Palm Oil Under Heavy Fire Over Environmental Toll

Palm oil farmers in Jambi. China and India may offset falling Western demand due to environmental concerns. (JG Photo/Yudhi Sukma Wijaya)

Palm oil has always been under fire, first because of its allegedly adverse effect on cholesterol, since disproven, and then because of tropical deforestation to clear the way for oil palm plantations.

However, the ante has been raised considerably in recent months. The palm oil industry beat back an attempt at the United Nations Conference on Climate Change in Copenhagen in December to curb additional planting under a World Bank proposal called Reducing Emissions from Deforestation and Forest Degradation in Developing countries (REDD).

But the industry’s relief has been tempered. On Dec. 11, Unilever, the world’s biggest buyer of the oil, which is used in everything from biofuels to chocolate chip cookies, suspended a $32 million contract with a subsidiary of the giant Sinar Mas Group until the Indonesian conglomerate proved its plantations are not contributing to deforestation.

Just three days before, in a program called “The End of the Jungle,” the BBC accused the Malaysian government and the palm oil industry of “laying waste to the last remaining rainforests of Borneo in what has been described as a corporate land grab.”

Now the plantation companies are concerned that other major European Union and US importers, particularly Procter & Gamble and Nestle, may follow Unilever’s example, especially as the global warming debate intensifies and concerns grow over the accelerating and alarming destruction of the habitat of the orangutan.

Scientific American recently quoted Richard Zimmerman, director of Orangutan Outreach in New York, as saying Indonesian tropical forests are wiped out at a rate of six football pitches per minute to make way for palm oil plantations.

As many as 20,000 orangutan have been killed, according to the report. A recent Jakarta Globe article called attention to massive deforestation of ostensibly federally protected forest areas on the island of Riau, with 2,000 hectares of forest leveled in 2008 alone.

On the Malaysian side of Borneo, according to the BBC, IOI Group, which sells palm oil in more than 65 countries, is bulldozing vast tracts of rainforest for oil palm plantations.

“From a distance, the plantations look quite green and lush — in reality they are barren: the life has basically gone,” the report found. “It’s estimated that only 3 percent of the primary rainforest of Malaysian Borneo remains.”

Between them, Malaysia and Indonesia produce 90 percent of the world’s palm oil — with world demand at 48 million metric tons annually and growing. Virtually all of the major plantation companies belong to the Roundtable on Sustainable Palm Oil, an alliance between consumers and producers that ostensibly subscribes to best environmental practices. Unilever was a founding member.

But both the Unilever decision on the Sinar Mas subsidiary and the BBC show on IOI have exposed vast discrepancies between promises and practices. In addition, both the Malaysian and Indonesian governments fully backed the two companies, attesting that they were protecting the environment.

In effect, those events make the Roundtable look like a sham and call into question its credibility in getting importers and exporters to work in concert to raise environmental standards.

The palm oil industry has become increasingly concerned as environmental groups have raised awareness of the loss of primary forest and carbon sinks. The Intergovernmental Panel on Climate Change estimated in a recent report that preventing carbon release from deforestation is “the climate-change mitigation option with the globally largest and most immediate carbon-stock impact per hectare in the short term.”

An industry group, World Growth, headed by Alan Oxley, an Australian lecturer and climate-change skeptic, has been established. It has bitterly disputed Greenpeace’s efforts, saying environmental groups, by their actions against palm oil producers, are themselves potentially devastating to the poor, with tens of thousands of jobs at risk on palm oil plantations.

Palm oil, the industry group said, can generate returns of more than $3,000 per hectare, while village farming generates less than $100 per hectare. Malaysia’s plantations alone, which directly employ 580,000 people, support two million livelihoods, World Growth argues.

Oxley has aggressively sought to contradict environmentalists. He has argued that development and forestry experts have shown that two-thirds of forest clearance is driven by low-income people in poor countries searching for land, habitation and food production.

Oxley has described environmentalists as “Europe-based activists who don’t provide data that can be verified,” peddling so-called science that “cannot be substantiated or is severely exaggerated.”

The question is what happens next. As a Reuters analysis pointed out, if European buyers of palm oil get stickier about requiring Indonesian companies to observe strict environmental standards, there are roughly 2.5 billion people in India and China alone who have no qualms whatsoever about buying Indonesian and Malaysian palm oil, by far the largest staple oil in Asia. It is far cheaper to produce than either soybean or corn oil and requires virtually no fertilizer.

Not only is palm oil by far the most popular cooking oil in Asia, just-auto.com, the automotive industry’s online analytical publication, says that “Rising energy consumption and environmental issues have now shifted the focus toward biofuel use, particularly in transportation. Though the biofuel industry is in its initial stages in Asia-Pacific, there is a huge potential for its development in the region.” Any downshifting of demand for palm oil in the West appears to be matched rising demand in Asia.

The global biofuels market, the publication said, is likely to grow by 1.47 percent on a compounded annual basis through 2015.

One thing is certain. The credibility of the Roundtable on Sustainable Palm Oil has been severely damaged, perhaps fatally, and the credibility of the Malaysian and Indonesian governments regarding protection of their tropical rainforests is equally at risk.

Asia Sentinel