Palm Oil – The Green Development Oil Newsletter

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WWF attacks Asian palm oil; Supported by Indian domestic oilseed interests

WWF has initiated a campaign attacking palm oil imports from South-East Asia into India, claiming that palm oil is a key driver of deforestation, and Indian imports of the commodity are driving biodiversity loss and greenhouse gas emissions through peat burning. The claims are either gross exaggerations or false. Meanwhile the foreword of the report was written by a businessman with commercial interests in domestic palm oil production, suggesting protectionist intentions.

Minister announces Malaysian responsible palm oil initiative

Malaysian Plantation Industries and Commodities Minister, Tan Sri Bernard Dompok, recently announced that the Malaysian Government was investigating options to develop a scheme that would brand responsibly produced Malaysian palm oil. The intention is to develop a government-endorsed scheme to differentiate Malaysian palm oil from other sources.

WB/IFC funds biodiversity over poverty alleviation?

The World Bank’s forest policy has been heavily criticized in an internal evaluation. The policy, regulating how the Bank finances forestry projects, as well as some agricultural projects including palm oil financing, has come under fire for prioritising an environmentalist agenda above the Bank’s goal of alleviating poverty. The report also highlights the Bank’s collaboration with the RSPO, through the funding of biodiversity projects which do little to alleviate poverty. This source of funding is embraced by NGOs who use ‘biodiversity assessments’ to attack and restrict industry expansion at the expense of economic development.

Uncertainty in peat calculations; campaigns likely overstate environmental impacts

New research claims that degradation of tropical peat forests is resulting in carbon entering nearby waterways, which may result in more CO2 emissions from peatland degradation than previously estimated. The study has been misused by campaigners to attack the palm oil industry, in order to claim that palm oil plantations grown on peat are leading to climate change. The allegations are based on misuse of the study’s findings.

UK aid agency rep attacks poverty alleviating commodity in SE Asia

Department for International Development (DFID) – the UK Government aid agency – has published a blog post attacking palm oil production in South East Asia despite its contribution to economic development. The post underlines the backwards thinking prevalent in the international development ‘industry’, where poverty alleviation is less important than ‘trendy’ public policy statements.

WWF attacks Asian palm oil; Supported by Indian domestic oilseed interests

India is the world’s largest importer of palm oil, and represents a huge market for both importers and domestic vegetable oil producers. According to the report, India’s palm oil imports have doubled in the last few years, with the majority supplied by imports from Indonesia and Malaysia. Efforts to restrict imports would limit economic opportunities in South East Asian producer countries, and ultimately raise levels of rural poverty in producer countries.

India is also a large market for the RSPO, the WWF established and endorsed palm oil certification body. RSPO has struggled to gain a foothold in the Indian market, where there is little consumer demand for eco-labels. Darrel Webber, contributor to the report and Secretary General of the RSPO, indicated that advocacy efforts in India are one of the organisations “strategic pillars”.

The WWF report claims that increased procurement of RSPO certified palm oil will reduce the environmental impact of commodity production in South East Asia. The contention is contemptible. The WWF attack insinuates that Asian palm oil imports are somehow ‘unclean’, and suggests such imports are unsustainable. These claims cannot be substantiated.

Over a quarter of India’s palm oil imports come from Malaysia. Malaysian palm oil industry is well regulated and is responsible for little forest lost. Deforestation rates in Malaysia are low, even compared to some fully industrialised countries. Over 60% of Malaysia is still forested, while much of the industry expansion that has occurred over the last two decades has been confined to already degraded lands, or lands converted from other commodity crops. The country has strict biodiversity and conservation regulations; while land clearing is well regulated in part since Malaysia enacted a ‘zero burn’ policy over 10 years ago.

The WWF report includes a foreword by Jamshyd Godrej, Chairman and Managing Director of Godrej & Boyce Manufacturing Company Limited. This holding company includes diversified interests, including agribusiness Godrej Agrovet – a significant domestic palm oil grower and producer. Godrej is also President Emeritus of WWF India.

According to its website, Godrej Agrovet is the largest palm oil producer in India with over 44900 hectares of smallholder cultivation and potential cultivation area of over 200,000 hectares. The company claims to be “positioned to significantly reduce India’s crippling dependence on imported edible oil.”

