Environmentalist: palm oil not necessarily a failure as a biofuel, ban would be disastrous for the environment

Here at the Biopact, we were surprised to find an in-depth and very nuanced essay on why promoting sustainably produced palm oil based biofuel is wiser than calling for a simplistic 'moratorium'. Such a hypothetical import ban by the West on fuels made from the most productive energy crop would be far more disastrous for the environment than stimulating the production of eco-friendlier palm oil, even if it means expanding the sector. The main reasons: (1) palm oil employs millions of small farmers; taking away their livelihoods without providing realistic alternatives results in far more environmental destruction; (2) Asian demand is growing rapidly and only a sustainability offensive launched by the EU can bring a counter-weight; in order to kickstart this drive towards eco-friendlier production, more investments are needed in the sector, not less.

The essay was written by Rhett A. Butler, chief editor and researcher for Mongabay, a publication with a very strong record of promoting environmental sustainability, biodiversity and conservation, especially in the tropics. Butler develops a kind of reasoning we fully appreciate and understand. It is based on a pragmatic and realist vision, on strong knowledge of the social realities in the South, and on a deep analysis of the complex environmental economics of palm oil.

In particular, Butler argues against Marcel Silvius, a renowned climate expert at Wetlands International in the Netherlands, who recently said palm oil is 'a failure' as a biofuel because the deforestation it drives is responsible for greenhouse gas emissions. Butler sees this "not only as a misleading statement, more problematically, it doesn't help efforts to devise a workable solution to the multitude of issues surrounding the use of palm oil."

Let us summarise this battle between these two types of environmentalists - the idealist with irrealistic expectations and the pragmatic environmentalist who knows the field. We add some notes of our own.

Some basics and a taboo
Let us first describe some of the well known disadvantages and benefits of palm oil as a biofuel:

• palm oil drives deforestation, illegal logging and biodiversity loss, but provides jobs to many of the world's poorest who have very few alternatives (around half of the world's palm fruit is produced by smallholders); on the other hand, biodiversity loss is irreversible, people losing their livelihoods (in case of a hypothetical ban on palm oil biofuels) is not; loss of income to the smallholder will however fuel a vicious socio-economic cycle that typically drives environmental degradation further (poverty, lack of investment in efficient agriculture leading to extensive forms of agriculture and ultimately to far more deforestation, etc...)
  
• deforestation based on burning campaigns results in greenhouse gas emissions; there is however a strong taboo amongst some environmentalists that is not often discussed, namely the fact that oil palm trees, as they grow, recapture the carbon dioxide previously released and store more of it during their life-cycle than the original forest (up to twice as much); palm trees are more effective carbon sinks than pristine rainforests (the carbon dioxide released by the destruction of peatlands is another matter, though)
  
• the carbon sink argument should not be misinterpreted; obviously nobody in his sane mind would advocate burning rainforests for the sole purpose of replacing them by a monoculture that happens to be more efficient at storing carbon; the point is that, there where forests have been cleared for non-palm related purposes, planting palm trees is a good idea
  
• as Butler points out, a major benefit of palm oil, compared to other plants, is the fact that it is the most efficient energy crop known to man; it yields unsurpassed amounts of biomass feedstocks for biofuels (see table 1, click to enlarge); this means comparatively far less land is required for the production of a given amount of energy (compared with corn, this can be 10 times less); in a resource-constrained world, this is obviously an important factor
  
• with the advent of second-generation biofuels, the vast amount of biomass produced by a palm plantation, but that is currently considered to be 'waste', becomes available for energy production; however, for these technologies and the production processes required to become commercially viable, more investments in the sector are needed, not less (see table 2, click to enlarge)
  
• there is a great potential to intensify palm production (replacing old plantations with new high-yielding varieties, bringing better practises and skills to smallholder communities), to increase processing efficiencies and to create new markets and new value added products (such as bioplastics and second-generation biofuels from the vast stream of biomass residues); again, this requires more investments in the sector, not less; maintaining the current status quo would be disastrous for the environment, as it would fuel more extensive instead of intensive forms of production (more conversion of forest land instead of increasing yields on existing plantations)

Drawing on these basics, Butler writes:
bioenergy :: biofuels :: energy :: sustainability :: oil palm ::biodiesel :: ethanol :: biomass :: deforestation :: biodiversity :: poverty ::

"Palm oil is quite obviously not a failure as a biofuel—it is derived from perhaps the most productive energy crop on the planet. A single hectare of oil palm may yield nearly 6,000 liters of crude biodiesel. In comparison, soybeans and corn generate only 446 and 172 liters per hectare, respectively. The problem with palm oil is not its yield, but how it is produced."

