Palm oil is not green

Down to Earth No. 71, November 2006

Plans have been shelved to use palm oil in a UK power station after campaigners highlighted the negative consequences for local communities, forests and wildlife. But the promotion of palm oil as a means of addressing climate change, on top of its use in food products, still threatens millions of livelihoods in Indonesia.

Npower, one of the UK's top three gas and electricity suppliers, announced its decision to drop plans to use palm oil to fuel its Littlebrook power station in Kent, southeastern England, in November. The power station, which currently uses petroleum-based oil, has a capacity of 1,000 megawatts and is used as a top-up electricity generator in times of high demand. The conversion to palm oil would have made Littlebrook Britain's biggest biofuel electricity generation project by far. According to the company, using palm oil would reduce carbon dioxide (CO₂) emissions by almost a million tonnes per year - the equivalent of taking quarter of a million cars off the road*.

The company, which is owned by Germany's RWE, said it had made the decision because its strict sustainability criteria could not be met.

NGO pressure may well have contributed to the decision too. Friends of the Earth England, Wales and Northern Ireland (FoE EWNI) publicly criticised the company's plans in August. In October, the German group Watch Indonesia! wrote to Npower, urging the company not to go ahead with plans to use palm oil at Littlebrook, pointing out that palm oil is neither clean nor climate-friendly.

"For producer countries like Indonesia, the growing demand for palm oil turns out to be a curse for the rainforests and the local communities living there: as a consequence, forests are destroyed, soil, water and air are poisoned by agro-industrial toxins, conflicts over land erupt and the people concerned lose their livelihood and often suffer human rights abuses. At breathtaking speed, the habitats of species threatened with extinction, i.e. orang utans, forest elephants and tigers on Sumatra and Borneo, have fallen prey to deforestation carried out to make way for palm oil plantations." (Watch Indonesia!, letter to Npower, 10/Oct/06)

Malaysia and Indonesia are the world's two big players in palm oil production, accounting for more than 80% of the total global trade. Indonesia is expected to overtake Malaysia soon as the world's biggest producer but the interests of both countries are closely linked as Malaysian companies are investing heavily in plantations in Indonesia. Indonesia's palm oil production is forecast to rise to 17.6 million tonnes next year from an estimated 15.9 million tonnes in 2006. (See DTE 69 and DTE 66 for more background).

Friends of the Earth, which is campaigning against the use of unsustainable palm oil in the food and biofuel industries, said that current levels of demand for palm oil for the food industry are already threatening Indonesia's forests with annihilation. "The forests and the people and wildlife they support simply cannot cope with a steep rise in global demand for palm oil for the energy industry. It will sound the death knell for the orang-utan and create further conflict between palm oil companies and local communities," said FoE's Ed Matthews (Press Association 23/Aug/06). FoE reckons that oil palm plantations are probably responsible for the destruction of 10 million hectares of Indonesian rainforest.

Indonesian groups have also warned that the emerging biofuel market will put more pressure on the country's forests and forest peoples. Indonesia's advocacy network on palm oil, Sawit Watch, believes that higher European targets for renewable energy and electricity could mean that more forests that provide livelihoods for local communities - especially indigenous peoples - will be converted to oil palm plantations.

Despite such warnings, the large profits to be made are prompting the palm oil industry and the Indonesian government to keep on promoting palm oil as both food product and biofuel, and announce ambitious schemes such as the Kalimantan-Malaysian border mega-project. Its use is being promoted on the domestic market too: President Susilo Bambang Yudhoyono issued two decrees on energy earlier this year to encourage the use of biofuel as fossil fuel substitute and, in June last year, Aburizal Bakrie (then coordinating minister for economics and industry, and now embroiled in the Sidoardjo mudflow disaster - see mudflow article) stated that an additional 600,000 hectares of plantation land would be made available for oil palm cultivation for biodiesel production.

According to Reuters, Indonesia and Malaysia plan to set aside up to 40% of their palm oil output for biodiesel. Jakarta estimates that 600,000 tonnes of crude palm oil will be used by the biodiesel industry next year. Earlier this year, the government allowed a 10% blend of biofuels in fuel products and state oil and gas company, Pertamina, is selling diesel with a 5% palm oil content.

A company owned by the Bakrie family is planning to build Indonesia's first large-scale biodiesel production plant in Sumatra with a capacity of 60,000-10,000 tonnes per year (see DTE 69). Other Indonesian companies that have announced plans to develop biodiesel plants are PT Astro Agro Lestari and PT Asian Agri. Foreign companies planning to enter the Indonesian biofuel industry include Malaysia's Golden Hope Plantations, Genting Bhd and Sime Darby Bhd, and Singapore's Wilmar Holding Pte. Ltd.

