Ditulis oleh: Siska Damayanty
Artikel diambil dari 10 tulisan terbaik dalam kegiatan Nagantara Essay Competition 2025 kategori Mahasiswa

 

The global energy transition has positioned electric vehicles (EVs) as a symbol of  a major shift in modern industrial civilization (IEA, 2022). For many countries, especially  in Europe, electric vehicles are not only a means of transportation but also a tangible  representation of their commitment to decarbonization. In this new ecosystem, electric  vehicle batteries have emerged as the heart that determines both the competitiveness and  sustainability of the supply chain. Batteries are not merely technical components but also  a benchmark for whether a country is ready to face increasingly stringent global  regulatory pressures. 

China is at the forefront as the world’s largest producer of batteries. The country  controls the supply chain from upstream to downstream, from mining, raw material  processing, precursor production, to battery cell assembly (Zhao & Luethje, 2025). On  the other hand, Indonesia occupies a vital position as the world’s largest supplier of nickel,  the metal that is the main material for lithium-ion battery cathodes. The relationship  between the two countries in the electric vehicle battery sector is one of the most strategic  collaborations in Asia, and even the world.  

China currently controls more than 70% of global EV battery production capacity  (Barizi & Triarda, 2023). Major companies, such as CATL and BYD, have become  dominant players supplying various global automotive brands. China’s advantage lies in  its supply chain integration: from lithium mining overseas, nickel and cobalt processing,  to mass battery production. 

Indonesia, on the other hand, has approximately 21 million tons of nickel reserves,  the largest in the world. The government’s downstreaming policy, including a ban on  nickel ore exports since 2020, aims to attract foreign investment to build a domestic  battery processing and manufacturing industry (Hikam, 2025). China is the main investor,  with billions of dollars committed to building smelters, precursor factories, and an electric  vehicle ecosystem in industrial areas such as Morowali and Weda Bay. 

This cooperation creates significant economic opportunities, including job  creation, increased foreign exchange earnings, and strengthening Indonesia’s position in 

the global supply chain. However, behind these opportunities lie serious challenges  related to sustainability. This cooperation is not only about economic aspects. In an  evolving global regulatory landscape, particularly one led by the European Union,  sustainability has become a determining factor. Investments that fail to meet  environmental, social, and governance (ESG) standards will face serious obstacles in  international markets. Therefore, the legal challenges of sustainability in EV battery  investments between China and Indonesia are becoming increasingly urgent to address. 

International Regulatory Pressure 

Investments in the battery sector today cannot be judged solely by production  capacity or financial returns. Global market access increasingly hinges on adherence to  international sustainability standards (Su et al., 2025). The European Union, in particular,  has positioned itself as a key driver of these standards through a range of legal  instruments. While these regulations pose real challenges for both Indonesia and China,  they also present a strategic opportunity: aligning with them can serve as a shared benchmark for responsible growth and competitive advantage. 

China’s investments in Indonesia’s EV battery sector have reached billions of  dollars, with major projects concentrated in Sulawesi and North Maluku. Industrial hubs  such as Morowali Industrial Park and Weda Bay Industrial Park have become centers for  integrated nickel production, supplying raw materials to global battery markets. Yet the  sector faces critical obstacles, notably its heavy reliance on coal energy. Most smelters  operate on coal-fired power, which significantly increases the carbon footprint of  Indonesia’s nickel products. If these energy practices continue, batteries produced  through Indonesia-China collaboration could struggle to enter markets that increasingly  value sustainability, such as the European Union and the United States. Addressing these  challenges proactively is not just an environmental imperative but also essential for  securing a foothold in the global green economy. 

1. EU Battery Regulation 2023/1542 

The EU Battery Regulation 2023/1542 requires that every battery sold in Europe carry  a digital passport. This passport documents the carbon footprint, the origin of raw 

materials, and compliance with sustainability standards throughout the supply chain.  As a result, batteries produced using environmentally harmful or socially  irresponsible practices can no longer access the European market. The regulation  compels manufacturers to ensure transparency and accountability at every stage, from  raw material extraction to final production, reinforcing sustainable practices across  the global battery industry. 

