Jakarta. Indonesia recently tried to convince France to strike a technology transfer deal aimed at making its industries greener as Europe will start slapping carbon taxes on imported fertilizers and aluminum starting next year.

The European Union (EU) has what it calls the carbon border adjustment mechanism (CBAM), which is expected to take a toll on Indonesia's exports. Under the CBAM, importers have to pay for the emissions associated with the goods' production. A transitional phase is currently underway, but the policy will officially come into effect in 2026. During this phase-in period, importers only have to report the emissions without having to pay for the financial obligations or CBAM certificates. CBAM initially targets energy-intensive goods like fertilizers, iron, and steel, aluminum, cement, electricity, hydrogen -- some of which Indonesia sells to the European bloc. 

With about 9 months left until the carbon tax officially applies, senior minister Airlangga Hartarto tried to find ways to help make Indonesian steel and aluminum greener. During a trip to EU member France, Airlangga met French businessman Pascal Cagni on Thursday local time. France's President Emmanuel Macron had appointed Cagni as his ambassador for international investments. Aside from the ongoing trade deal negotiations between Indonesia and the EU, the meeting also revolved around CBAM.

Airlangga talked with Cagni about the possibility for France to work together with Indonesia on green technology as CBAM looms. This includes possible technology transfer, investments, or capacity building to develop low-carbon industries for steel, aluminum, and fertilizer -- all of which Indonesia exports to the EU.

"France has the expertise in hydrogen technology. Indonesia can propose some sort of pilot project for green hydrogen to produce low-carbon fertilizers and materials," Airlangga told Cagni, as reported by a ministerial press statement.

Indonesia is also hoping that France can disburse the money under the Just Energy Transition Partnership (JETP) so its industries can better comply with the CBAM rules. The JETP is a $21.5 billion climate package deal to make Indonesia ditch coal. France is one of the donors in this climate funding alongside other rich nations like Japan and Canada.

According to local media reports, the government reported that the CBAM could cause Indonesia to lose $1 billion in fertilizer exports if Indonesia does not switch to clean hydrogen for its production. The EU imported $904 million worth of iron and steel from Indonesia in 2023. The bloc's imports of Indonesian aluminum totaled $89 million.

Government data shows Indonesia-EU trade amounted to $30.8 billion throughout 2023. Indonesia's EU-bound exports stood at $16.7 billion that year with palm oil being among the leading products. Palm oil, too, is facing another setback in the EU. The bloc has imposed what it calls the anti-deforestation regulation EUDR, which requires companies to prove its imported palm oil does not come from deforested land. Europe has postponed the EUDR by a year, and so it will apply for large operators and traders starting on Dec. 30. Micro- and small enterprises still have time until June 30, 2026, before they have to fully comply with the EUDR.

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