Palm Oil, A Non-sustainable Solution

The need to reform the energy system has brought up a controversy about the climate and sustainability footprint of bio-energy. The pledge of the European Commission to have 10% biofuels in transport by 2020 (current proportion amounts to 5%) will require significant increase in the imports of palm oil. We sat down with Philipp Dera and discussed his recently published book "Biodiesel" - a growth market with guaranteed sustainability?, which deals with the socio-economic dimensions of palm oil production in Indonesia. The author investigates the question if ecological standards can offer a solution to the various goal conflicts that arise from the production of palm oil for the Indonesian export industry.

The European Union will not be able to cover the 5% increase in biomass fuel proportion from the European canola fields, instead, it will resort to importing cheap biomass from the developing world. Indonesia as one of the biggest palm oil producing and exporting countries is facing difficulties on all levels of sustainability:

From an environmental point of view, since new arable land will be needed for agricultural plantations, more tropical forests will have to be cleared and the soil oxidization will lead to massive emissions of stored carbon (a process also known as tropical peatland degradation). Although Indonesia does not have heavy industries compared to other developed countries, it is still the third biggest greenhouse gas emitter (closely followed by Brazil), solely based on cutting and burning rainforest.

There is also a significant social impact, connected with distributional equity. The price of palm oil has risen 50% in the internal Indonesian market already and the growing demand from abroad will lead to further escalations in the prices. Lower income families will be disproportionately affected by the rising price, because they are dependent on palm oil as a main source of nutrition. Even the attempt on the EU side to proclaim "grey areas" or grassland as sustainable arable land, does not take into consideration that indigenous people and small subsistence farmers heavily depend on this land for farming.

Indonesia is concentrating on the production of palm oil as a main export industry and thus creates a dangerous economic dependency. While crops like canola and maize are harvested annually, growing palm oil is a slow process. it takes a minimum of four years until the palm beans can be gathered in. Volatile prices would thus affect palm oil producers much more severely than canola and maize producers.

If we look at the demand on the European market, one finds that palm oil today is an ingredient omnipresent regardless of the field of consumption. You can find it in cosmetics, alimentation, heating and fuels so the average person has no means of changing what one consumes. The adjustments needed are beyond one's reach. We think we have the freedom of choice as consumers, but when we buy a product there is no guarantee that it will not contain palm oil, because there is a lack of proper labeling/insufficient regulations about labeling. One example is vegetable oil, which is not always labeled as palm oil. Another example is bio-diesel, which is a mix of fossil fuels and bio-fuel that one has no influence on.

It is the European Union that we expect to make the required sustainable solutions, but there is a goal conflict on the institutional level as well: energy and climate policy. The EU has created the bio-energy industry through its substantial subsidies to European farmers. Instead of leaving uncultivated land, farmers could plant canola and a whole industry was created from this politically induced process. Now this industry and the energy lobby are persuading the European administration with the argument that refineries and other biofuel production structures already exist and they are not fully utilized, so additional biomass can be imported without increasing the production capacities. For the EU, bio-diesel solves several problems with one strike:

- greenhouse gas emissions will be reduced (the emissions from deforestation and degradation in Indonesia are not on the EU's bill),

- resource diversification will make Europe less dependent on oil, which either way the planet is running out of,

- it makes sense from geopolitical point of view, since it will weaken the dependency on oil from the Middle East.

The climate lobby, familiar with the heated debates on bio-ethanol, requires now the introduction of a certification system that would separate sustainable palm oil producers. The problem however is that sustainable certification never existed in the bio-fuel business. There is no system for monitoring and control and no way to guarantee that the Asian bio-fuel companies will not cheat. These companies are in fact making use of the weak regulation system in Indonesia, where e.g. conflicts about traditional property and land rights often are solved through unofficial channels.  Institutional deficiencies enable corruption and empower the big palm oil corporations, putting small producers at a disadvantage. As the biggest importer of palm oil, the EU is effectively giving the wrong incentives and setting incompatible goals.

We finished our discussion considering the solutions from the consumer and the institutional perspective. The only reasonable answer, which is the conclusion of the book, is a complete EU ban on palm oil production until a workable certification system is developed, which would match the goals of sustainability.

Philipp was a student of political science, economics and South Asian studies at the Humboldt University in Berlin. He speaks Indonesian and his frequent visits in the region have enabled him to gain an acute understanding of the most import issues at stake. He cooperates with NGOs like "Watch Indonesia!", which try to raise awareness on democracy, human rights and environmental issues.

Maria Elena and Velichka