Oil palm development and the challenges for sustainable and equitable growth and forest governance

THINKING beyond the canopy

Oil palm development and the challenges for sustainable and

equitable growth and forest governance

D. Andrew WardellCIFOR South-South Exchange, 21 September 2011


Overview

Global and Indonesian contexts Overview of production and investment trends Governance systems for oil palm Socio-economic impacts Environmental impacts Improving sector governance Securing access to credible information Policy options


Global context Population growth and per capita consumption.

Requires an additional 28m tonnes of vegetable oil annually by 2020 (WBG, 2011).

Continued growth in global energy consumption. Energy (in)security and the high cost of fossil fuels

Apprehension associated with global warming and efforts to reduce GHG emissions

National/regional commitments to promote biofuels. 3 major players – USA, Brazil and European Union


Biofuel production trends 2001-09

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100

ROW

Central & South America (less Brazil)

Asia & Oceania

Europe

Brazil

United States

Billi

on L

iters

per

yea

r

Ethanol

Biodiesel


A “crime against humanity”?

....by using 100 million tons of grain and corn to ethanol while almost a billion people are starving (Jean Ziegler, UN Special Rapporteur on the Right to Food, 26 October 2007)

Animal production uses 756 million tons of grain per year

98% of the 225 million-ton global soy crop is fed to farmed animals

Sources: Ferrett, G., 27 October 2007; World Bank, 26 August 2008; Singer, P. 2009

all cited in Safran Froer, J. 2009.


Indonesian context 2.0 GtCO2e (2005), projected to grow to 2.6 GtCO2e

(2020) – BAU

80% of GHG emissions – LULUCF, notably conversion of peatlands (total area - 22m ha)

Oil palm - 2m ha (2000) grew to 7m ha (2010), projected to grow to between 16.5 and 26m ha by 2020

7 provinces account for 75% of LULUCF emissions e.g. East Kalimantan (86% of emissions but also 30% of GDP and 39% of jobs)


Feedstock Investments Feedstock No. of

countriesTotal investment (US$ billion) Range of investments per

country (US$ million)

Total in all countries

Estimated share for biofuel

Total range Of which for biofuel

Jatropha 7 0.18 - 0.29 0.18 - 0.29 3 - 200 3 -200

Oil palm 6 19 - 28 0.76 - 1.12 1 - 15,000 0.04 - 600Soybean 2 1.7 - 2.1 0.27 - 0.34 200 - 1,800 32 - 288

Sugarcane 5 4.3 - 5.3 0.77 - 0.95 20 - 5,000 3.6 - 900

Totals 20 25 - 36 2.0 - 2.7 1 - 15,000 0.04 – 900

Total investments in past 10 years: US$ 25 -36 billion Of which for biofuel: US$ 2.0 - 2.7 billion Two-thirds in oil palm


Biofuel Investments Based on feedstock

No. of countries

researched

No. of countries with biofuel investments

Total biofuel investment(US$ billion)

Range of investments per

country (US$ million)

Jatropha 7 1 0.01 - 0.02 14 – 18

Oil palm 6 3 1.2 - 1.6 150 - 1,000

Soybean 2 1 0.7 - 0.9 700 – 900

Sugarcane 5 2 3.8 - 4.2 8 - 4,200

Totals 20 7 5.7 - 6.7 8 - 4,200

Total investments: US$ 5.7 – 6.7 billion Two-thirds in sugar-based ethanol One-third in biodiesel from palm oil and soy


Governance systems for biofuels Role and effectiveness of government intervention in promoting

domestic production capacity and uptake Maintain supplies for domestic use (pricing, incentives, single-use

feedstocks and progressive export tax) Importance of government support both on the production and

consumption side Role and effectiveness of government intervention in maximizing

benefits of large-scale investments and minimizing costs of sector development Environmental protection

SEIA - weak compliance Smallholder participation

Enhancing smallholder productivity and market access Mechanisms for FPIC, avenues for legal recourse

Land tenure security Stimulating investments in suitable and available land


Deforestation from industrial plantationsSite Start

dateConcession

area (ha)

