Shaping the future of the palm oil industry

06/12/2010 (The Jakarta Post) - The pros and cons regarding the role of the Roundtable on Sustainable Palm Oil (RSPO) have been discussed in an on and off manner since the group’s inception. Similar debate arose ahead of its recent eighth meeting in Jakarta from Nov. 8 to 11 and the sixth Indonesian Palm Oil Conference, held in Bali, which concluded on Dec 3.

Considering the diverse backgrounds and interests of RSPO members, it is little wonder that they found have it very difficult to find a middle ground that benefited all. But perhaps it is now time to remind everyone again that the world has been changing from the “muscle era” to the “mind era”, which requires the use of soft power, such as creative thought, as suggested by John Elkington.

Palm oil plantations have been tainted by a series of negative campaigns. There are blind spots as a result of the negative campaigns against Indonesian palm oil industry players, who then are unwilling to sit together to shape their common future under the RSPO.

I believe that the blind spots originated from a mixture of facts, myths and conflicting viewpoints surrounding palm oil cultivation.

First, there is a conviction among environmentalists that palm cultivation emits carbon and carbon emission is a new driver of environmental consciousness. However, some researches suggest that palm oil cultivation, particularly in the process of growing, is actually absorbing more carbon from older trees.

Thus, from some perspectives palm oil cultivation is deemed as a carbon sequester.

Another issue associated with palm oil cultivation that is vaguely recognized and sometimes lost in the fray is the socio-economic aspect.

It is a fact that palm oil contributes to food security as the most productive and highest yield of edible oil, and is a development driver for poverty alleviation through small-holder development.

Second, many misunderstandings have been attributed to legal uncertainty in Indonesia. Many accusations toward palm estates are sourced from different interpretations of conflicting laws and regulations concerning forestry, environment, agriculture, regional autonomy and land concessions.

Some parties, for example foreign NGOs, accuse growers of violating the environmental law, while the goodwill of the growers to comply with certain laws is not viewed impartially.

So how to straighten out the mess? I believe that firstly, the government should provide tacit support for sustainable palm oil development by eliminating all overlapping regulations and potential loopholes from different areas.

The overarching objectives should capture the spirit of sustainable development with a three-pronged approach, namely economic prosperity, environmental quality, and social justice.

Second, the spirit of partnership in building new understanding should be reached among the many actors in the palm oil industry. This could be achieved through a global campaign, public education and a global forum on palm oil.

Third, certification and standardization of palm oil is inevitable and indispensable to meeting the agreed standards. However, the criteria should be built on consensus among all stakeholders in a transparent, fair, accountable and equitable manner.

Fourth, RSPO is one of the means to up the ante of palm oil quality and performance, which should be used effectively by all stakeholders, including the government and growers, to further advance sustainability in the palm oil industry.

However, on the other hand, the government and growers are mulling an alternative certification regime under the Indonesia on Sustainable Palm Oil (ISPO), which has been seen by some parties as contradicting the whole purpose of RSPO.

It is also noted that certifications do not prevent black campaigns. Thus, tangible incentives for certifications should be in place. Otherwise, disincentives may also be applied to non-sustainable products in terms of discount prices or trade barriers.

Promotion of sustainable palm oil should involve all value chains within the industry. Therefore, it is necessary to further differentiate the sustainability of palm oil by adopting several types of certifications in different schemes.

Some suggest that RSPO is an ideal venue to shape the sustainability of palm oil, however the forum faces growing challenges from both members and non-members for different reasons. The Indonesia Sustainable Palm Oil (ISPO) is seen as an alternative certification standard introduced by the government along with concerned stakeholders.

Such alternative certification schemes are intended for palm oil growers, but can also be applied for other value chains on the basis of palm oil uses, processes or products. Despite its noble intention, the alternative certification is facing daunting challenges in terms of institutional credibility and product acceptability.

The process will draw certification and standardization of palm oil, which is inevitable and indispensable for the palm oil industry to meet the agreed standards.

By building the criteria on consensus among all stakeholders in a transparent, fair, accountable and equitable manner, we can expect the industry to reach positive new development in the near future.

At the very least, the current plan aims to: First, differentiate the sustainability of palm oil by adopting several types of certifications; second, promote alternative certification schemes, including specific certification on the basis of its uses, process or products; and third, develop the best certification mechanisms, including a clearing house mechanism to resolve conflicts and disputes.

These processes, if conducted consistently, will help us achieve what Elkington calls sustainability as a result of long-term maintenance of systems according to environmental, economic and social considerations.

Further, in shaping the future of sustainable palm oil, the RSPO should be used as a platform for development of sustainability certification, either by government-driven, market-driven or other multi-stakeholder-driven standard setting on sustainable palm oil.

Taking into account the sensitivity and complexity of sustainable standards and certifications, RSPO is considered ideal for playing a role as a clearing house to reconcile conflicting interests and views on sustainable palm oil. However, its roles should go beyond its members to also accommodate other parties, such as the government and consumer groups.