2. Carbon Border Adjustment Mechanism (CBAM) 

The Carbon Border Adjustment Mechanism (CBAM), set to take full effect in 2026,  imposes additional tariffs on products with high carbon footprints (Chu et al., 2023).  Batteries or components produced using coal energy may face significant extra costs  when entering the European market. CBAM is designed to incentivize global  manufacturers to adopt clean energy and reduce carbon emissions, promoting  transparency by basing tariffs on verifiable emissions data. Companies that fail to  provide accurate reporting risk penalties and export restrictions. This creates a strong  economic incentive to improve production efficiency and transition to renewable  energy. Moreover, CBAM encourages international collaboration in lowering the  carbon footprint of the battery sector, fostering a global shift toward greener industrial  practices. 

3. Corporate Sustainability Due Diligence Directive (CSDDD) 

The Corporate Sustainability Due Diligence Directive (CSDDD) requires companies  operating globally to conduct thorough audits of their supply chains, considering both  social and environmental impacts. Automotive firms sourcing batteries from China or  Indonesia must ensure that their suppliers adhere to strict sustainability principles.  Beyond compliance, the directive promotes circular economy practices, including  battery recycling and sustainable waste management. By encouraging companies to  take responsibility for the full lifecycle of their products, CSDDD strengthens the  integration of environmental stewardship and social responsibility into corporate  operations. 

 

Legal Risks and Challenges 

The sustainability of EV battery investments between China and Indonesia faces several  legal challenges, which can be grouped into three main areas: 

1. Environmental Regulations 

Indonesia has established an environmental legal framework, ranging from the  Environmental Protection and Management Law to specific regulations addressing  mining tailings. However, enforcement of these laws remains inconsistent. China,  guided by its concept of Ecological Civilization, promotes green policies at the  national level (Xie, 2019). Yet, when Chinese investments extend abroad, adherence  to these green standards is not always guaranteed. In the context of bilateral  cooperation, no unified legal instruments are harmonize environmental standards  between the two countries. This gap creates a risk of non-compliance, potentially  affecting the reputation of products in global markets, especially in regions where  environmentally responsible practices are strictly enforced. 

2. Supply Chain Traceability 

Global regulations increasingly require full traceability. Every kilogram of nickel,  every ton of precursor, and every battery cell must have a verifiable digital record.  The European Union is preparing a Battery Passport to provide consumers with  transparent information about material origins, carbon footprint, and waste  management (Kwak & Kang, 2025). In the current Indonesia-China collaboration,  such a traceability system is not yet in place. Products that cannot demonstrate full  traceability risk being rejected by international markets, particularly the rapidly  expanding green market. This creates both financial and reputational risks for  investors and manufacturers while intensifying the urgency to develop a traceability  system that meets global standards. 

3. Limited Recycling Capacity 

Indonesia currently lacks facilities for lithium-ion battery recycling, representing a  critical gap in the sustainability chain (Rachmadhani & Priyono, 2024). Government  efforts to boost electric vehicle production have focused primarily on building the 

battery manufacturing ecosystem, as seen with the Hyundai-LG factory in Karawang  and Wuling in Cikarang (Ussainar et al., 2025). The absence of recycling capacity not  only presents environmental risks due to accumulating battery waste but also  economic and regulatory risks. International markets, particularly in the European  Union and the United States, increasingly demand products that are environmentally  responsible throughout their lifecycle, including post-use recycling. Without proper  recycling infrastructure, the Indonesia-China battery collaboration risks losing access  to markets that prioritize circular economy principles and long-term sustainability. 

 

Potential and Direction of Solutions 

Indonesia and China have the opportunity to capitalize on this momentum by  designing a joint legal protocol that can strengthen environmental compliance, supply  chain transparency, and sustainability-based dispute resolution mechanisms. This legal  framework will serve as a foundation that enables investment between the two countries  to develop efficiently, transparently, and in line with sustainability principles. 

