The document outlines the OECD framework for facilitating the net-zero transition of the steel sector in Indonesia, addressing key challenges such as financing, technology transfer, and policymaking. It emphasizes the need for tailored solutions, stakeholder engagement, and the development of bankable projects to support Indonesia's emission reduction targets. The framework aims to align with national development plans and establish market conditions conducive to low-carbon transitions over an implementation period of 12-18 months.

1. FRAMEWORK FOR INDUSTRY’S
NET-ZERO TRANSITION
1
26 October 2022
Joseph Cordonnier
Industry Programme Analyst
Hakimul Batih
Local co-ordinator
Deger Saygin
Industry Programme Lead
Developing financing solutions in emerging and developing
economies

2. • Introduce the OECD “Framework for industry’s net-zero
transition”
• Identify and discuss the key challenges for the decarbonisation
of the steel sector in Indonesia
• Discuss potential Focus Areas for the Framework implementation
2
Objectives of the Kick-Off Meeting

3. Solutions for a net-zero transition requires
understanding of industry / country considerations
Technology
transfer & R&D
Carbon
Markets
Asset
stranding
High costs of
transition &
competitiveness
A flexible approach is
needed to develop
tailored solutions that
encompass many
considerations for
emerging and developing
economies
• Improving enabling market
conditions (policies,
regulations, etc.)
• Financing instruments
Strategic alignment with national
plans and policies, such as:
• The National Medium-Term
Development Plan (RPJMN) 2020-2024.
• The 2022 enhanced Nationally
Determined Contribution.
• The Net Zero Emission 2060 analysis
prepared by the Ministry of Energy and
Mineral Resources.

4. Min. of Industry
Min. of Finance
Min. of Energy
Min. of Environment
Min. of Planning
Other government
Financial regulator
Textile
…
MSMEs
Clusters
Iron / steel
…
Heavy
industry
Supply
chains
R&D
Tech.
transfer
Assets
Key stakeholders and Framework’s 3 Pillars
Develop financing
solutions for a
pipeline of bankable
projects
Solutions to improve
the enabling market
conditions
Support international
dialogue by sharing of
best practices
Understanding benefits &
risks of industry’s low-
carbon transition
2. Implementation Outcomes 3. Framework benefits
1. Focus Area
Finance
institutions
Policy
makers
Energy system
and
infrastructures
Regulation, target setting
Implementation, reporting
Industry

5. The Framework is a step-by-step guide
on how to approach industry transition
Deliverables
Activities
Step 1
Stakeholder Engagement
and Focus Area
Step 2
Background Research
Step 3
Business Cases and
Pipeline of Projects
Step 4
Market and Financing
Solutions
Step 5
Disseminate Framework
outcomes
Pillar 1
Focus Area
Pillar 2
Implementation Outcomes
Pillar 3
Framework Benefits
Report:
Country status
and Focus Area
Slide deck:
pathway,
projects,
business cases
Market &
Financing
solutions
Policy
brief(s)
Use cases
Bilateral meetings
Workshops
Desktop Research
Workshops
In-house
analysis
Plenary
session
Workshops
Consultations
Plenary
session
Meetings and
conferences
Website
communication
Envisaged Framework implementation period: 12-18 months
JULY 2023 NOV. 2023 JANUARY-JUNE 2023 MARCH - DECEMBER 2024 THROUGHOUT 2024/2025

6. 20-30 members representing
• Policy Makers
• Industry actors
• Financial institutions
• Think tanks, academics,
international organisations…
Pillar 1: Stakeholder Engagement
Project Steering Committee (PSC)
Chair: Kemenperin / Secretariat: OECD
Governance, Coordination, Decision-Making.
Technical Advisory Committee (TAC)
Support and review analyses;
Provide insights throughout the Framework
implementation;
Participate in ad hoc meetings.
Extended stakeholder list
Share insights during bilateral consultation calls;
Participate in workshops and dissemination events
Private banks, other steelmakers, international
development finance institutions, international
organisations, academics…

