Analysis of Energy and Raw Materials in EU-Indonesia CEPA

Co-Published: Koalisi Masyarakat Sipil untuk Keadilan Ekonomi (MKE Coalition) and the European Trade Justice Coalition (ETJC)

October 2026
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Key points

• The Trade in Goods chapter restricts Indonesia’s raw materials policy space because it prohibits most measures used to support domestic processing and industrial policy.
• The exceptions for export duties on critical minerals are not significant enough to enable Indonesia to benefit from value addition, as only minerals in the pre-smelting phase are covered. This further locks Indonesia in a raw material export trap.
• Social and environmental due diligence standards referenced in the Trade in Goods and Energy and Raw Materials chapters are weak and offer little legal value.
• CEPA risks prioritising European access to critical raw materials while leaving Indonesia to bear the environmental and social costs.
• Instead of the current agreement, we need a ‘Fair Raw Materials Partnership’.

Context

Indonesia is a major global supplier of critical raw materials, including nickel, bauxite, copper and tin, which are essential for industrial production and the energy transition. At the same time, Indonesia has pursued an ambitious downstreaming strategy aimed at expanding domestic processing capacities, increasing local value addition and reducing its dependence on raw material exports. Export restrictions and export duties have been important instruments of this industrial policy.

The EU-Indonesia Comprehensive Economic Partnership Agreement (CEPA), concluded in September 2025, introduces new disciplines on raw material trade and investment. While the EU presents the agreement as a means of securing and diversifying critical raw material supply chains, important questions arise regarding its implications for Indonesia’s policy space, economic development and environmental and social protection.

CRM Export Ban Analysis

• The Trade in Goods chapter restricts Indonesia’s raw materials policy space because it prohibits export restrictions (Article 2.8), except in accordance with GATT Article XI. GATT Article XI (2) allows for temporary export prohibitions to prevent or relieve serious shortages of essential products.
• It is doubtful whether this exception under GATT Article XI will suffice for protecting the Indonesian CRM market. In case of the previous nickel export ban, Indonesia lost the case with the EU for its failure to prove that there were critical shortages of nickel for the domestic market.
• The Trade in Goods Article 2.6 prohibits the imposition of export duties, taxes, or other levies on traded goods. There are several exceptions to this rule:
  • (a) measures adopted or maintained before 13 July 2025 (for Indonesia, the following regulations apply as of 13 July 2025: Minister of Finance Regulation No. 38/2024 and Minister of Finance Regulation No. 30/2025), except for goods subject to the commitments in Annex 2-B;
  • (b) continuation or extension of the action referred to in point (i), insofar as this does not reduce the conformity with the scope of goods covered by the action referred to in point (i); or
  • (c) future measures relating to goods obtained in the processing of minerals in the pre-smelting phase (“Processing of minerals in the pre-smelting phase” is defined as the process of separating minerals from raw ore and converting them into concentrated and differentiated products).
• These exceptions for export duties on critical minerals are not significant enough to move up Indonesia’s mineral value chain, however, as only minerals in the pre-smelting phase are covered by the exceptions. This further locks Indonesia in a raw material export trap.

Dual pricing and public policy objectives

• Throughout the Trade in Goods and Energy and Raw Materials chapters, awkward compromises have been made and there is a fair bit of deliberate ambiguity: in key clauses, exceptions are made for ‘public policy objectives’, but while some of these objectives are explicitly defined, it remains unclear how broadly they can be interpreted and to what extent they provide sufficient policy space for Indonesia to pursue its industrial development goals.
• Energy and Raw Materials Article 14 regulates the prohibition of a party to impose a higher price for its exports of raw materials than the price for such raw materials for the domestic market. In a previous WTO case, the European Union protested the practice of Indonesia’s policy on dual pricing—where domestic prices are lower—alleging a violation of subsidy rules under Agreement on Subsidies and Countervailing Measures (ASCM).
• However, Article 14.2 offers an exemption for parties to regulate the price of the supply of raw materials to a non-household customer in its domestic market lower than the export price to achieve a public policy objective through a transparent manner and non-discrimination criteria. It does not become clear what this public policy objective is. However, the price differentiation policy is strategic to carry out the national downstreaming agenda in order to transform Indonesia from a raw material exporter into a producer of high-value-added products.

Sustainability

• Social and environmental due diligence standards referenced in the Trade in Goods and Energy and Raw Materials chapters are weak. Energy and Raw Materials Article 14.7(f) speaks only of ‘promoting’ international standards, but none of them are mentioned by name, giving it very limited legal value. Article 14.8 states that the parties should conduct Environmental Impact Assessments (EIA), but the new Indonesian EIA law is weak and often criticized and therefore of little value. Language on effectively engaging civil society is weaker than in the corresponding text in the EU-New Zealand trade agreement.

Cooperation in raw materials

• Energy and Raw Materials Article 14.13.2. establishes a mechanism for technical consultations if one party believes that the other’s laws or regulations are hampering existing or future investments along raw material value chains, or trade/investment linkages.
• The clause explicitly frames domestic regulation as a potential “obstacle” to trade and investment. It reinforces the idea that laws protecting the environment, labour, or communities could be treated as barriers to investment in raw material sectors. By treating new regulations (e.g. stricter mining permits, environmental safeguards, local processing requirements) as “hampering investments,” the clause risks creating a regulatory chill: governments may avoid enacting progressive laws out of fear of trade/investment conflict.
• The 60-day (or shorter) timeline for consultations gives regulators little space for inclusive debate, environmental assessment, or democratic participation. It prioritises speed of resolution for investors over careful consideration of environmental and social impacts.
• This mechanism works one way: it allows pressure against stricter domestic rules but does not enable sanctions against destructive investment practices (e.g. illegal mining, rights violations).

Conclusion

1. Restricted policy space: CEPA limits Indonesia’s ability to use export bans, export duties and dual pricing to support domestic processing and industrial development.
2. Limited exceptions: While some safeguards exist, their scope and effectiveness remain uncertain, potentially restricting Indonesia’s ability to move further up mineral value chains.
3. Weak sustainability provisions: Environmental, labour and human rights protections remain insufficient to address the social and ecological impacts of raw material extraction and processing.
4. Unequal distribution of benefits and costs: CEPA risks prioritising European access to critical raw materials while leaving Indonesia to bear much of the environmental and social costs.
5. Need for a fair raw materials partnership: An equitable agreement must safeguard Indonesia’s industrial policy space, promote local value creation and ensure enforceable environmental, labour and human rights standards.

I think we should examine the exceptions under Article 2.6 and Annex 2-B more closely. In particular, we need to distinguish between existing export duties, which may be maintained under certain conditions, and the introduction of new export duties. The current analysis seems to suggest that all exceptions are limited to minerals in the pre-smelting phase, but this restriction only applies to one of the exceptions. A more detailed assessment of Annex 2-B would help clarify how much policy space Indonesia actually retains for individual critical raw materials. I am not suer myself if I got it right, what do others think?