The Impacts of Coal Mining on the Economy and Environment of South Kalimantan Province, Indonesia

Abstract

I. Coal in Indonesia and Its Environmental Impacts Coal is one of the world's most plentiful energy resources and its use is likely to quadruple by 2020. The world coal trade grew steadily from 386.90 million tons in 1990 to 468.20 million tons in 1995, and to an estimated 1,920.90 million tons in 2005 (Mimuroto 2002). Coal occurs in many forms and qualities, mainly, (a) hard coal, which includes coking coal used to produce steel, and other bituminous and anthracite coals used for steam and power generation, and (b) brown coal (sub-bituminous and lignite), which is used mostly as onsite fuel. Coal has a wide range of content characteristics including moisture, sulfur and ash content, which can affect the value of the coal as fuel and its environmental impacts. In Indonesia, coal is plentiful, with deposits estimated at 57 trillion tons (PSE-UI Jakarta 2002) and current annual production at 130 million tons (National Energy Coordination Agency 2005). East Kalimantan province has the largest stock, with 35 per cent of the national total. South Sumatera ranks second place with 33 per cent and South Kalimantan third with 16 per cent (PSE-UI Jakarta 2002). Most of the coal mined in South Kalimantan is for export. Strip mining is commonly used. This method contributes to land degradation and forest cover destruction. Coal mining is a profitable business. It creates employment, generates value-added, and improves the foreign investment of a country or region. It is also a dirty business for locals, contaminating water, permeating the air and coating houses with coal-dust, and creating health problems. Coal mining can cause floods, and many depleted mining areas are left without rehabilitation. Moreover, coal transportation vehicles contribute to road accidents and road damage. These heavy vehicles are also a nuisance to the communities living along the roads because of the dust and noise they create. In South Kalimantan, there are three large authorized coal mining contractors (called legal miners). There are also many small-scale coal miners without licences, called illegal miners. Almost every district of South Kalimantan Province contains several illegal coal mines, and their numbers are growing. In 1997, 157 individuals or businesses of this type were recorded, rising to 445 in 2000 and 842 in 2004. Although the coal business seems to be profitable for both individuals and businesses, the benefits of this activity to the region are unclear. The coal industry is an industry of booms and busts, and hence the welfare of the community in the region is usually closely tied to the health of the coal industry (Roenker 2002). In South Kalimantan, there is also a marked difference in the welfare and incomes of the communities living nearby the mines and along the coal transportation roads and those of the coal miners who earn much more. The public get the dust and dirt of the coal industry, while the workers and managers get the benefits (Adaro 2002). However, there is little research on these negative impacts or on the effects of coal mining on economic development. There is also a lack of information on how and to what extent coal mining influences income distribution among the various communities in the South Kalimantan Province and how the benefits are shared by communities within and outside the region. II. Research Objectives This article analyses the impact of the coal mining industry on the economy and environment of South Kalimantan Province, Indonesia. Its objectives are: * to analyse the impact of the coal mining industry on the development of the economy of South Kalimantan Province according to the following indicators: --value-added generated by the coal mining industry compared to other industries in the economy; --output generated by the coal mining industry compared to other industries in the economy; --employment provided by the coal mining industry compared to other industries in the economy; and --production structure and interdependency of the coal mining industry in the economy; * to analyse the impact of the coal mining industry on income distribution in South Kalimantan Province; * to analyse the extent of the leakage (1) the coal mining industry, in particular to compare benefits received by the region and the outer (other regions in Indonesia and other countries) from the coal mining industry; * to simulate the effects of several policies for the coal industry of South Kalimantan Province in order to find the best strategy in terms of economic improvement and environmental maintenance. …