The company clearly has an aggressive strategy to compete with overseas imports, raising the possibility that Godrej’s cooperation with WWF to campaign against palm oil imports is de facto protectionism. Only 10 per cent of palm oil produced globally is certified under the RSPO system. If India only permitted imports of RSPO certified palm oil, the cost of palm oil in India would rise. The approach is likely to be supported by protectionist interests within the Indian agricultural sector.

Limiting South East Asian imports might aid WWF and Godrej and Joyce, but not the Indian people or the Indian Government. A senior Indian official told palm oil producers recently that India needed cheap palm oil, not certified palm oil.

Palm oil production in India should be supported. The industry has contributed significantly to economic development and poverty alleviation in South East Asia and Africa. With investment and expertise, palm oil may also be an important tool for poverty alleviation in India as well. However efforts to decrease the competitive advantage of competing imports – through coordinated campaigning by business interests, WWF and RSPO – will not strengthen the India industry in the long term.

Minister announces Malaysian responsible palm oil initiative

The Malaysian minister stated that palm oil produced in the country must undergo stringent quality control measures and strict enforcement to ensure compliance with the national regulatory regime. According to Dompok, despite Malaysia’s efforts to establish and enforce “laws and regulations needed for sustainable production of this important crop we have not, perhaps, managed to inform the world of what we have been doing.”

It appears that the initiative will include a government system to verify and brand Malaysian palm oil in order to guarantee these attributes to consumers and global manufacturers.

Dompok commented that the new system would employ a ‘triple bottom line’ approach that focusses on achieving beneficial outputs for ‘People, Planet and Profit’.

Certification systems are currently available for palm oil growers and producers. The RSPO, for example is a voluntary certification scheme, endorsed by WWF. The scheme has been criticised by growers in developing countries for being overly onerous and too expensive for adoption, especially for palm oil smallholders who cannot afford the high cost of individual or group certification required under the system.

The scheme has allowed itself to be used as a campaign tool by NGOs who oppose national interests in promoting palm oil. These NGOS have effectively inserted aspects of their agenda that restrict industry growth in developing countries into the scheme standards, thereby undermining small farmers that rely on oil palm cultivation for their livelihood.

As a result, growers are reluctant or unable to sign up to the RSPO, while consumer recognition of RSPO in export markets remains low. Governments have also begun developing alternative verification and branding schemes to provide consumers with sustainability assurances that are aligned to national development aspirations. Indonesia is working to establish a government endorsed scheme, which is currently being backed by the United Nations Development Program (UNDP).

Development of government backed sustainability schemes give purchasers of products additional options to demonstrate input into products are sustainable. It also gives them room to manoeuvre in commercial dealings if activist NGOs attempt to pressure them to adopt certification standards developed by NGOs which aim to advance NGO objectives, rather than objectively demonstrating sustainable practice.

WB/IFC funds biodiversity over poverty alleviation?

The agricultural sector is a key industry for poverty alleviation and improving food security. Palm oil in particular, has been identified by the World Bank itself in the past as a crop with the potential to alleviate poverty by giving rural poor the opportunity to produce relatively high value agricultural goods.

In 2002 under pressure from Green NGOs that oppose industrial agriculture and conversion of forest for agricultural production, the Bank changed its forest policy. The revised policy now places onerous environmental requirements on such projects.

The revised approach effectively put poverty alleviation and economic development on equal footing with conservation efforts. The policy compromises the Banks stated goals of poverty alleviation.

The recent review of this policy shows the Bank is failing in its goal to “help reduce poverty”, and instead places environmental concerns above the needs of the poor. The leaked evaluation document – Managing Forest Resources for Sustainable Development: An Evaluation of World Bank Group Experience – appears to be an internal assessment prepared by the Bank’s Independent Evaluation Group (IEG).

The review was particularly candid about the Bank’s work in relation to palm oil. According to the evaluation, one third of the total advisory support provided by the International Finance Corporation (IFC) – the Bank’s private sector lending arm – was focused on promoting “the adoption of biodiversity-friendly production practices”.

