Industrial decarbonisation is essential, as in many countries, industry is the second largest emitting sector after the power sector. Approximately 40% of global CO2 emissions come from industry, 70% of which is from heavy industry. While roughly 25% of global emissions come from the export trade, industrial decarbonisation must also focus on domestic production. Reducing emissions from goods made for local use is just as essential for meeting climate goals.
Hence, industrial decarbonisation has been a focus for many countries and their international partnerships. Due to the global nature of industrial production, it is important that stakeholders of industrial decarbonisation work together, both domestically and internationally.
Two countries, Indonesia and South Africa, are looking to do exactly this. As the industrial capacity of both countries grows due to economic development and their increasing involvement in global trade, they are looking to decarbonise their industrial sector. Both countries have concrete plans, but there are realities that they have to face. Both have made efforts to kick-start their industrial sector towards net-zero.
In this blog, we will introduce both countries' efforts to achieve industrial decarbonisation, as viewed through the lens of experts from both countries. Commissioned by Germanwatch, domestic experts have written two reports on industrial decarbonisation. The publications provide insight into the progress made towards net-zero in the industrial sector and the countries’ connection to international initiatives such as the Climate Club, as well as a small overview of the role of civil society.
Indonesia: Setting the Foundation for a Green Economy
Introduction
Indonesia’s manufacturing sector is a key driver of economic growth but also accounts for 34% of national greenhouse gas emissions, with cement, iron, and steel emerging as rapidly growing sources alongside pulp and paper. In response, Indonesia has committed to achieving net zero emissions by 2050, supported by legal revisions that signal a shift from voluntary action toward mandatory compliance. The government’s strategy focuses on reducing emission intensity and expanding near-zero production through five pathways: industrial decarbonisation, energy efficiency, carbon capture and utilisation, carbon pricing, and material recycling. Progress, however, is constrained by gaps in data transparency, financial regulation, and technical guidance. Even so, export-oriented subsectors such as cement and steel are already planning for deep decarbonisation under growing external market pressure.
Achieving this transition requires a collaborative ecosystem rather than a purely top-down approach. Civil Society Organisations play a central role as researchers, advocates, conveners, and capacity builders, ensuring that policies are evidence-based and inclusive. Indonesian civil society has helped develop practical decarbonisation frameworks, facilitated dialogue between government and industry, and strengthened capacities across stakeholders, contributing to greater alignment between public and private actors around a shared green industrial objective.
National Context
The Ministry of Industry has launched a comprehensive strategy prioritising nine industrial subsectors, with a specific focus on metal, pulp and paper, cement, and fertiliser. Recent policy developments, such as Ministerial Regulation 13/2025 on greenhouse gas reporting, demonstrate progress, yet technical implementation varies. For instance, while the cement industry is relatively advanced with low-carbon projects coming from the Clean Development Mechanism (CDM), its recent growth has been stunted by the pandemic, forcing companies to prioritise economic survival over green investment. Similarly, the iron and steel sector shows promise with some companies reducing emissions by 40% through scrap usage, though incomplete data and technical limitations hinder widespread adoption.
Significant hurdles remain in governance and supply chain management. The pulp and paper industry faces a bureaucratic challenge where emissions reporting often falls under the Ministry of Forestry rather than Industry, creating a data disconnect. In the fertiliser sector, while investment in Carbon Capture and Utilisation is growing, carbon accounting remains inadequate. To address these cross-sectoral technological and supply chain gaps, the Ministry of Industry is developing the Green Industry Service Companies (GISCO) mechanism, acknowledging that a multi-sector approach is vital for success.
International Context
Indonesia is actively deepening its engagement with international frameworks to accelerate its industrial transition. The country participates in the Global Eco-Industrial Parks Programme (GEIPP) to advance its circular economy strategy and is a member of the Climate Club. Through the Climate Club’s Global Matchmaking Platform and the German-supported Partnership for Net Zero Industry, Indonesia seeks to align international support with domestic needs. Collaboration also extends to specific projects, such as the Joint Crediting Mechanism (JCM) with Japan in the cement sector and carbon capture initiatives in the fertiliser industry.
Preparation for the European Union’s Carbon Border Adjustment Mechanism (CBAM) is also a key priority. The Ministry of Industry is currently assessing the compatibility of the EU Emissions Trading System (EU ETS) with the establishment of a domestic Indonesian ETS. These efforts highlight Indonesia’s recognition that industrial decarbonisation is inextricably linked to global trade dynamics and regulatory alignment.
Click here to access the study on industrial decarbonisation in Indonesia.
South Africa: Crisis and the Opportunity for Green Reindustrialisation
Introduction
South Africa stands at an economic crossroads. The country is experiencing rapid deindustrialisation, with manufacturing numbers and workforce employment in steady decline. While the resource extraction industry was once the bedrock of the economy, it has shrunk dramatically. Green reindustrialisation offers a potential exit route from this decline, but the domestic challenges are immense. Fiscal space is severely constrained, and the government faces difficult trade-offs between subsidies for State-Owned Enterprises such as Eskom and Sasol and other budgetary needs.
