24/04/2009 (World Watch Institute) - Malaysia-based United Plantations marked the beginning of a new era for the controversial palm oil market last November with its first certified "sustainable" shipment.
The purchaser, Unilever, greeted the oil with a welcoming ceremony at the Dutch port of Rotterdam. A refinery in the United Kingdom received the palm oil a few days later, churned it into edible cooking oil, and shipped it to Sainsbury's, a leading UK grocery chain.
Oil palm plantations in Indonesia are also lining up for certification, hoping to demonstrate to buyers that ecologically rich tropical forests were not cleared to grow their crop. Industrial producer PT Musim Mas received the country's first certificate in February, and at least four other companies, such as Cargill-owned PT Hindoli, have followed.
More companies and governments, particularly in Europe, are requiring that the palm oil they source meet rigorous sustainability standards. Under a new European Union biofuel policy [PDF] finalized earlier this month, any palm oil biodiesel imported to the region must, over its full life cycle, demonstrate a 35-percent savings in greenhouse gas emissions compared to fossil fuel diesel, and the feedstock cannot be grown in areas with high biodiversity value or a high stock of carbon.
These demands have led the main global certification body, the Roundtable on Sustainable Palm Oil (RSPO), to become a major player in the future of palm oil production.
Nearly 40 million tons of palm oil was produced in 2007, according to the United Nations Food and Agriculture Organization. Indonesia leads global production and is expected to supply more than half the palm oil that the world will demand in the coming years for cooking, cosmetics, and biofuel.
Despite the global recession, the country plans to establish about 1.4 million hectares of new oil palm plantations by 2010. This will likely require clearing additional large swaths of tropical forest, contributing to the loss of indigenous lands and further threatening the habitat of endangered species such as the orangutan.
It would also increase Indonesia's contribution to global climate change. The country already emits more greenhouse gases than any other nation besides China and the United States, due primarily to the clearing and burning of tropical forests.
Sustainability Criteria Remain Controversial
In response to these environmental and social concerns, conservation group WWF teamed up with the palm oil industry to launch the RSPO, a multi-stakeholder body, in 2004. One of the body's top mandates has been to define what "sustainable" palm oil production entails, and to develop a credible standard to reflect this. The standard was released in 2005.
To meet the new standard, growers and processors must apply eight principles, containing 39 specific criteria [PDF], to their operations. The principles include a commitment to transparency on environmental, social and legal issues; environmental responsibility with regard to waste, resource use, and climate; and responsible consideration for workers, individuals, and communities affected by palm oil production.
Producers are beginning to implement the RSPO criteria: as of last year, members included 72 firms worldwide, more than half of them from Indonesia. About 1.5 million tons of palm oil was certified last year.
Although relatively few companies have been certified, villagers and non-governmental organizations in Indonesia are already using the RSPO's criteria to demand better treatment for communities displaced by plantations, according to Norman Jiwan, a researcher with the Indonesian human rights group Sawit Watch. "By using the criteria, indigenous people in local communities can stop the companies' aggression on the ground," Jiwan said.
But the rules are not without loopholes.
New plantations are allowed to remove forest as long as the land is not deemed "high-value conservation forest." With RSPO members from the Americas, Africa, Asia, and the Pacific islands, the body has allowed each country to interpret "high value" based on its unique situation.
Instead, the RSPO plans in upcoming meetings to tighten its rules for how much greenhouse gas a new plantation may release. The maximum amount of gases released by new plantations would be based on the forest's original biomass. Areas with dense, old-growth trees or carbon-rich peat, would rank higher on the biomass standard than new growth forests.
"Defining a ‘high value conservation forest' is a vague process. It's subject to opinion," said Tim Killeen, who represents the environmental group Conservation International on the RSPO. "But a biomass standard is not going to be subject to interpretation."
The RSPO criteria also state that oil palm trees planted before 2005 are exempted. On average, the oil palm requires about seven years to bear fruit, so the "high value conservation forest" requirements do not pertain to the recent palm oil shipments that received RSPO certification.
The environmental groups Greenpeace International and Wetlands International argue that such loopholes allows palm oil firms to join RSPO and improve their image despite the fact that very little palm oil has yet been produced according to the sustainability criteria.
The Jakarta-based Center for Orangutan Protection has directly opposed the certification scheme. The group said last year that it found two RSPO member companies clear-cutting forests that were home to orangutans, sun bears, and Borneo gibbons. "It has been six years after RSPO was put into operation but forests are still cleared and orangutans are continually killed," said Novi Hardianto, the Center's habitat program coordinator, in a press release. "All criteria on sustainable palm oil and certification process are merely public lies."
For Killeen, the potential for oil palm to become an environmentally sustainable, high-income crop is too great to ignore. If the RSPO can address its shortcomings, the certification system can become a key tool in reducing deforestation across Indonesia, he said.
But without a larger share of the market demanding sustainable palm oil, any progress made by the RSPO may not halt the damaging effects of expanded oil palm production.
"The RSPO controls the market exporting to Europe, basically. China doesn't care. India doesn't care. Domestic consumption in Vietnam, Korea, they don't care," Killeen said. "Don't expect the RSPO to stop the problems."
In order for Indonesia to continue developing its lucrative oil palm industry without devastating tropical ecosystems, the industry will need to increase yields on land that has already been cleared, according to Michael Shean, a global crop analyst with the U.S. Department of Agriculture (USDA).
On average, plantations yield about four tons of oil per hectare, but some producers, often larger commercial estates, have managed yields as great as 10 tons per hectare, Shean said.
"There need not be such a drive to open new acreage at the expense of tropical forests if the average Indonesian producer - that means both commercial and smallholders - were to actually invest a greater amount of capital in yield improvements," Shean said.
Without regulations that place strict limits on expanding plantations, however, producers do not have enough incentive to invest in boosting their yields, Shean said.
Proponents of international carbon offset programs view the successor climate change treaty to the Kyoto Protocol as an opportunity to finance yield improvements.
Negotiators will decide at December's U.N. summit in Copenhagen, Denmark, whether to include a policy that pays landowners to keep forests intact. Although specifics of the approach, known as "reduced emissions from deforestation and forest degradation," or REDD, remain undefined, Indonesia has applied for funds from both the U.N. and the World Bank for pilot projects that could pay oil palm plantations to avoid clearing dense forests.
The Nature Conservancy, one of several conservation groups exploring the use of REDD, predicts that an international carbon price of roughly $6 per ton would make conserving Indonesia's forests economically competitive with oil palm development.
"The strategy is to direct oil palm to areas already degraded," said Greg Fishbein, director of the group's conservation finance division. "The benefit of REDD is that you show up with a bunch of money."
A study in the journal Conservation Letters last month estimated that if REDD is included in a cap-and-trade market for greenhouse gas emissions, payments for "avoided deforestation" could range between $1,500 and $11,800 per hectare, depending on when the carbon credits are allocated and sold. In comparison, the oil palm market was estimated to generate a net present value between $3,800 and $9,600 per hectare over a 30-year period.
The carbon market offers the potential to expand RSPO criteria to a larger share of oil palm plantations. But the success of the REDD approach depends on how the funding, which is expected to be significant, would be allocated.
"If REDD is spent providing for jobs in old, deforested landscapes, it might be effective," Killeen said. "If REDD is spent by NGOs or consultants or governments on silly things that are not investments in productivity [and] not investments in people, [then] people will still cut down the forest."