Future Palm Oil Industry

EU – Poland and Germany create bio-energy research group

After a meeting between the Polish Minister for Agriculture and German Agricultural Minister, the German and Polish governments have agreed an alliance for cooperation on the development of bio-energy feedstocks, Biofuels International reports. The move establishes Bio-GEPOIT, a task force group that will be coordinated by the Polish Research Institute of Construction, Mechanics and Electricity, and the German Biomass Research Centre in Leipzig.

Both ministers agreed that the importance of food security takes preference over energy production, but added that bio-energy could contribute to energy security and the improvement of farm incomes.

In France, PSA Peugeot Citroën group want the government to study the introduction of B10, which would be the diesel equivalent of the new gasoline fuel SP95-E10 introduced in April, which contains 10% ethanol of agricultural origin, Autonews reports. "The CO2 emissions control would be strengthened, given the share of diesel vehicles in circulation," says PSA in a statement. "This will achieve the ambitious goals of bio-fuel incorporation that France set for 2010," the statement says.

Royal Dutch Shell’s CEO criticized electric cars as impractical and said his company plans to focus its clean energy efforts on bio-fuels and developing carbon capture and storage, AP/the New York Times report. “My milkman used to drive around in electric cars a long time ago, what’s new? I want Shell to be really big in one renewable, and that will be bio-fuel,” he said. He declined to say how much money Shell would invest in bio-fuels or carbon capture and storage in the coming year but said the company is hoping to increase gradually the mix of fuels it will supply with a special emphasis on advanced bio-fuels from sources such as algae. Shell is also a big player in Brazil's sugarcane ethanol industry.

The former UK government Chief Scientific Advisor writes in his latest quarterly bulletin published by UBS Investment Bank that second generation biofuels will make a significant contribution to the battle to find a sustainable solution for transport fuels and could come into play in 5-10 years. In ‘Biofuels: the route to a low carbon future?’ he says second generation biofuels could be a much more fuel efficient option than first-generation food-based fuels. His findings come after working with research teams from Oxford and Cambridge Universities, which are developing a system for producing petrol or kerosene from by-products of food crops and general waste.

The Financial Times reports that Defra (the UK Farm Ministry) is warning that a pesticide ban voted in by the EU Parliament would seriously damage agricultural output. The UK Environment Secretary told a British Parliamentary committee that the regulations could cause agricultural yields in the UK to decline by up to 30% for no recognisable benefit to human health.

The European Parliament has approved the use of 5 billion Euros ($6.7 billion) of unspent EU budget funds to boost green energy and Internet links across the EU, Green Momentum reports.

The endorsement means the EU can now start spending the money, which comes from unused EU farm subsidies, on a list of projects already approved by EU leaders at their March summit. The spending is meant to create jobs and stimulate economic growth across the 27-nation bloc. (8 May 2009)

Green Energy

Brazil – Bio-diesel blending may sharply cut soy oil exports

A vegetable oils analyst said Brazil's plans to increase blending of local bio-diesel with diesel to 4% from 3% in July will sharply reduce its exports of soy oil, Dow Jones reports. He said price prospects for the soy complex are more bullish than palm oil. "If the new (biodiesel) mandate is confirmed and implemented, it will rule out any further exports of soy oil from Brazil during the second half of 2009," the head of vegetable oil purchasing at Indian conglomerate Godrej International said.

Brazil and Japan will cooperate in bio-fuel research, renewable energy and environmental issues, the Japanese Government said last week as it signed various bilateral agreements with Brazil, ADP News reports. Japan will provide technology for bio-ethanol development, surveys on carbon dioxide cycles in the Amazon rainforest, food security and others. The plan developed by the two countries will be carried out through to March 2011. EFE adds that Japan will contribute its knowledge and technology on bio-fuels made without using food as feedstock. (18 May 2009)

World- Oil majors invest in bio-fuels

A review by international auditor KPMG has found that 14 large oil companies have begun to invest in renewable energy, and while the top picks are solar and wind energy, biomass and bio-fuels have attracted the interest of most of the companies in the survey, ADP News reports.

A KMPG partner said bio-fuels are seen as the logical and natural extension of the traditional oil companies, although noting that the weight of alternative energy diversification is still insignificant in financial terms.

It could take more than seven years for sales of cars to return to 2007 levels of 69 million units, the president-executive of Nissan said, Reuters reports. He said the credit crisis and currency volatility are worsening the impact of the recession.

World food production needs to double in the next four decades to head off mass hunger, the head of the UN's Food and Agriculture Organisation said on Monday at the start of a two-day international conference in Madrid, AFP reports. He said the credit crunch, combined with lower prices for farm goods, could lead to a drop in investments in the agriculture sector which would threaten further FAO's goal to halve the number of people who live in hunger by 2015.

Separately, a report by the British international affairs think-tank Chatham House says that recent falls in food prices are a temporary reprieve and are set to resume their upward trend once the world emerges from the economic downturn, M2 Presswire reports. The report, called ‘The Feeding of the Nine Billion: Global Food Security for the 21st Century’ says food supply will have to grow by 50% by 2030 to meet projected demand but climate change, water scarcity and competition for land will make it much harder to achieve. (26 January 2009)