7. 7
Overview of Pillar 1: Focus Area
Steps 1 and 2
Engage with the OECD CEFIM programme
counterpart
Identify and understand the stakeholder groups’
priorities
Agree on the Focus Area
1.1
1.2
1.3
Set up a Steering Committee and
prepare Terms of Reference and work plan
1.4
2.3
2.2
2.1
Desktop research on current status of
technology, policy and financing
Regulatory, policy, financial and business status
Inform Step 1 to confirm the Focus Area

8. 8
Pillar 1: Focus Area will focus on critical steps of the
value chain in Indonesia
Source: SBTi (2022)
> Select ~3-5 key technologies or projects (existing and/or new assets)
consistent with net-zero pathways and Indonesia’s priorities, for which
the OECD will carry out an assessment of their business cases.

9. 9
Overview of Pillar 2: Implementation Outcomes
Step 3: Business Cases and Pipeline of Projects
Evaluate business cases and identify
a pipeline of projects and financing needs
Assess investment needs
Choose a net zero pathway for the Focus Area
Choose a Current Policies scenario as a reference
3.1
3.2
3.3 3.4
Technology solutions
to close the transition gap:
• Energy efficiency
• Direct use of renewables
• Switching to low-carbon fuels
and feedstocks
• Circular economy
• CCUS
Investment needs for the technology
solutions
Based on quantification of technology
solutions (how many tons of low-carbon
fuels, % of recycling, ...)
2020 2050
2030 2040
Emissions of
Focus Area
[Mt CO2/yr]
Current policies
scenario
Net-zero
transition pathway
Choice of scenario/pathway
based on existing analyses for the
Focus area
Business Cases and pipeline of
projects
Based on a subset of technology
solutions consistent with the net-
zero transition pathway
Selection of relevant technologies
and projects:
• Technical parameters
• Economic parameters (CAPEX,
market prices, …)
• Selection of indicators and
metrics (Internal Rate of Return,
public money spend…)

10. 10
Overview of Pillar 2: Implementation Outcomes
Step 4: Market and financing solutions
4.1
4.3
4.4
4.5
Agree on a monitoring and evaluation
mechanism
Identify financing gaps in the available financing
instruments
Match low-carbon projects and financing
solutions
Establish the financing and market barriers
Develop market enabling solutions
4.2 Develop financing solutions
Analysis of gaps and barriers
Based on extended desktop research and
work with stakeholders, supported by
output of business cases in Step 3
Internal Rate of Return
[ % ]
Low-carbon Conventional
Development of solutions
Based on policy toolboxes and
workshops with stakeholder groups;
covering the capital and the operation
and maintenance costs
Internal Rate of Return
[ % ]
Low-carbon Conventional
Matching of solutions with projects
Based on quantitative KPIs (required
financing, CO2 improvement, ...)
Definition of country-level mechanisms
for monitoring and evaluation
Policy maker Industry
Finance institutions

11. 11
Output summary
Pillar Step Item Name of the Output Intermediate
Output
Final Output Timelines
Iron and Steel Textile
Pillar
1
Focus
Area
1
1.A Report: summary of stakeholder priorities x N/A N/A
1.B
Country stakeholder meeting summary
Kick-off meeting (steel sector)
x
December 2022
October 2023
1.C Governance structure x November 2023
2
2.A Slide deck: Country status and identification Focus Area x September 2023
2.B Excel dataset x September 2023
Pillar
2
Implementation
Outcomes
3 3.A Slide deck: Focus Area pathways, projects, business cases x March 2024 June 2024
4
4.A Slide deck: Barriers and market & financing solutions x July 2024
September
2024
4.B Report: Guide for the next steps x December 2024
4.C Report: Policy briefs x
On demand – December
2024 or first half of 2025
Pillar
3
Framew
ork
Benefits
5 5.A Series of dissemination events x Throughout 2024/2025