Presently much of the world's palm oil is coming out of the forests of Southeast Asia—increasingly in the biodiverse rainforests of Indonesia. Oil-palm cultivation has expanded in Indonesia from 600,000 hectares in 1985 to more than 6 million hectares by early 2007, and is expected to reach 10 million hectares by 2010. With such rapid growth—and room for expansion—Indonesia is expected to displace Malaysia as the world's largest producer of palm oil within a few years. Environmental groups say that clearing for oil-palm plantations is directly threatening key habitat for such endangered species as the orangutan, the Bornean Clouded Leopard, and the Sumatran Rhino as well as exacerbating illegal logging already rampant across the region. There is no dispute about this, these are facts.

Beyond forest-clearing for oil palm, palm-oil production often employs large amounts of fertilizer and generates hefty amounts of waste, which can pollute local waterways. An added threat comes from the conversion of carbon-rich peatlands for cultivation. Merely draining peatlands releases massive amounts of carbon dioxide into the atmosphere—Silvius's own Wetlands International estimates that destruction of these ecosystems and forests in Indonesia alone releases some 2 billion tons of CO2 per year or 8 percent of total anthropogenic emissions of the greenhouse gas.

Butler:

"So yes, as currently practiced, palm-oil production often has a significantly negative impact on the environment, but it's unlikely that oil-palm plantation development will slow anytime soon. Its continuing growth is due to (1) lack of economic alternatives in many areas where the renewable energy source is grown and (2) rising biofuel demand from China."

People under pressure
After large-scale deforestation in the lowlands and the importation of millions of people through poorly-executed transmigration programs, there are few economic options in most of Borneo and Sumatra, two islands where much of the current land conversion for oil palm is occurring. Having lost jobs in the forestry sector, many villages are faced with having to decide whether to give up the remaining forest for oil palm or continue with subsistence living. Oil-palm plantations are often viewed as offering the best economic potential, especially given rapidly expanding demand from China.

While policymakers debate in Brussels the impact of biofuels, it seems clear that in the future China is going consume far greater amounts of biodiesel than Europe. With demand for cars surging and the country facing energy supply constraints and pollution problems, China appears to be ramping up for a massive expansion of diesel car production. Where is the diesel fuel to power these vehicles going to come from? Smart bets are on oil palm in southeast Asia and soybeans in the Amazon. Why else would state-backed Chinese firms be bankrolling oil-palm development in Indonesia and infrastructure projects linking coastal South America to the heart of the Amazon? The potential of close-to-home oil-palm plantations is simply too alluring.

Butler calls upon Europe to take the lead in a drive towards more sustainable palm oil production. This will require huge investments, but the dark alternative is a shift of markets, away from the very EU that could push for sustainability, and towards East Asia.

Offering palm oil producers a carrot
Since demand for palm oil isn't going to go away, Butler says:

"Europe's best approach is to convince Indonesian oil-palm producers to cultivate their crop in a manner that's less damaging to the environment, as exemplified by the Roundtable on ustainable Palm Oil (RSPO). This won't be done by hand-holding or Kumbaya circles; it will be done through financial incentives—if no one is demanding "green" palm oil, no one will produce it. Europe should inform producers that it is willing to buy a set amount of palm oil (in billions of liters per year), provided that it is independently certified as having been produced in an environmentally friendly and socially equitable way. Europe may even want to offer a minimum price guarantee to satisfy producers that it intends to hold up its side of the bargain."

With scaled-up production and reduced government subsidies (see below), it may turn out that sustainable palm-oil production isn't as costly as we've been led to believe. Further, a guaranteed market for eco-friendly palm oil will provide opportunities for innovation that could further reduce costs.

Europe should engage the Indonesian government as well. It should urge Indonesia to eliminate subsidies for oil-palm plantations grown on natural forest lands, ban development of peatlands, and set aside primary forests for conservation in exchange for funds reflecting the value of the carbon emissions avoided.