First, the establishment of bilateral environmental standards is a key step in  ensuring that every battery investment complies with minimum standards for safe and  responsible environmental practices. These standards cover all stages of the battery  industry value chain, from nickel mining and refining to battery production and recycling  (Global Green Growth Institute, 2024). The implementation of bilateral environmental  standards enables the integration of environmentally friendly practices with national legal  procedures and supports regulatory harmonization between Indonesia and China.  Furthermore, these standards open opportunities for clean technology transfer from  China, enhance the value of Indonesia’s natural resources, and mitigate the risk of legal  disputes related to environmental impacts arising from industrial activities. Thus, a  comprehensive legal framework will place sustainability as a key element in investment  planning and oversight. 

Second, the implementation of clear legal regulations related to EV battery  management is the basis for sustainable industrial development in Indonesia. Chinese  battery factory projects in Indonesia, such as Hyundai-LG and Wuling, focus on the  production of lithium-ion batteries. Strict regulations enable used batteries to be collected, 

sorted, and processed for safe recycling. With legal certainty, Chinese investors can  transfer battery waste processing technology to Indonesia. This enhances local capacity  while strengthening domestic and international supply chains. The integration of this  system also promotes transparency and compliance with applicable environmental  standards. Battery management policies support the creation of additional economic value  through recycling and the creation of new jobs. The synergy between regulations, Chinese  investment, and recycling technology strengthens Indonesia’s position in the global EV  supply chain. This step opens opportunities for Indonesia to build a complete battery  industry ecosystem, from production to the reuse of critical materials (Habiburrahman,  2025). 

Third, the development of a shared digital traceability system that can strengthen  accountability and transparency throughout the battery supply chain. This digital platform  can utilize blockchain, the Internet of Things (IoT), and electronic certification systems  to ensure that every stage of production is recorded in real time and can be audited. Digital  traceability not only strengthens compliance with environmental and social standards but  also supports law enforcement by providing legally valid verification evidence in the  event of violations. The implementation of this system aligns with the principles of the  European Union’s Battery Passport and creates a framework that enables both countries  to systematically assess and mitigate environmental and social risks while enhancing  investor and consumer confidence. 

For China, legal certainty will enhance investment security while facilitating  access to European and American markets. For Indonesia, standard certainty will impact  local labor absorption, technological capacity enhancement, and environmental  protection. From a global perspective, both countries can position themselves as pioneers  of a competitive green supply chain. 

 

Conclusion 

The energy transition requires more than just large-scale battery production.  Sustainability has become key to legitimacy and competitiveness in the international  market. Indonesia and China, as two major players in the EV battery supply chain, face  serious challenges related to environmental regulations, supply chain traceability, and 

battery recycling limitations. However, behind these challenges lie strategic opportunities  to establish a bilateral legal framework that can ensure sustainability. By establishing this  protocol, Indonesia-China EV battery investment cooperation can position both countries  at the forefront of sustainable industrial civilization.

 

References 

• Barizi, M. H., & Triarda, R. (2023). Rantai Pasokan Global Dan Nasionalisme Sumber Daya  Alam: Kajian Terkait Hilirisasi Nikel di Indonesia. Indonesian Journal of International  Relations, 7(2), 312-338. 
• China-Indonesia BIT. (1994, November 10). Agreement between the Government of the  Republic of Indonesia and the Government of the People’s Republic of China on the  Promotion and Protection of Investments. ArbitrationLaw.com  
• Chu, H. L., Do, T. N., & et al. (2023). Carbon Border Adjustment Mechanism Impact  Assessment Report for Vietnam. Prepared for the Energy Transition Partnership for  Southeast Asia (ETP), Hanoi, Vietnam. 
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• Rachmadhani, D. R., & Priyono, B. (2024). Techno-Economic Analysis of the Business  Potential of Recycling Lithium-ion Batteries using Hydrometallurgical  Methods. ASEAN Journal for Science and Engineering in Materials, 3(2), 117-132.  https://doi.org/10.58451/ijebss.v2i02.141 
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