12. SESSION 1: KEY CHALLENGES
FOR THE DECARBONISATION
OF THE STEEL SECTOR IN
INDONESIA
12
6 November 2023

13. 13
Discussion points
• Do forecasts at company and country level provide a clear view of the future
pathways for steel production, demand and carbon emissions?
• Are the technologies to reduce emissions in the short and long-term well identified?
What are the key challenges for their implementation?
• Do the existing policies and regulations provide sufficient support for decarbonising
iron and steelmaking assets?
• Do current decarbonisation projects in the steel sector manage to attract financing?
Is there sufficient financial support to create a level-playing field for decarbonisation
technologies?

14. SESSION 2: DISCUSSION ON
THE FOCUS AREA FOR THE
FRAMEWORK
14
6 November 2023

15. 15
Discussion points
• Which processes should the Framework focus on: Blast Furnaces, Direct Reduction
Plants, Electric Arc Furnaces, rolling mills? Could it also address other parts of the
value chain, such as mining processes or sourcing of scrap and alternative
fuels/reductants?
• Should the Framework address both the improvement of existing assets and the
development of new capacities?
• Which projects and low-carbon technologies currently struggle the most to reach
economic viability and/or attract investment?
• Are there examples of decarbonisation projects that could benefit from the outputs
that will be developed in the Framework?

16. 16
Please visit our webpage:
www.oecd.org/cefim/
For more information, please contact:
Joseph Cordonnier
Joseph.CORDONNIER@oecd.org
Hakimul Batih
hakimul.BATIH@oecd.org
Deger Saygin
Deger.SAYGIN@oecd.org

17. FRAMEWORK FOR INDUSTRY’S
NET-ZERO TRANSITION
17
26 October 2022
Deger Saygin
Industry Programme Lead
Joseph Cordonnier
Industry Programme Analyst
Developing financing solutions in emerging and developing
economies

18. • In 2022 the Government of Indonesia pledged to reduce emissions from 2020-2030 by 31.89%
(unconditionally) up to 43.20% (conditionally) against the 2030 business as usual (BAU) scenario.
• 6 strategic steps identified in MEMR's Roadmap for NZE 2060 for the industry sector:
18
Introduction
Nationally Determined Contribution & Net-zero Emission
Fuel switch
Energy
efficiency
Electrification in
industry
Hydrogen Biomass
Carbon Capture
and Storage
(CCS)
• Electricity share
increase from
24% in 2020 to
51% in 2060
• Reduce coal
share from 33%
in 2020 to 7% in
2060
• Reduce natural
gas share from
27% in 2020 to
15% in 2060
• Reduce
specific energy
consumption of
equipment by
50-60% by
2060
• For low
temperature
processes (e.g.,
food &
beverage,
textile,
electronic
devices),
assuming 55%
electrification
in 2060
• Replace fossil
natural gas by
green
hydrogen in
high-
temperature
processes from
2036
• Replace fossil
fuels with
biomass in
high-
temperature
processes,
especially in
the cement
industry
• Use CCS in the
cement and steel
sectors starting
from 2036
• Potential to
reduce 13 million
tons CO2
emissions from
the use of coal
and gas in these
sectors..

19. 19
Introduction
Energy mix outlook for industry in Indonesia
➢ September 2022: Energy Sector Roadmap to
net zero emissions by 2060 in Indonesia by
Ministry of Energy and Mineral Resources
(MEMR) and the International Energy Agency
(IEA)
➢ Based on the IEA’s Announced Pledges
Scenario (APS), with net zero emissions in
Indonesia by 2060
➢ Accelerated scenario: Net Zero Emissions by
2050 (NZE)
➢ Decarbonisation solutions vary for each
industry subsector
Source: IEA, 2022