Sawit Watch reports

Two new reports by Sawit Watch and partner NGOs highlight the serious injustices already caused to indigenous peoples, local communities and smallholders by oil palm development in Indonesia. The first report, which is based on a detailed legal study and field surveys, shows that Indonesia already has around 6.4 million ha of oil palm and plans a further 20 million ha. Most of this area is the customary land of indigenous peoples and local communities, who have minimal protection under Indonesia laws. Communities are still being forced to give up their lands against their will, without adequate compensation.

The second Sawit Watch report, based on workshops and interviews with smallholders, shows how local farmers have been forced to relinquish their land, only receiving small plots as oil palm smallholdings on large commercial oil palm estates in return. They are saddled with large debts which take up to 20 years to pay off. Farmers complain of low prices, unclear financial arrangements, poor infrastructure, inadequate training and serious social problems on the estates. Sawit Watch estimates that there are about 4 million smallholders and their families on these estates in Indonesia.

RSPO links

The Sawit Watch reports were published in advance of the November meeting of the Roundtable on Sustainable Palm Oil (RSPO) in Singapore. This is a voluntary body set up in 2004 by the palm oil industry and World Wide Fund for Nature (WWF) partly in response to NGO charges than oil palm plantations destroy forests and impoverish local communities. Sawit Watch is a member of the RSPO Executive Board and helped push the organisation to adopt relatively progressive social criteria for plantation developers last year (see DTE 66 and DTE 68 for more background).

In his opening address to the Singapore meeting, RSPO president Jan Kees Vis of Unilever drew attention to the Nairobi climate change discussions, pointing out that climate change is a very real threat and that changes in attitudes are taking place. Governments and companies are now taking biofuels very seriously and this supports the lobby for palm oil as biodiesel. However, he warned that expansion of palm oil plantations to meet this end was potentially enormous and could have devastating effects on the environment and local people's livelihoods. He went on to argue that the RSPO should not take a position on the sustainability of biofuels, including palm oil.

RWE Npower, also an RSPO member, was aiming to source its palm oil supply for the Littlebrook power station from fellow RSPO members. The company linked its decision not to go ahead to the fact these suppliers could not yet prove that their products were from 'well-managed' plantations. According to Npower, this means they did not involve rainforest destruction or relocation of indigenous peoples to establish them. The company's stance reflects a high level of scepticism over plantation companies' ability and willingness to apply RSPO standards. RSPO members with decidedly dodgy credentials include Musim Mas, whose heavy handed attempts to break up a union at its Sumatra operation, ended in jail sentences for six workers, while others were evicted from their homes. RSPO member LonSum is still refusing to settle land disputes with communities in Pergullaan (North Sumatra) and Paser (East Kalimantan). Another affiliate member is Syngenta, makers of Paraquat, the highly toxic weedkiller used in oil palm plantations associated with a range of serious health impacts on workers, especially women (see DTE 66).

At the latest Roundtable meeting in Singapore, NGOs criticised Malaysian companies that are members of the RSPO for lobbying for the national ban on the use of Paraquat to be lifted, even though the RSPO has ostensibly committed itself to finding substitutes for Paraquat by the end of 2007. Moreover, the Malaysian Palm Oil Association, which is represented on the Executive Board of the RSPO, also called for the RSPO standard to be revised as member companies thought the standard was too high for them. The announcement caused dismay among European retailers and manufacturers who want to source 'sustainable palm oil' by the end of 2007.

RWE Npower itself has not ruled out using palm oil in future and may still be involved in smaller-scale use right now. According to the company's website, it is already using palm oil to replace heavy fuel-oil during start-up at its coal-fired power stations in the UK. The company has also been linked to another, smaller UK power generation project, approved earlier this year by Southampton city council. The proposed combined heat and power project is designed to power more than 3,000 council homes around the city. It plans to use palm oil only initially, until local enterprises are able to supply locally grown alternative biofuel crops. Construction is expected to start later this year.

Incentives and subsidies

The Npower case highlights the fact that incentives for using biofuels like palm oil are not linked to good sustainability practices throughout the supply chain. Had it gone ahead with its plan, Npower would have benefited from the UK government's Renewable Obligation Certificates subsidy, despite the fact that using palm oil is linked to decidedly ungreen activities like forest fires, peatland destruction and deforestation - all major contributors to global warming.

In a case study on Southeast Asian palm oil, the NGO Biofuelwatch says that government incentives boost demand for the product, without guarantees of sustainability.