Europe's sustainability initiative should be comprehensive:

"Since neither the United States nor China is going to take the lead on this issue, Europe should not miss the opportunity to do so. In a place where there are few economic opportunities for large numbers of rural people living in a degraded landscape, green biofuels could go a long way toward addressing poverty, the environment, and global climate change. Figuring out a way to plant oil palm across the vast stretches of deforested wasteland in Indonesia could be immensely beneficial to local populations as well as the environment—palm-oil plantations sequester more carbon and support vastly more species of wildlife than barren land. Now's the time to act. Almost everyone will be better off from greener palm oil."

Butler hints at current initiatives that are worth supporting, like the Roundtable on Sustainable Palm Oil and the attempts by firms like Golden Hope Plantations Berhad, a Malaysian palm-oil producer, to cultivate the crop in a manner that helps mitigate climate change, preserves biodiversity, and brings economic opportunities to desperately poor rural populations.

What would be the basics of such an initiative aimed at radically greening palm oil production? Butler lists several of them:

Conserving natural forests
The most important step in reducing the environmental impact of palm oil is banning the establishment of oil-palm plantations in natural forest areas and peatlands. Oil-palm cultivation in both these areas does more harm than good, either through the reduction of biodiversity and ecological services (natural forests) or through the release of massive amounts of carbon dioxide (peatland conversion). Oil-palm plantations should be encouraged on existing agricultural lands and areas that have been heavily degraded and deforested.

Retaining natural forest cover is particularly important near oil-palm plantations where forest serves as a refuge for predators of oil-palm pests and can help reduce soil erosion on hillsides and water catchment areas, while slowing and reducing water runoff.

Minimizing haze
Every year a choking haze spreads across large parts of Southeast Asia. While most of this results from peatland and forest fires, some of the pollution is produced by vegetation burning on oil-palm plantations. This impact can be reduced using "zero burning replanting" techniques pioneered by Golden Hope Plantations.

Instead of burning stands of unproductive oil palm, Golden Hope cuts and shreds them and lets them decompose. This helps fertilize the soil for future crops—shortening the fallow period and lessening the need for chemical fertilizers—and reduces both "haze" and greenhouse-gas emissions. Further, under zero-burning techniques, land-clearing is cheaper ($300-400 per hectare saved in replanting costs) and independent of weather conditions. Concerns over increased risk of beetle infestation can be abated by using leguminous cover crops, which also fix nitrogen and enhance the soil.

Pest control
Monocultures in tropical climates often suffer from pest problems—oil-palm plantations are no exception. Generally, plantation owners are heavy users of pesticides that pollute waterways and affect local wildlife.

Golden Hope has taken a different approach. It has reduced its use of chemicals by focusing on biological control, including the use of beetles, birds, and fungi to deal with common oil-palm pathogens. Golden Hope builds owl boxes to attract rodent-eating barn owls and plants native tree species to draw bats and other insectivores. When pesticides are determined absolutely necessary, the company employs highly selective application of insecticides to control the worst outbreaks. Because it relies on early detection of pests, large-scale applications are rarely needed.

Palm-Oil Mill Effluent (POME)
Waste generated by the pressing of palm fruit during crude palm-oil production is a general problem for processors. While these compounds are non-toxic, they can't safely by discharged into local waterways due to their high acidity. Golden Hope addresses this issue by treating raw POME with anaerobic bacteria that break the effluent into methane (which can be recaptured as fuel), carbon dioxide, and water. The company holds the treated POME for longer than average and uses it as a substitute for inorganic fertilizer. Golden Hope also composts empty fruit bunches and other wastes from the production process, further diminishing the need for petroleum-based fertilizers.

Other techniques
In many parts of Indonesia, where plantation expansion is the fastest, there are serious concerns over the impact of oil palm on the water table. Golden Hope tries to minimize this risk by carefully managing water use through reservoirs and irrigations systems. To cut erosion, the company uses terracing and creeping leguminous covers, which also improve soil biodiversity and fertility.

