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Palm oil: deforestation diesel?

Palm oil is a disputed biofuel
Palm oil is a disputed biofuel

Palm oil production in Indonesia and Malaysia is projected to increase dramatically in the next few decades amidst concerns about the environmental sustainability of this expanding industry.

High in vitamin A and magnesium, palm oil (Elaeis guineensis), has recently replaced soy as the world's leading edible oil. Used in the food and cosmetics industry in products ranging from margarine and bread to soap, current global palm oil production of over 28 million tonnes per year is projected to double by 2020. With rising oil prices, palm oil is also an attractive biofuel crop; it produces more oil per hectare than any other oilseed, and can be blended directly with petroleum-based diesel, producing a cleaner fuel. But the advantages of using palm oil as a biofuel are disputed, especially in Malaysia and Indonesia, which together account for 84 per cent of the world's production.

Big business

With high petroleum prices, alternative sources of fuel are increasingly big business. Malaysia is the world's leading producer and exporter of palm oil, and has doubled production in the last two decades; in Indonesia production has tripled in the same period. Malaysia is currently drafting legislation that will make it mandatory for diesel to contain five per cent palm oil by 2008 and, through use of biofuel alternatives, the Indonesian government plans to halve national consumption of petroleum by 2025.

But although the industry is an important source of foreign exchange and employment, in both countries there has been concern from environmental groups and NGOs. A report by Friends of the Earth suggests that palm oil plantations are responsible for 87 per cent of deforestation in Malaysia, and forest fires - the quickest and cheapest method of clearing trees - are often started by palm growers. The expansion of palm oil plantations has led to the loss of forest cover and biodiversity, endangering animals such as the orang-utan and Sumatran tiger. Moreover, forest land that is allocated for clearing, in order to make way for oil palm plantations, is frequently left abandoned and undeveloped once the valuable trees have been removed. In addition to these environmental problems, land disputes often result in violent social conflict.

Sustainable Palm Oil

To address the growing problems of sustainability in the palm oil industry, the Roundtable on Sustainable Palm Oil (RSPO) was established in Kuala Lumpur in 2003. A non-legally binding 'statement of intent' signed by over 40 companies and organisations was established to promote sustainable palm oil production through implementing better management practices. Its members comprise oil palm producers and growers, traders, 15 retailers including the Body Shop (a UK based ethical cosmetics chain), and environmental and social organisations, including the WWF. The RSPO develops training modules for plantation managers and smallholders, and monitors practices such as integrated pest management, land use planning and waste management.

The RSPO has agreed a set of principles and guidelines for conditions in oil palm plantations which will become an international standard in 2007, and encouraged funding for smallscale farmers, who contribute 30 per cent of palm oil production in Indonesia. However, environmental and social concerns prevail, and although initiatives such as the RSPO encourage sustainable production, the role of government in applying RSPO standards remains unclear, as do the responsibilities of industries in the supply chain.

Small scale plantations might appear to be the most environmentally-friendly option for oil palm. Traditionally, farmers carry out shifting cultivation, allowing degraded soil to recover by rotating their crops. While large plantation schemes are viable in some areas, they require good soil drainage, level terrain and large amounts of fertilisers. International organizations, such as CIFOR, have been evaluating land use in terms of suitability for large-scale plantations, advising the use of mixed agroforestry systems to make plantations more sustainable.

Big business in the future?

Although the economic prospects look good for palm oil production, there are concerns that such alternative fuels will not be economically sustainable if oil prices drop. In addition, high initial costs, lack of state incentives for growers and producers, and allegations of corruption are creating potential barriers to expansion in the industry. Malaysia and Indonesia have announced a joint commitment to each produce 6 million tonnes of crude palm oil per year, to feed the production of fuel oil and biodiesel. It remains to be seen whether such targets will be economically and environmentally sustainable.

Date published: November 2006


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