Indonesia's pathway to net-zero emissions faces a significant hurdle: making carbon capture and storage economically attractive for existing coal plants. A new financial analysis of the 2,000 MW Jawa 9 & 10 facility in Suralaya examines whether CCS can pencil out in the Indonesian context.
Researchers modeled four CCS deployment scenarios over 30 years, varying transportation methods (pipeline versus shipping) and carbon revenue sources (domestic versus international carbon markets). The results paint a sobering picture for domestic solutions. Under Indonesia's current carbon pricing framework, the benefit-cost ratio ranges from 0.5 to 0.6—meaning costs exceed benefits by 40–50%. This makes domestic-only CCS uneconomical.
However, international carbon credit markets tell a different story. When revenues come from high-value international mechanisms, the benefit-cost ratio climbs to 1.1–1.2, crossing the financial viability threshold. Pipeline transport consistently beats shipping on economics, reducing ongoing operational expenses.
Sensitivity testing reveals sharp economic dependencies. A one percentage point rise in carbon prices boosts project returns by just 0.3–0.5%, indicating limited price elasticity. Conversely, discount rate assumptions dramatically matter: each one percentage point increase in the discount rate cuts the benefit-cost ratio by 3.8–4.3%. This underscores how financing costs and investment risk profiles heavily influence CCS feasibility.
The study's policy implications are clear. Indonesia cannot rely on domestic carbon pricing alone to drive large-scale CCS deployment. Instead, a multi-pronged strategy is needed: strengthening participation in international carbon markets, accessing concessional climate finance at below-market rates, structuring public-private partnerships to share CCS investment risks, and potentially coupling CCS investments with energy transition support.
These findings extend beyond Indonesia. They demonstrate how developing economies face distinct financing barriers when deploying mature climate technologies and underscore the need for tailored policy frameworks that blend domestic ambition with global climate finance mechanisms.
