Citation:

Philio Valerino, Valid Hasyimi. "Investment Decision of Carbon Capture Utilization and Storage (CCUS) Implementation in the Indonesian Steel Industry" International Research Journal of Economics and Management Studies, Vol. 5, No. 7, pp. 35-46, 2026. Crossref. http://doi.org/10.56472/25835238/IRJEMS-V5I7P104

Abstract:

Indonesia's steel industry relies heavily on the carbon-intensive Blast Furnace-Basic Oxygen Furnace production route. Carbon Capture, Utilization, and Storage (CCUS) serves as a vital bridging technology for decarbonization. However, high investment costs and weak policy frameworks hinder its widespread implementation. This study assesses the feasibility of implementing CCUS in the Indonesian steel sector. The analysis integrates SWOT, PESTLE, and Real Option Valuation (ROV) to evaluate 3 operational scenarios of CCUS implementation: standalone storage, enhanced oil recovery (EOR), and soda ash production. Static financial models indicate that all scenarios yield negative Net Present Value under current market conditions. The ROV framework indicates that the soda ash utilization pathway yields a positive Expanded Net Present Value of US$ 81.40 million. EOR utilization will become rational with carbon pricing at 13.23 US$/tCO2, a green steel premium at 70.10 US$/t-steel, or CAPEX grants at 41.88%. Commercial viability requires the simultaneous activation of carbon pricing, green steel premiums, and specific government subsidies. The study concludes that soda ash production is the optimal short-term implementation strategy. Standalone carbon storage remains strictly a long-term option. It requires effective carbon prices to escalate beyond 56.11 US$/tCO2 to become investable.

References:

[1] E. Hanson, C. Nwakile, and V. O. Hammed, "Carbon capture, utilization, and storage (CCUS) technologies: Evaluating the effectiveness of advanced CCUS solutions for reducing CO2 emissions," Results in Surfaces and Interfaces, vol. 18, Jan. 2025, doi: 10.1016/j.rsurfi.2024.100381.
[2] R. Ramadhan, M. T. Mon, S. Tangparitkul, R. Tansuchat, and D. A. Agustin, "Carbon capture, utilization, and storage in Indonesia: An update on storage capacity, current status, economic viability, and policy," Oct. 01, 2024, KeAi Communications Co. doi: 10.1016/j.engeos.2024.100335.
[3] L. de M. Ozorio, C. de L. Bastian-Pinto, T. K. N. Baidya, and L. E. T. Brandão, "Investment decision in integrated steel plants under uncertainty," International Review of Financial Analysis, vol. 27, pp. 55–64, 2013, doi: 10.1016/j.irfa.2012.06.003.
[4] A. A. Bouramdane, "Multi-criteria evaluation of carbon capture technologies in steel, cement, petrochemical, and fertilizer industries: Insights for emerging and developed countries," Science of the Total Environment, vol. 957, Dec. 2024, doi: 10.1016/j.scitotenv.2024.177754.
[5] D. Y. Aji and U. S. Putro, "System dynamics modeling of leveraging geothermal potential in Indonesia towards emission reduction effort: A case study in Indonesia state-owned energy enterprise," Renewable Energy Focus, vol. 51, Oct. 2024, doi: 10.1016/j.ref.2024.100612.
[6] C. Gu, K. Li, S. Gao, J. Li, and Y. Mao, "CO2 abatement feasibility for blast furnace CCUS retrofits in BF-BOF steel plants in China," Energy, vol. 294, May 2024, doi: 10.1016/j.energy.2024.130756.
[7] Kodukula P. and Papudesu C., Project Valuation Using Real Options: A Practitioner's Guide. J. Ross Publishing, 2006.
[8] H. Lamberts-Van Assche, M. Lavrutich, T. Compernolle, G. Thomassen, J. J. J. Thijssen, and P. M. Kort, "CO2 storage or utilization? A real options analysis under market and technological uncertainty," J. Environ. Econ. Manage., vol. 122, Oct. 2023, doi: 10.1016/j.jeem.2023.102902.
[9] X. Yao, X. Yuan, S. Yu, and M. Lei, "Economic feasibility analysis of carbon capture technology in steelworks based on system dynamics," J. Clean. Prod., vol. 322, Nov. 2021, doi: 10.1016/j.jclepro.2021.129046.
[10] R. W. Puyt, F. B. Lie, and C. P. M. Wilderom, "The origins of SWOT analysis," Long Range Plann., vol. 56, no. 3, Jun. 2023, doi: 10.1016/j.lrp.2023.102304.
[11] H. Vilas Belsare, "PESTLE ANALYSIS," Int. J. Adv. Res. (Indore)., vol. 13, no. 02, pp. 608–612, Feb. 2025, doi: 10.21474/IJAR01/20411.
[12] C. B. Agaton, "Application of Real Options in Carbon Capture and Storage Literature: Valuation Techniques and Research Hotspots," Nov. 15, 2021, Elsevier B.V. doi: 10.1016/j.scitotenv.2021.148683.
[13] B. Lin and Z. Tan, "How much impact will low oil price and carbon trading mechanism have on the value of carbon capture utilization and storage (CCUS) project? Analysis based on real option method," J. Clean. Prod., vol. 298, May 2021, doi: 10.1016/j.jclepro.2021.126768.
[14] L. J. Gitman, R. Juchau, and J. Flanagan, Principles of Managerial Finance. Pearson Higher Education AU, 2015.
[15] M. Hasby, M. Daulay, and J. Heikal, "CAPM-Based Investment Decisions In The Under-Researched Indonesian Business Support Services Sector," Management and Industry (JEMI), vol. 07, no. 01, pp. 21–30, 2024, doi: 10.36782/jemi.v7i1.2539.
[16] J. Mun, Real Options Analysis: Tools and Techniques for Valuing Strategic Investments and Decisions. John Wiley & Sons, 2012.
[17] I. T. Harja and M. A. Virgy, "Strategic Role of Green Public Procurement in Decarbonizing Indonesia's Iron and Steel Sector," May 2026.
[18] A. Rokhmawati, V. Sarasi, and L. T. Berampu, "Scenario analysis of the Indonesia carbon tax impact on carbon emissions using system dynamics modeling and STIRPAT model," Geography and Sustainability, vol. 5, no. 4, pp. 577–587, Dec. 2024, doi: 10.1016/j.geosus.2024.07.003.
[19] P. Popielak, I. Majchrzak-Kucęba, and D. Wawrzyńczak, "Climate change mitigation with CCUS - A case study with benchmarking for selected countries in adapting the European Union's Green Deal," Feb. 01, 2024, Elsevier Ltd. doi: 10.1016/j.ijggc.2023.104057.
[20] Z. Wang et al., "Assessing policy uncertainties and interactions of the CCUS deployment in China's steel industry," International Journal of Greenhouse Gas Control, vol. 152, p. 104615, May 2026, doi: 10.1016/j.ijggc.2026.104615.
[21] A. N. Rakhiemah and Y. Xu, "Economic viability of full-chain CCUS-EOR in Indonesia," Resour. Conserv. Recycl., vol. 179, Apr. 2022, doi: 10.1016/j.resconrec.2021.106069.
[22] K. M. Wagialla, I. S. Al-Mutaz, and M. E. El-Dahshan, "The manufacture of soda ash in the Arabian Gulf," 1992.
[23] TransitionAsia, "GREEN STEEL PREMIUM: PRICING AND MARKET DEVELOPMENT IN CHINA," 2023. [Online]. Available: https://www.miit.gov.cn/jgsj/ycls/gt/art/2022/art_368e1aae99704e9281a618dc73c046f7.html
[24] T. Zhang, M. Zhang, L. Jin, M. Xu, and J. Li, "Advancing carbon capture in hard-to-abate industries: technology, cost, and policy insights," Jul. 01, 2024, Springer Science and Business Media Deutschland GmbH. doi: 10.1007/s10098-024-02810-5.
[25] J. Beiron and F. Johnsson, "Progressing from first-of-a-kind to Nth-of-a-kind: Applying learning rates to carbon capture deployment in Sweden," International Journal of Greenhouse Gas Control, vol. 137, Sep. 2024, doi: 10.1016/j.ijggc.2024.104226.
[26] J. N. Kang et al., "The Prospects of Carbon Capture and Storage in China's Power Sector under the 2 °C Target: A Component-based Learning Curve Approach," International Journal of Greenhouse Gas Control, vol. 101, Oct. 2020, doi: 10.1016/j.ijggc.2020.103149.
[27] J. Liu, Q. Zhang, H. Li, S. Chen, and F. Teng, "Investment decision on carbon capture and utilization (CCU) technologies—A real option model based on technology learning effect," Appl. Energy, vol. 322, Sep. 2022, doi: 10.1016/j.apenergy.2022.119514.
[28] X. Zhang, X. Wang, J. Chen, X. Xie, K. Wang, and Y. Wei, "A novel modeling-based real option approach for CCS investment evaluation under multiple uncertainties," Appl. Energy, vol. 113, pp. 1059–1067, 2014, doi: 10.1016/j.apenergy.2013.08.047.
[29] B. Fattouh and H. Muslemani, Capture Carbon, Capture Value: An Overview of CCS Business Models. 2024.
[30] N. F. Ramadhani, D. Irawan, Sudono, and P. A. Aziz, "A Techno-Economic Approach to Optimizing CCS Fiscal Parameters in Indonesia: A Case Study of Integrated Oil and Gas Development in CO2-Rich Areas," Scientific Contributions Oil and Gas, vol. 48, no. 3, pp. 53–66, 2025, doi: 10.29017/scog.v48i3.1809.

Keywords:

CCUS, Decision Making, Indonesia Steel Industry, Investment, and Real Option Valuation.