"Palm oil has by far the highest energy yield of all the biodiesel crops grown at present. This, together with low wages and the lack of any rights for plantation workers, gives south-east Asian palm oil a great competitive advantage in the new free biofuel market. Biodiesel companies in the UK, such as Biofuel Corporation, favour palm oil as their main source. Once the UK's Renewable Transport Obligation comes into force, in 2008, the amount of biodiesel sold in the UK will dramatically increase and it is likely that most of it will come from Indonesian and Malaysian palm oil."
 

Biofuelwatch also reports that large sums of funding for another subsidy, the Kyoto Protocol's Clean Development Mechanism (CDM- see box), are used to support Indonesia's palm oil industry and the demand for its produce, despite plantation developers' responsibility for the destruction of peatlands and forests. Biomass projects (including palm oil) already account for 63% of all CDM funding in Indonesia and this is expected to increase in coming years, according to the group. At the same time, industrialised countries are implementing measures under the Kyoto Protocol which are vastly increasing the demand for palm oil and thus giving an incentive for ever faster deforestation and peat destruction. These include the European Biofuels Directive and the European Biomass Action Plan (making palm oil burned in power stations eligible for government support). Under the Biofuels Directive, 5.75% of transport fuel should come from renewable fuel sources by 2010, and 20% by 2020. (See also DTE 69 for background on Kyoto and the CDM.)

Biofuelwatch says that CDM funding has been criticised by many NGOs because it allows polluting companies in rich countries to buy themselves out of having to reduce their own emissions. In the case of palm oil, the companies involved not only fail to reduce their own emissions, but also fund the causes of forest and peat destruction in Indonesia. "There is probably no single industry in any single country which contributes as much to global warming as palm oil in Indonesia, and the Kyoto Protocol is being used to finance and sustain it."

Forest fires

Biofuelwatch, along with Ecological Internet, Watch Indonesia! and Save the Rainforest (Germany) have launched a campaign calling for 'real action' to address the causes of the annual peat and forest fires in Southeast Asia. The campaign is addressed to the signatories of the United Nations Framework Convention on Climate Change (UNFCCC) who met in Nairobi this November to debate the future of the Kyoto Protocol. The groups say that Indonesia's peat contains some 50 billion tonnes of carbon - equivalent to 7-8 years of global fossil fuel emissions. Peatland areas drained for oil palm and timber plantations, plus the annual fires, many of which are deliberately set by plantation developers, releases carbon stored in the peat. The NGOs cite a Wetlands International report, which said one tonne of palm oil grown on peat is linked to the release of around 20 tonnes of carbon dioxide from that peat.

The science journal Nature estimated that carbon emissions from Indonesia's 1997-1998 forest and peatland fires, were equivalent to 40% of all global emissions from burning fossil fuels that year. Oil palm companies using fire to clear land were widely believed to be responsible for much of the destruction (see DTE 35, fires supplement, for further background), but close links to the Suharto elite meant that almost no legal action was taken against them. Now this year's fires are being described as the worst since 1997-1998 and they are still being linked to oil palm plantation companies.

The NGOs wanted the Nairobi conference to agree to international assistance to fight the fires raging in many parts of Borneo. They also want UNFCCC governments to set up a working group to draft proposals for the protection and restoration of the peatlands which must report back within a year.

(Sources: BBC Radio 4 You and Yours, 14/Nov/06 at www.bbc.co.uk/; RWE npower statement regarding future use of Palm Oil, 13/Nov/06 at www.npowermediacentre.co.uk/; Green fuels at www.rwenpower.com/cr/green_fuels.aspx, accessed 20/Nov/06; Indonesia is not an oil palm plantation, briefing note by Sawit Watch and DTE, 16/Sep/06; SEEDA Board Meeting 20/Jul/06, at www.southeast-ra.gov.uk/ accessed 16/Nov/06; Friends of the Earth Briefing The use of palm oil for biofuel and as biomass for energy, August 2006; Nature, 7/Nov/02; Press Release circulated by Forest Peoples Programme 17/Nov/06; Biofuelwatch Factsheet 1: South-East Asia' Peat Fires And Global Warming; joint press release, 10/Nov/06; both documents on www.biofuelwatch.org.uk; Reuters 21/Nov/06)

*Biofuels are sometimes described as 'carbon neutral' meaning that the amount of CO₂ released when they are burned is equivalent to the amount of CO₂ the crop absorbs when growing. However, this does not take into account the carbon-producing external inputs required to grow the crop, including agricultural chemicals, transport and processing, and in transporting the product from producer to consumer country. In palm oil's case, such sources of CO₂ must be added to the massive amounts of carbon released when forests are cleared or peatlands drained to make way for the plantations.