Should Tesla Invest In Indonesia’s Nickel Mines & Build A New Gigafactory There?

Dozens of non-governmental organizations (NGOs) have appealed to Tesla to terminate their anticipated investment in Indonesia’s nickel industry due to “potentially devastating impacts on the environment and the lives of Indonesian people.”

A letter addressed to CEO Elon Musk expressed concerns that a recent meeting he conducted with Indonesian delegates at the Austin Gigafactory was part of a larger effort in the development of a Tesla nickel factory — a new Gigafactory — in Indonesia.

Indonesia has the world’s biggest nickel reserves. Nickel is an essential raw material of the Tesla cell battery.

The NGOs said in the multiple signatory letter that a slew of impacts from the nickel industry and its supply chain would occur if Tesla moved ahead with its nickel plant plans:

  • systemic, large-scale environmental damage;
  • criminalization threats against indigenous communities and the environmental defenders protecting their lands from nickel mines;
  • harmful impacts on vulnerable groups such as women; and,
  • violations of law that are perpetrated by the upstream and downstream actors of the nickel industry.

Nickel is mined mostly in Russia, Canada, New Caledonia, and Indonesia, with the growth in electric vehicles (EVs) adding a new source of demand for the metal.

The Indonesian Forum for Environment, WALHI, is the largest and oldest environmental organization in Indonesia. Alongside members of US civil society organizations and other NGOs, the organization revealed that Indonesia’s Coordinating Ministry of Maritime and Investment Affairs conducted a meeting with Musk in April and with President Joko Widodo in May.

A Plea to Tesla to Halt Nickel Mining Investment

In the letter to Tesla, the NGOs acknowledge that Tesla has invested heavily in its nickel supply chain and battery research. Noting that Tesla considers nickel acquisition part of its “green investment,” the signatories also make transparent that the nickel industry in Indonesia is anything but green.

Indonesian mining, on the contrary, has a record of environmental damage, protester imprisonment that abuses democracy and equity, threats to the vulnerable groups, and multiple violations of law.

In the spirit of encouraging improvements to environmental, social, and human rights protections in Indonesia, the NGOs have urged Elon Musk and shareholders of Tesla, Inc. to consider the following recommendations:

  1. Terminate any potential direct investment plan in the nickel industry in Indonesia because the ongoing practices from the nickel industry reveal potential widespread damage to both the environment and communities in Indonesia.
  2. Prohibit nickel sourced and produced in Indonesia in every business line of Tesla, Inc. to prevent perpetuating the widespread damage to both the environment and communities in Indonesia.
  3. Ensure the business lines of Tesla Inc. comply with fundamental principles of business implementation and human rights as provided by the United Nations to prevent the violation of human rights perpetrated in noncomplying business operations.

Digging Down on Mining Processes

Mining operations have caused various damages — from micro-scale (such as reducing soil fertility), to large-scale loss of primary forest, to triggering climate change. It is unclear how Tesla would influence nickel mining procedures were the company to move forward with an Indonesia gigafactory. (It should be noted that Tesla is also working to limit its need for nickel.

In 2020, Musk urged the mining industry to produce more nickel “in an environmentally sensitive way” and derided US nickel production as “objectively very lame.”

“I’d just like to re-emphasize, any mining companies out there, please mine more nickel,” Musk said during a quarterly conference call. “Wherever you are in the world, please mine more nickel and … go for efficiency, obviously environmentally-friendly nickel mining at high volume. Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way.”

Those comments came at a time in which a network of independent experts, activists, leaders, and organizations of Russian indigenous peoples called on Tesla and Musk to boycott a Russian mining company until it met specific ecologically-sound conditions. Nornickel was recognized as an international leader in nickel production but is “also a global leader in environmental pollution.”

Mineral extraction results in environmental damage, especially with regard to soil, hydrology, and vegetation loss. Mining operations can harm the natural ecosystem, particularly through the use of heavy equipment, the dumping of rock waste and tailings, the construction of several large acidic and toxic holes, and the reduction of surface water outflow.

Mining in the South Sulawesi province demonstrates how nickel mining leads to serious environmental damages. For instance, approximately 4,449.2 hectares (10,994 acres) rainforest area was destroyed due to pollution — waste tailings caused the exposure of mining mud in Mahalona Lake, silting the river estuary, and polluting the water with mud from Pongkeru and Malili River to Lampia Beach.

Similar issues have also occurred in Bungku Beach in Central Sulawesi in which tailings waste increased silt in nearby rivers and beaches, which inhibits the ability of local and indigenous peoples to engage in their traditional livelihood of fishing.

Fears of Indonesian Deforestation & Its Consequences

Environmental damage results from the total area of the forest converted to nickel mining, causing increased deforestation and the threats of polluted water in the river, lake, and beach, which are essential to the livelihood of the indigenous and local community. Nickel mining has subsumed the forest area in Indonesia, adding to the devastation from coal and gold mining.

Approximately 673,246 hectares (1,663,628 acres) of forest area in Indonesia have been granted to nickel mining corporations that will potentially lead to deforestation. Deforestation and forest degradation are prominent indicators of the loss of natural resources which cause a decline in the quality of human life and climate changes.

In 2019, forest destruction due to mining activities caused catastrophic floods in Southeast Sulawesi. Forests were damaged due to land conversion to plantations and mining.

Environmental Devastation across Regions & Peoples

Indonesian law prohibits mines from being located on small islands, as stated in Law 2 of 2007 letter K Article 35 in conjunction with Law 1 of 2004. The law seeks to forbid mineral mining in regions if the mining technically, ecologically, socially, and/or culturally creates environmental damage, environmental pollution, or harm the surrounding community.

The nickel industry has largely failed to comply with this Indonesian law, and nickel mines in Indonesia often operate on small islands which are vulnerable to irreparable damage.

As a result of mining pollution, Kawasi Village, one of the oldest villages on Obi Island, no longer has a water spring due to the expansion of the mine. Toduku River, located beyond the community’s residence and often utilized for basic living activities such as drinking, bathing, washing, and playing, is now filled with nickel ore waste sediment. The community of Kawasi Village has to resort to consuming bottled water.


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