The economic fundamentals paint a worrying picture. The expanded unemployment rate sits at a staggering 41.99%, while the debt-to-GDP ratio has surged from 23.6% in 2008/09 to an estimated 77.4% for 2025/26. This precarity is exacerbated by the deepening liabilities of State-Owned Enterprises, with Eskom alone projected to have received R496 billion in bailouts by 2026. Despite the high cost, the power remains dirty; Eskom’s coal-heavy fleet emitted 190.4 Mt of CO2 in 2024, making it one of the largest national emitters, which locks the country’s industrial potential behind a wall of high carbon intensity and unreliable power supply.
Overview of South Africa’s deindustrialisation crisis
The scale of job cuts in South Africa is above average in international comparison, signalling a crisis of capacity underutilisation and declining product diversity. Gold mining employment collapsed from 500,000 in 1988 to just 94,000 in 2023, while the manufacturing sector lost 300,000 jobs between 2008 and 2018. Key industrial giants are faltering: Sasol, which accounts for 12.4% of national emissions, faces a sunset phase for its refining complexes as coal and gas supplies deplete. Similarly, PetroSA survives merely by selling diesel to Eskom, plagued by mismanagement and failed gas exploration.
The steel and chrome sectors are equally distressed. ArcelorMittal South Africa recently closed its Newcastle steel plant, putting 3,500 jobs at risk. Furthermore, South Africa has lost its dominance in ferrochrome production to China, which now smelts 70% of South Africa’s exported raw ore. The larger industrial failures also point to broader structural governance weaknesses. Ongoing challenges, including corruption and other criminal activities, risk hindering progress in rebuilding the rail and power systems needed for a green transition.
Challenges to green reindustrialisation
The barriers to green reindustrialisation often lie outside the classic scope of climate policy. The primary blockers are corruption and a fractured regulatory environment. While the Department of Forestry, Fisheries, and Environment manages climate negotiations, it lacks the political weight of the Ministry for Mineral and Petroleum Resources, which often obstructs renewable energy expansion. Externally, South Africa faces looming trade barriers that could be the final nail in the coffin of its carbon-intensive exports.
However, the South African Constitution mandates environmental protection, and the Climate Change Act was enacted in 2025. Civil society and the press have played a crucial role in holding power to account, for example by stopping the acquisition of Russian nuclear reactors. Their continued involvement, alongside the powerful Department of Trade, Industry, and Competition, is vital for steering the country toward a renewable energy roadmap that is both economically viable and institutionally sound.
Click here to access the study on industrial decarbonisation in South Africa.
Key Challenges and Recommendations
South Africa: A Path to Green Reindustrialisation
To successfully pivot towards a green economy, South Africa requires a fundamental restructuring of its financial and budgetary architecture. The high production costs associated with green commodities, such as green steel, necessitate significant capital injection and ‘unorthodox’ budgetary allocations to absorb the green premium. To make these capital-intensive projects bankable, the government must facilitate long-term contracts that guarantee a reasonable return on investment for early movers. Crucially, this financial shift must be supported by a massive increase in Research and Development spending, raising it from 0.6% to at least 2% of GDP, to foster domestic innovation rather than relying solely on imported solutions.
For energy-intensive industries such as steel and ferrochrome, survival hinges on lowering input costs and modernising outdated technology. The steel sector urgently needs stabilised logistics through functional freight rail and reliable power, as well as access to affordable green inputs to withstand volatile global markets. The ferrochrome industry, meanwhile, depends on improved wheeling regulations, which govern power transmission to and from third-party distributors, to source renewable energy, and on accelerated adoption of SmeltDirect technology, which could cut electricity use by up to 70% and revive mothballed smelters.
Approaches to hard-to-abate sectors must be pragmatic and rooted in South Africa’s constraints, particularly in cement, where carbon capture, utilisation and storage is unviable mainly due to high costs and limited storage options, making investment in large pipeline projects inefficient. Funding should instead prioritise research and development of alternative low-carbon construction materials, alongside cross-cutting reforms to revive rail infrastructure and dismantle criminal networks that inflate costs and deter investment. Successful implementation further depends on strong institutions and accountability, requiring a reinforced and politically insulated Industrial Development Corporation, increased support for civil society and independent media, and decisive action against corruption to ensure that technical solutions translate into real industrial renewal.
Indonesia: Future Prospects and Challenges
Despite some progress, Indonesia faces major obstacles to meeting its commitments under the Paris Agreement, as expressed in their Enhanced Nationally Determined Contribution (NDC) targets. Non-state actors question the Climate Club’s effectiveness due to its vague mandate and lack of enforcement powers, while weak regulatory impact assessments and limited public consultation undermine policy coherence at the national level. These shortcomings are evident in Presidential Regulation No. 14/2024 on carbon capture and storage, which lacks a clear legal basis for industry and raises concerns about consistency and a just transition.
Looking ahead, Indonesia’s net-zero pathway is shaped by a divide between high-tech solutions such as Carbon Capture and Utilisation and green hydrogen and approaches centred on a circular economy. Policy misalignment continues to slow progress, exemplified by the conflicting treatment of scrap metal across ministries. There is broad agreement that mandatory greenhouse gas reporting is the most urgent priority, but this will require technical support and regulatory reform. In this area, international cooperation could play a decisive role.
