In the National Industrial Development Master Plan (RIPIN) 2015 – 2035, the Indonesian government sets a mission to become a strong industrial country. The main policy directions to support this goal include the development of Industrial Zones and Special Economic Zones, as well as overall industrial development. RIPIN targets to increase the number of large and medium industrial companies to 9,000, with half of them outside Java, and 20,000 small industrial companies. To achieve such growth, a sufficient and reliable electricity supply is crucial. There are approximately 32 (thirty-two) Industrial Zones and/or Special Economic Zones (SEZ) being developed by the government based on RIPIN, as stipulated in Government Regulation (PP) No. 14 of 2015.

In addition to the targets in RIPIN, the Indonesian government also has international commitments related to emission reductions as outlined in the Nationally Determined Contribution (NDC) document, which sets Indonesia’s contribution to achieving the Paris Agreement to reduce greenhouse gas (GHG) emissions by 29% below the Business as Usual (BAU) scenario by 2030 with its own efforts and up to 41% with international funding assistance. In this regard, Indonesia has ratified the Paris Agreement through Law No. 16 of 2016 on the Ratification of the Paris Agreement on the United Nations Framework Convention on Climate Change.

The Indonesian government’s efforts to realize this commitment are embodied in the preparation of the Energy Transition roadmap towards Net Zero Emission (NZE) 2060. Considering that the backbone of the national electricity sector is coal-based Steam Power Plants (PLTU), the national energy transition roadmap, and efforts to achieve the NZE 2060 targets in the electricity sector focus on reducing the use of coal-based PLTUs or other fossil fuels. The Energy Transition towards NZE 2060 is not only focused on on-grid power plants (connected to the PLN grid) or isolated PLN-owned power plants but also includes fossil energy power plants owned and operated by business entities/private companies with business permits (captive power).

Implementing decarbonization efforts is an important step to advancing the energy transition and achieving NZE and NDC targets. Decarbonizing the industrial sector with traditional approaches ultimately drives large-scale material and energy consumption that contributes to drastic geological resource depletion, posing environmental threats through carbon dioxide emissions from offstage mining, shipping, refining, and disposal activities. In this context, the traditional linear economy model that applies the “take-make-dispose” method is no longer aligned with sustainable development goals. One of the biggest challenges faced by society is balancing the availability of limited resources and low-carbon development targets with the increasing resource needs for development.

To address this, an alternative economic model called the “Circular Economy” emerges as an ideal solution to approach or even achieve global economic sustainability, where products are designed and managed with consideration of minimization, reuse, recycling, and/or recovery factors. The concept of circular material management with energy-saving and integrated fuel substitution perspectives is gradually becoming a global trend for sustainable development. Therefore, increasing resource efficiency through the Circular Economy approach needs to be adopted by national planners, policymakers, and the industrial sector.

In this regard, Bappenas has adopted the principles of the Circular Economy 9R as a guideline for implementing the Circular Economy approach, especially for the industrial sector. Circular Economy and decarbonization in the industrial sector are closely related concepts, both playing important roles in supporting sustainability and climate change mitigation. The Circular Economy provides a framework to rethink how people produce, consume, and dispose of goods, focusing on waste reduction and maximizing resource efficiency. By integrating circular economy principles with decarbonization efforts, the industrial sector can play a significant role in low-carbon development while driving economic growth and resilience.