Reforestation
Golden Hope encourages reforestation in forested reserves, on steep slopes, and on land near catchment areas, using native species—especially those with commercial, medicinal, culinary, and ecological value. Regarding these planted areas, the company says it aims to "enhance their attractiveness and ability to sustain fauna diversity by planting food tree species already endemic in the areas" and "encouraging resting by migrating birds by building perches and retaining dead tall trees."

Their effort seem to be paying off: surveys have recorded 268 species of flora and fauna, including 87 birds and 11 mammals, in oil-palm plantations. While this is lower than those found in primary or even secondary forest areas, it represents an improvement over barren land or other monocultures.

Expanding on these concepts for concessions in other parts of Malaysia and Indonesia, governments should encourage the recovery of developed secondary forests for recreation, biodiversity, and carbon value. Through some sort of carbon-trading or "avoided deforestation" mechanism, it may be possible to compensate these firms for forest conservation efforts. Beyond this direct monetary incentive, secondary forests can yield sustainable forest products and other ecological services for plantation workers and local communities.

Social Justice
Some of the biggest problems associated with palm oil production are social. While there is no doubt that oil-palm plantations provide much-needed employment opportunities in Indonesia—especially Borneo, which is used as an example in the next paragraphs—there are questions on the fairness of the existing system, which appears to sometimes lock small plantation owners into conditions akin to slavery.

Given the scarcity of timber in parts of Borneo, much of its population has few economic options at present. Oil palm seems to be the best alternative for communities that are just eking a living off rubber cultivation, subsistence rice farming, and fruit gardens. When a large agricultural firm enters an area, some community members are often eager to become part of an oil-palm plantation. Since these people lack legal title to their land, deals are often structured so that they acquire 2-3 hectares (508 acres) of land for oil-palm cultivation. They typically borrow some $3,000-6,000 (at 30 percent interest per year) from the parent firm for the seedlings, fertilizers, and other supplies. Because oil palm takes roughly seven years to bear fruit, the community members work as day laborers at $2.50 per day on mature plantations, according to Dr. Lisa Curran, a biologist who has spent more than 20 years in Borneo. In a series of papers, she has documented the emergence of oil-palm plantations on the island. While the community members are working in established plantations, their own plots generate no income but require fertilizers and pesticides, which are purchased from the oil-palm company. Once a plantation becomes productive, the average income for a two-hectare allotment is $682-900 per month. In the past, rubber and wood generated $350-1000 month, according to Curran. The low level of income, combined with large start-up costs and relatively high interest payments, virtually ensures that small holders will be perpetually indebted to the oil-palm company.

Curran said this debt, combined with almost total dependence on entities they barely trust, has a psychological impact on communities. Because there are no ways to contest actions by the company, conflicts invariably arise within communities, especially when a large part of the community has opposed the plantation. (Dayaks often oppose oil-palm schemes.) At times under-the-table means are used to sway a community. For example, a gift of a motorbike can win over influential community leaders. Once the oil-palm firm gets the approval, it may negotiate on a one-on-one basis with each household, eliminating any sort of bargaining power of the greater community.

Surveys by Curran suggest that communities in West Kalimantan are deeply concerned about flooding after the establishment of oil-palm plantations. They also worry about loss of forest resources and culture—older community members don't always like the idea of women and children working on plantations. Oil-palm cultivation also makes local people more dependent on agricultural firms, since they no longer grow their own food. Finally, some communities have expressed dissatisfaction about working for Malaysians. They would rather be working independently, according to Curran. While they have a litany of complaints, few see other alternatives.

Meanwhile oil-palm firms are making a fortune. By Curran's calculations, some firms in West Kalimantan are seeing a 26 percent annual internal rate of return over a 25-year period, an astounding number. Because of booming demand for biofuels, they have little downside risk.


Butler concludes by saying that:

"Given this situation, it is critical that sustainable oil-palm production include social justice for local people. Governments should work to ensure that there are standard contracts to guarantee basic legal rights to land and universal codes that prevent unfair lending practices. In especially remote areas, large oil-palm firms should be asked to pay some of the costs for health care and education of workers and their families.

These steps can help make oil-palm production more equitable and environmentally friendly. Done right, the world's most productive biofuel can go a long way towards improving the quality of life for millions of rural poor."

Image 1, credit: Mongabay.
Image 2: cc, Biopact, 2007.