knowhow, and extraction methodology. Currently, the average productivity of small
miners is 59 tons per ha p.a., far lower than the average productivity of the big companies of 144
tons per ha p.a. With over 1,200 small miners, it is difficult to support them all with financing,
technology, and training to increase production. The natural response of the market would be
consolidation of the small miners into larger, more efficient mines and companies; yet, this has
been slow to occur in East Kalimantan. Thus, the best identified option is to improve productivity
by better screening of new miners and issuing production permits only to companies with
sufficient technical capabilities. The provincial mining monitoring team can help districts assess
the technical capabilities of the applicants and any contractors they intend to employ. 20 Based on
those assessments, the mining monitoring team would then recommend to the districts whether to
reject or accept the application.
DRAFT
-
0.29
-
0.05
0.36
0.56
2.80
0.01
0.11
0.49
0.03
0.07
0.00
-
4.77
-
-
-
1.52
0.57
3.39
4.48
7.60
0.07
1.00
1.40
0.37
0.22
0.03
20.66
0 - 1
1 - 2
2+
Other potential initiatives to increase GDP from coal have been rejected as they are too
carbon-intensive. Beyond improving the productivity of coal extraction once a site has already
been deforested, the options for increasing the economic value added from coal require moving
downstream and utilizing the coal itself, which creates more emissions. There is downstream
potential for coal-to-liquid processing to produce diesel, but this produces far more CO2e than
conventional oil refining. The coal could be burned to produce power, potentially for export for
other parts of Kalimantan or Malaysia, or used to power energy-intensive industries such as steel,
aluminum, and cement. Yet, all these options do not move the coal sector to less-carbon intensive
20 The mining contractors will need to be rigorously inspected as well