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Indonesia has grown to become the world’s largest exporter of steam coal. Its production has increased from 77 million tons in 2000 to 353 million tons in 2011. The Indonesian part of Borneo Island (Kalimantan) has become the main coal producing center in the country. Between 2000 and 2011, coal mining concessions in Kalimantan expanded from 1.5 million ha to about 13 million hectares. So far, the extent of forest loss because of coal mining has been limited and is much lower than that caused by oil palm. However, this is largely because small scale mining concessions, which form the majority of the mining concession area allocated, are yet to be activated. Because the legal framework encourages expansion and growth in coal production, the pressure on forest may increase if small mining concessions become fully operational. This may happen if the demand for coal in China and India, currently the main driving force behind the growth of coal mining in Indonesia, expands as predicted. Domestically, the privileged treatment of the coal mining sector as a strategic part of Indonesia’s long term development plan is a potential threat to forests as well. New policies limiting the intensity of coal mining, seeking to add value, and limit environmental damage are needed to guard against long term environmental and social damage.