Indonesia plans to introduce a tax on nickel exports this year

Indonesia may impose a tax on nickel exports this year, President Joko Widodo said, as the largest producer of the metal for electric vehicle batteries plans to do more recycling.

The President confirmed that Southeast Asia’s largest economy is considering imposing an export tax. This comes after an announcement earlier in the year that the country is exploring the possibility of introducing a progressive tax on nickel pig iron and ferronickel.

The growing production of electric vehicles has sparked a surge in demand for battery metals, including nickel, lithium, and cobalt. While Indonesia has benefited from rising prices for nickel, which is also used to make stainless steel, the president plans to move the country up the electric vehicle supply chain. Ultimately, the president wants to stop all raw material exports.

Nickel refining could create up to $35 billion in added value, but in the short term the tax could limit foreign sales revenues and global prices are likely to rise as well.

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Nickel is one of Indonesia’s main export destinations, along with coal and palm oil. Earlier this year, the country rocked markets by banning palm oil supplies to curb inflation. This temporary ban, taken at a time when countries are grappling with rising food prices, has raised concerns that food inflation will worsen.

The government later reversed course when stocks recovered, imposing a domestic market obligation to sell some palm oil locally. Jokowi also said that the DMO would be canceled if the market was stable, but the national interest took precedence.

The President also said that Indonesia would introduce a carbon tax before the end of the year, which would be the first step toward carbon neutrality.

Indonesia will be the first developing country in Asia to introduce an emissions tax, which will initially be set at Rs 30,000 ($2.01) per tonne of CO2 equivalent for coal-fired power plants.