Banks can’t fund Adaro’s smelter without funding coal. 

Adaro, the second largest coal miner in Indonesia, is trying to build an aluminium smelter which would be powered by new coal-fired power plants in North Kalimantan, a province of Indonesia on the island of Borneo. Companies and banks need to steer clear of this project to avoid violating their own coal restriction commitments.

Background on the project

Adaro plans to build an aluminium smelter powered by coal power and hydroelectric capacity. This smelter project will be developed in three phases with the first two phases including the construction of new coal power capacity. The first phase is estimated to be commercially operational by early 2025. 

Adaro is betting on the failure of climate goals.

The International Energy Agency has made it clear that there can be no new coal-fired power plants if the world is to limit temperature increases to 1.5°C and align with net zero by 2050.

The scale of new coal power capacity required for the planned smelter is staggering. At full capacity, the smelter would produce 1.5 million tonnes of aluminium per annum and at least two-thirds of its power needs would be met by burning coal. This would require building the equivalent of two large-scale coal power plants.

Powered by a new coal power plant, the first phase of the aluminium smelter will emit 5.2 MtCO2-e per annum [1], while it is clear from the expert advice that we can’t afford to build any more CO2 emitting infrastructure if we want to have any hope of meeting the global goals of the Paris Agreement.

Hyundai shouldn’t be buying dirty aluminium

Hyundai Motor Company signed an MoU to purchase aluminium from Adaro at an early production stage, claiming that the aluminium would be classified as low-carbon aluminium because it is powered using hydroelectric power generation.

However, Hyundai’s MoU fails to mention that hydroelectric power will only meet the smelter’s power needs at a later stage, with the early stage reliant on burning coal. Adaro confirmed publicly that the early stage of the smelter will be powered using coal capacity.

Buying dirty Aluminium to produce supposedly “green” electric vehicles is not a good look for Hyundai. The new coal power capacity needed for the smelter will create massive pollution that would contravene with Hyundai’s Carbon Neutrality Principles.

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