20. Breakdown by industry sub-sectors [%] (2016)
20
Contribution to Gross Domestic Product
Manufacturing industry: 20% of Indonesia’s GDP in 2020
Food and beverages,
32.8%
Tobacco products , 5.2%
Textile and apparel,
6.4%
Paper and paper
products, 4.0%
Chemical and pharmacy,
9.9%
Rubber and plastics, 3.5%
Non-metallic
mineral, 3.9%
Basic metal, 4.0%
Fabricated
metal, 10.7%
Transport equipment,
10.5%
Furniture, 1.4%
Wood products, 3.6%
Machinery and
equipment, 1.8%
Source: UNDP, 2018

21. 21
CO2 emissions breakdown by industry subsectors
284 Mt CO2e in 2019
Contributions of subsectors of the manufacturing industry to the GHG emissions, 2019
b) Industrial Process and Product Use: 58 Mt CO2-eq/yr
Source: Government of Indonesia, 2021
Iron and
Steel, 18.4%
Chemical,
7.7%
Pulp, Paper,
and Print,
9.5%
Food
Processing,
Beverages,
and Tobacco,
10.4%
Non-
Metallic
Mineral
Industry,
14.9%
Non-specified
Industry,
39.0%
Cement
production,
51.8%
Ammonia
production,
16.7%
Iron & Steel
production,
11.9%
Paraffin
wax use,
6.7%
Others,
12.9%
a) Energy-related emissions: 136 Mt CO2-eq/yr
c) 30% of electricity generation: 90 Mt CO2-eq/yr
e

22. 22
Physical output and production volumes
Iron and Steel
Source: SEAISI, 2022
Crude steel capacity, production and consumption
volumes, 2010-2020
0
5
10
15
20
25
30
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Mt/yr
Long+Flat Steel Capacity Long+Flat Steel Production
Long+Flat Steel Consumption
Steel investments projects in ASEAN
Overcapacity
Highest number of new plants
projects in ASEAN, with numerous
stainless steel investments

23. 23
Scenario analysis
Industry sector energy use and CO2 emissions
➢ CO2 emissions reach a peak around 2030 in a net-zero scenario. The majority of CO2 emissions are energy-related
in the next decades.
➢ As renewable electricity develops in a net-zero scenario, the relative share of industry emissions increases.
CO2 emissions by sector in a net-zero emission pathway
Source: MEMR's Roadmap for NZE 2060 (modeling result)
-600
-400
-200
0
200
400
600
800
1000
1200
1400
1600
2010 2020 2030 2040 2050 2060
Electricity Industry Transportation
Buildings Total Energy
Energy-related CO2 emissions breakdown
-600
-400
-200
0
200
400
600
800
1000
1200
1400
1600
2010 2020 2030 2040 2050 2060
Mt CO2-eq /
yr
Waste Industrial Processes and Product Use
Agriculture Energy
Food and Land Use Net emissions

24. Iron and
steel
Chemical
and
petrochemi
cal
Non-ferrous
metals
Non-
metallic
minerals
Food and
tobacco
Paper, pulp
and printing
Textile and
leather
-5
0
24
Strategic matrices of sectors
Strategic matrix – Economic and social criteria
Bubble size:
% of fossil fuels
in subsector
energy
consumption
Iron and steel
Chemical and
petrochemica
l
Non-ferrous
metals
Non-metallic
minerals
Food and
tobacco
Paper, pulp
and printing
Wood and
wood
products
Textile and
leather
2
20
30000 600000
Strategic matrix – Environment criteria
GDP
Contribution
(%
of
GDP)
Number of employees High
Low
Low
High
Bubble size
Trade balance
(USD)
Blue: Positive
Orange: Negative
High
Low
Low
High
Energy use
(Mtoe)
GHG
emissions
(Mt
CO
2
)
Caveat: all bubbles have the same size, because in the OECD/IEA
data, the share of fossil fuels is 100% for every industry sector