Area developed

(ha)

Area deforested

(ha)

Forest type % expansion displacing

forest

West Kalimantan, Indonesia

1994 13 605 5266(by 2009)

4949(by 2009)

Secondary peat swamp forest

94%

Boven Digoel, Papua, Indonesia

1998 34 000 17 000(by 2010)

11 300(by 2008)

Humid tropical

66%

Murdiyarso et al (2010) estimate total carbon loss of 1486 ± 183 MgCO2/ha

Fargione et al (2008) estimate 1294-3452 MgCO2/ha total carbon loss 420 to 840 years to recover the ‘carbon debt’ of peatland forest conversion to palm oil

Wicke et al (2008) estimate 8-16 years payback time from palm-oil based electricity production on logged-over forest

Carbon cycle implications


Socio-economic impacts Employees

Livelihood improvements observed in several sites due to increased incomes and improved access to social services

Mixed or negative impacts in others due to poor employment conditions, and not meeting promises or expectations

Gains from regularity of income rather than amounts Majority of jobs on palm oil plantations go to ‘migrants’

Land losing households Growing landlessness Loss of agricultural and forest incomes from displacement of

cropland and forest Additional labour burden due to increased distance of forests and

greater dependence on purchased foodstuffs CSR practices and land compensation payments failed to benefit

those most negatively affected


Improving sector governance Avoided Deforestation

Stronger regulation of large-scale producers (policy orientations, bank credit lines, monitoring)

Support to increase smallholder yields Critical importance of full carbon accounting

Protection of Vulnerable Groups Controlled expansion of outgrower schemes (legal literacy, contracts,

proof of concept) Protection of customary land users: legal protection of rights +

negotiation process inc. detailed/written description of benefits and their distribution

Leveraging co-benefits Preferential hiring/benefits flows to customary rights holders and

land losing households Overcoming barriers to market entry by poorer households


Governing biofuel finance Apply sustainability criteria (i.e. EU RED) to all

forms of foreign public finance including investments by state-owned companies

Stimulate responsible investment among pension funds

Integrate sustainability issues in bank risk management

Make sustainability reporting mandatory Stimulate financial sector to set up

independent compliance and grievance mechanisms


Access to credible information Corporate lobbying (e.g. Alan Oxley, World Growth Institute (WGI)

and International Trade Strategies Global (ITS Global) vs NGO advocacy (e.g. Greenpeace and Wahli-FOE-Indonesia)

Key misconception – “..two thirds of forest clearance is driven by low-income people in poor countries”

‘An Open Letter about Scientific Credibility and the Conservation of Tropical Forests’ (Laurance et al, 25 October 2010) – “…significant distortions, misrepresentations, or misinterpretations of fact.”

WGI/ITS fails to comprehend or is failing to convey accurately the real and growing magnitude of industrial drivers as a threat to tropical forests.

Laurance, W.F. et al, 2010. ‘An Open Letter about Scientific Credibility and the Conservation of Tropical Forests’. http://conservationbytes.com/2010/10/25/wolvesinsheep’sclothing:industriallobbyistsandthedestructionoftropicalforests/

Oxley, A., 2010. Reaction (to above) from Alan Oxley. Available at: http://conservationbytes.com/2010/10/29/wolves-masquerading-as-sheep/

http://conservationbytes.com/2010/10/25/wolvesinsheep%E2%80%99sclothing:industriallobbyistsandthedestructionoftropicalforests/



http://conservationbytes.com/2010/10/29/wolves-masquerading-as-sheep/


Policy options Target palm oil investments on degraded land

– requires improvements in spatial planning Increase yields by using inorganic nitrogen

fertilisers and/or POME as organic fertiliser – in Malaysia required new law prohibiting discharge into waterways

Collection of methane from POME treatment – CERs through CDM projects

Promote Palm Fatty Acid Distillate-based electricity production? (alternative uses include animal feed and soap industry)

Sources: Wicke et al, 2008 and 2011


www.cifor.org

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Oil palm development and the challenges for sustainable and equitable growth and forest governance

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