AUTHOR: Eline Blot
Aimed at deepening economic presence in the Southeast-Asian market, the EU-Indonesia trade agreement faces several hurdles after almost nine years since the start of trade talks. Indonesia’s main economic industries stand in stark contrast with the EU’s sustainability objectives and policies, complicating the conclusion of the negotiations.
With both the new EU and Indonesian governments keen to finalise the trade agreement, negotiators hope to conclude negotiations by June 2025. So far 19 rounds of negotiations have taken place, the latest dating back to July 2024. This briefing assesses trade-related sustainability challenges in Indonesia relevant to the FTA and proposes recommendations to further environmental and climate cooperation and progress between the trade partners.

This briefing is part of a IEEP policy series monitoring upcoming free trade agreements that are either being negotiated or concluded. For more briefings assessing the environmental sustainability of future FTAs, consult this page.
A large share of the Indonesian economy is reliant on the production of agricultural goods and raw materials; in 2022, Indonesia produced 68% of global palm oil fruit and 40% of the global supply of nickel. These figures begin to explain some reasons why the IEU-CEPA negotiations have been challenging, especially considering the EU’s climate and environmental policy measures such as the EUDR, RED II and the Critical Raw Materials Act.
Indonesia is particularly affected by rising sea levels leading to the decision to move the country’s capital from Jakarta to Nusantara. The nation also deals with air, water and waste pollution exacerbated by coal dependency, plastics pollution paired with less stringent emissions and waste legislation. This briefing focuses on three main trade-related sustainability challenges: commodity-driven deforestation, mining and processing of raw materials, and marine resource management.
Industrial expansion and export of palm oil, metals and minerals, and fish products are drivers for Indonesia’s main sustainability challenges. Since 2001, 30.8 million hectares of tree cover have been lost, with palm oil production driving 85% of deforestation. Despite efforts such as the FLEGT-VPA to combat illegal logging and a moratorium on new palm oil plantations, forest loss surged by 27% in 2023, fuelled by growing demand for nickel and wood pulp. In addition, mining activities are also responsible for water pollution and human rights abuses, including against Indigenous communities. Overfishing in Indonesian waters has led to 75% of marine resources being fully exploited. Additionally, aquaculture expansion is driving mangrove destruction. Poor fisheries management and illegal, unreported, and unregulated (IUU) fishing worsen marine degradation. Together, these environmental challenges threaten biodiversity, fuel climate change, and harm local livelihoods.
As these trade-related sustainability challenges are likely to increase pressures on local environments and ecosystems the Indonesia-EU Comprehensive Economic Partnership Agreement (IEU-CEPA) must acknowledge and provide protections to minimise these negative spillovers. The following recommendations serve as a starting point to provide more tailored provisions for the agreement’s TSD Chapter, in other sector-specific chapters, and spur accountable progress and cooperation alongside the trade agreement.
Recommendations
- Include binding provisions to effectively implement the Paris Agreement and the Montreal-Kunming GBF, acknowledging the role of protected area conservation in combatting climate change impacts.
- Introduce articles on sustainable water management and wastewater treatment in the TSD Chapter and relevant sector-specific chapters (marine resources and mining).
- Address sustainability issues in the mining sector by including higher labour and environmental standards (e.g., following IRMA best practices), in addition to commitments to safeguard Indigenous Peoples’ rights in the Energy and Raw Materials Chapter, subject to the agreement’s dispute settlement mechanism.
- Establish a dedicated dialogue between the Parties on tackling commodity-driven deforestation, regularly including recommendations from experts in academia and CSOs.
- Negotiate a roadmap with timebound targets to address sustainability challenges in Indonesia, linking to international agreements and conventions where applicable.
Read the briefing here.