No public environmental impact assessments are yet available for the project, although it is in the construction and land-clearing phase. The project's location within an industrial park does not preclude impacts on nearby communities, given the range of developments associated with transporting the coal and aluminium to and from the park. Aside from the land- and forest-clearing necessitated by the plant, there will also be extensive construction for worker accommodation and a jetty at the coast for transporting materials.

The Mentarang Hydropower project, which will power the smelter in later years, is also likely to have severe impacts on communities throughout North and East Kalimantan, including the inundation of Long Lejuh and Long Peleban villages, which will force 160 households or around 2000 people to relocate and jeopardise the livelihoods of local fisherpeople. This is in addition to its impacts on nature, set out below.

With a generation capacity of 1.1 gigawatts (GW), the emissions from the captive coal plant would emit 5.2 megatonnes of carbon dioxide-equivalent greenhouse gas emissions (Mt CO2-e) per year, about 1% of Indonesia’s total emissions. Details on the exact size and capacity of the plant have not yet been confirmed. Given that the project will progressively increase its aluminium output each year (see “About” above), the energy demand from (and therefore the climate impact of) the coal plant will also ratchet up over time. This is before the envisioned hydropower project replaces coal as the smelter’s energy source.

The KIPI park and its coal-fired aluminium smelter have been repeatedly criticised as a massive greenwashing exercise. Activists have argued that international finance for the project risks accepting the tenuous “green” credentials of the project, and thereby condoning broader development of Indonesia’s less populated islands. At a time when international support is flowing simultaneously to Indonesia's renewable energy transition, international companies and investors must recognise that this project and the climate burden it poses runs counter to Indonesia's ambitions to reach net zero emissions.

The construction of the smelter will entail significant impacts on the environment in North Kalimantan, while the much larger industrial park in which it is located will have even more severe damage. Aside from the smelter and its coal power source, the KIPI industrial park will produce steel, electric vehicle batteries, solar panels, industrial silicon, petrochemicals and other goods. The entire industrial park will cost US$ 132bn, US$ 2bn of which will be spent on the smelter and its coal facility. 

There are significant potential risks to local soil and freshwater resources from the park and the smelter. Media reports emphasise the remote, pristine nature in which the massive park will be located, describing it as on "the road to nowhere", a two-hour boat journey from the capital, and in which construction activity has already begun. Significant land-clearing has been undertaken at the industrial park site; President Joko Widodo initially estimated 16,400 hectares of land will be used, but that the park could ultimately expand to 30,000 hectares, roughly half the size of Jakarta.

As noted above, the industrial park will require the construction of large jetties to accommodate the transport of materials to and from the plants. Its developers have sought US $1bn for two jetties on the nearby coast for this purpose. It is unclear how increased maritime activity associated with the massive industrial park will impact nearby marine life. Similarly, the massive hydroelectric project noted above is being developed on 5,000 hectares of forest land, and is expected to cause large-scale environmental damage through that greenfield development.

Corruption Hyundai E&C, a sponsor of this project and buyer of the aluminium being produced by the smelter, already has a questionable history in coal-fired power projects in Indonesia. A Hyundai broker was charged in 2022 with corruption by Indonesia's Corruption Eradication Commission for having bribed high-ranking local politicians, with the regent of the area being convicted for accepting the bribes from Hyundai. The bribes helped Hyundai to win the contract for the Cirebon coal-fired power plant in 2015. Hyundai will be bringing this history of graft in Indonesia to the North Kalimantan Industrial Park.