Cement gives Indonesia a working measure of industrial decarbonization as thermal substitution reaches 9.77 percent

Industrial decarbonization in Indonesia is often discussed in the language of targets and roadmaps. This week it arrived in the language of plant data. On 13 August, reporting across several national outlets set out the 2025 operating figures behind PT Semen Indonesia (Persero) Tbk, known as SIG, and the numbers describe something specific: a heavy industry replacing part of its fuel input, year after year, and measuring the result.

The headline figure is the thermal substitution rate. In 2025 it reached 9.77 percent, up from 7.56 percent in 2024 and 7.27 percent in 2023. Behind that ratio sits 681 thousand tonnes of alternative fuel consumed across SIG operations, a 24 percent increase on the prior year, equivalent to 467 thousand tonnes of coal that the company did not burn. Scope 1 greenhouse gas emission intensity is now 21 percent below the 2010 baseline. Scope 2 intensity is 15 percent below its 2019 baseline.

Why the thermal substitution rate is the number that matters

Cement is difficult to decarbonize for a reason that no procurement decision can change. Roughly two thirds of the sector's emissions come from calcination, the chemical release of carbon dioxide when limestone is converted to clinker. That share responds to clinker factor and to alternative raw materials, not to fuel choice. The remaining share comes from the thermal energy needed to hold a kiln at around 1,450 degrees Celsius, and that is where fuel substitution operates.

Thermal substitution rate is the proportion of that thermal energy supplied by something other than fossil fuel: biomass, processed industrial waste, and refuse derived fuel produced from municipal solid waste. It is a single ratio, it is auditable, it maps directly onto tonnes of coal avoided, and it is comparable between plants and between countries. For a government trying to understand whether industrial decarbonization policy is landing, few indicators are as legible.

The three year series matters more than any one year. A move from 7.27 to 7.56 percent is incremental. A move from 7.56 to 9.77 percent in a single year is a step change, and step changes in this indicator generally reflect capital works rather than operating adjustments: feed handling systems, fuel preparation lines, kiln burner modifications, and secured supply contracts for the waste stream itself.

Alternative fuel does not reduce cement emissions by intention. It reduces them by tonnage, and the tonnage only moves when the waste supply chain, the plant equipment and the permitting all arrive at the same time.

The circular economy link that makes this a waste story as well

The fuels in question are not a separate commodity class. They are Indonesia's waste. Biomass residues, non biomass industrial waste, and refuse derived fuel drawn from municipal solid waste all feed the same kilns. Cement plants are, in practice, one of the few pieces of infrastructure in the country capable of absorbing processed waste at industrial scale with full destruction of the organic fraction and mineral capture of the ash.

This is the point at which the energy sector and the solid waste sector stop being separate policy files. A regency that improves its sorting and processing capacity produces a fuel that a kiln will pay for. A kiln that raises its substitution target creates offtake certainty that makes a refuse derived fuel facility financeable. Neither side can move far without the other, and the 467 thousand tonnes of displaced coal is the arithmetic result of both moving together.

The 2024 breakdown reported at the time of SIG's Science Based Targets initiative validation gives a sense of the composition: of 550 thousand tonnes of alternative fuel that year, 314 thousand tonnes was biomass, 206 thousand tonnes non biomass waste, and 30 thousand tonnes refuse derived fuel. The refuse derived fuel share is the smallest and the one most directly tied to municipal waste systems. It is also the share with the most room to grow.

Products, targets and third party validation

Alongside fuel substitution, SIG reports a green cement product line with a carbon footprint up to 38 percent lower than conventional cement at equivalent quality standards. The company also states a 2030 target of a 27 percent reduction in carbon dioxide per tonne of cement equivalent against 2010. Read against the 21 percent already achieved, that leaves six percentage points to be delivered over the remainder of the decade.

In January 2025 SIG became the first Indonesian building materials company to have its emission reduction targets validated by the Science Based Targets initiative on a pathway consistent with limiting warming to 1.5 degrees Celsius. Validation does not deliver reductions on its own. What it does is fix the accounting boundary and the trajectory, so that annual disclosure can be checked against something other than the company's own ambition.

The operating record was recognised on 6 August at Soehanna Hall in Jakarta, where SIG received the ESG Award 2026 from the KEHATI Foundation in the capital market listed company category. The award was presented by the Minister of Environment and Head of the Environmental Control Agency, Mohammad Jumhur Hidayat, and received by Muhammad Taqiyuddin, acting Group Head of Strategic Growth and ESG at SIG. The company also reported 628 hectares of post mining land reclaimed by 2025 and six PROPER Green ratings.

ESG is not merely a matter of meeting regulatory obligations. It is a competitive advantage for the future, said Vita Mahreyni, Corporate Secretary of SIG.

That framing is worth taking seriously rather than reading as corporate language. Alternative fuel substitution lowers fuel cost per tonne of clinker. Waste heat recovery power generation converts kiln exhaust into electricity that would otherwise be purchased. Rooftop solar reduces grid draw at sites with strong irradiance. Each of these is an energy efficiency measure with a payback period, and each of them also happens to reduce emissions.

Where this meets the policy calendar

The timing is useful. The Ministry of Industry has completed an industrial decarbonization roadmap covering nine energy intensive subsectors, cement among them, alongside iron and steel, fertiliser, chemicals, pulp and paper, textiles, glass and ceramics, automotive, and food and beverage. Ministerial regulations for individual subsectors are expected to begin issuing from September 2026. The roadmap projects emission reductions in the order of 66.5 to 68 million tonnes of carbon dioxide equivalent by 2035 and approximately 290 million tonnes by 2050.

A regulation drafted in the same period that a leading domestic producer publishes a verified three year substitution series has an advantage. The baseline is observable. The rate of improvement achievable with current technology and current waste supply is observable. Both are better inputs to a subsector target than a modelled estimate.

There is also an external timetable. The European Union's Carbon Border Adjustment Mechanism entered its definitive phase in 2026, and cement is among the covered goods. Embodied carbon per tonne is becoming a commercial variable in export markets for exactly the energy intensive subsectors the roadmap addresses.

Sirkularium's view

For government and public institutions, three practical points follow.

First, thermal substitution rate deserves a place in subsector regulation as a reported indicator with a defined method. It is already being measured by the industry, it is auditable, and it links the industry file to the waste management file without requiring a new data collection system.

Second, the binding constraint on this pathway is increasingly upstream. Kiln capacity to accept alternative fuel is expanding faster than the supply of consistently specified, contract ready refuse derived fuel. Regional governments that can deliver sorted feedstock at a stable calorific value and moisture specification hold something that industry now has a commercial reason to pay for. Standardising that specification nationally would reduce transaction cost on both sides.

Third, the financing case does not depend on carbon pricing alone. Fuel cost savings, waste heat recovery generation and avoided grid purchase carry these projects on conventional economics. Public financing instruments are most effective where they cover the fuel preparation and handling infrastructure at the front end, which is where the capital lumpiness sits.

What to watch next: the sequence in which the Ministry of Industry issues subsector regulations from September, whether cement is early in that sequence, and whether the 2026 disclosure cycle shows the substitution rate holding its new trajectory or settling back toward incremental gains.