A study of management decisions to adopt emission reduction measures in heavy industry in an emerging economy

Abstract

Heavy industry can face challenges in choosing applicable climate change mitigation measures due to a lack of technical background and practical guidance. A better understanding of these determinants is needed to design region-specific climate policies that most effectively enable more ‘successful’ low carbon transitions. Set in an emerging economy, this study aims to understand the determinants which underlie investment decision-making in greenhouse gas reduction. It relies on empirical research using an exploratory case study method in the leading cement company in Indonesia. The results show four key determinants influencing (constraining) adoption were (1) the primacy of profit-seeking objectives in operational planning and development; (2) the availability of sources (clinker substitutes and alternative energy fuels); (3) the limited access to cash capital; and (4) the complexity in implementing emissions reduction projects. The inquiry also compares determinants in an emerging and developed country to provide a comparative perspective on emissions management in manufacturing. It appears that firms from the industrial sector in emerging economies have investment strategies that are largely characterised by activities that accentuate achieving financial benefits or best value for money or cost savings in a short time frame, or ‘short-termism’. Currently, greenhouse gas emissions management activities tend to be second-preference strategies for firms in emerging economies, at least in the industrial manufacturing sector.