These funds were provided under the ‘Biodiversity and Agricultural Commodities Program’ (BACP), which focusses on the impacts on biodiversity by commodities such as palm oil and soy, rather than providing support to producers of key commodities who generate economic development. Malaysia is a target country.

Activities supported by BACP grants include biodiversity assessments, as well as identifying and demarcating areas of ‘high conservation value’ and “critical ecological corridors”. BACP appears to be in partnership with the WWF endorsed palm oil certification system – the RSPO – providing grants to directly support and fund RSPO biodiversity related initiatives. The program appears to be a lucrative source of funding for NGO-endorsed programs.

The Bank’s track record on palm oil is unsound. The IFC recently closed an 18 month moratorium on lending for palm oil projects despite the potential of the commodity to contribute to the lives of farmers in developing countries. The Bank has subsequently tied financing palm oil projects to compliance with environmental standards that recognise RSPO requirements, and developed a strategy that erects barriers to industry growth.

It appears that the World Bank prefers RSPO standards over the sustainability standards set by sovereign national governments. The Bank’s policy and actions now appear to be aligned to the goals of NGOs that seek to limit agriculture production, rather than poverty alleviation.

Uncertainty in peat calculations; campaigns likely overstate environmental impacts

The attack is overstated and a gross misuse of the study’s findings. Peatlands are found the world over, with around 90% located in the Northern hemisphere. Many peatlands located in developed countries have been degraded well beyond the scope of those located in palm oil producing countries. While most peatlands are outside of South East Asia, the tendency of activists to focus on tropical peatlands indicates their underlying agenda – the reduction of commercial agriculture in developing countries, rather than science based approach to climate change.

Palm oil expansion in Malaysia over the last few decades has occurred largely on degraded lands, or those previously used for alternative plantation crops such as rubber. Campaigners continuously overstate the amount of Malaysian palm oil currently grown on peat soil.

Yet despite a flurry of campaign rhetoric, the study itself does not address the quantity of emissions from palm oil or even from degradation of peat lands. Rather it seeks to assess the amount of carbon released into waterways when peat forests are degraded.

The study estimates that only a tiny proportion of the total carbon stored in South East Asian peatlands entered waterways over an 18 year period. This ‘lost’ carbon is a very small component of the carbon cycle and the costs of restricting agricultural production as demanded by activists are disproportionate to the potential environmental outputs.

Furthermore, the amount of carbon that entered waterways does not necessarily equate to CO2 emissions from peatlands. There is very little science to assess how much carbon in waterways is emitted as a greenhouse gas. The authors claim that that much of the carbon will be emitted into the atmosphere as CO2, but base this on limited evidence. The amount of carbon eventually released as CO2 depends on a range of factors. Some evidence indicates that waterways, and in particular the oceans where they feed into, are considerable carbon sinks which far exceed the size of territorial sinks such as forests and soils.

The researchers measured only eight samples in water channels in the Malaysian peninsular bordering on peat swamp forests classified as either ‘intact’, ‘degraded’ or ‘severely depredated’. Efforts to extrapolate their findings to draw regional conclusions do not stand up to tests of statistical rigour. The small sample size provides little certainly.

This was also the conclusion drawn in earlier research examining general carbon calculations attempting to analysis land use change. Put simply, the data is simply not good enough to support the allegations made by activists.

Malaysian industry appears to have embraced environmental management practices to regulate palm oil plantations that are located on peat soils. The industry is committed to practices that minimise emissions from peat, such as zero burning policies and water management techniques and guidelines. Malaysian officials have also hit back at activists, arguing that peatlands are an important land resource for Malaysian farmers.

Meanwhile the, Malaysian media has reported on research by Tropical Peat Research Laboratory Unit director, Dr Lulie Melling, that found little variation between carbon dioxide emissions of oil palm plantations, secondary forest and peat swamp. With such divergence within the science community, credible organisations should avoid making generalised allegations about the palm oil industry’s role in climate change.

UK aid agency rep attacks poverty alleviating commodity in SE Asia

According to the DFID official, palm oil is an appropriate crop for Africa growers due to its high value in importer markets such as the UK. However, the official attacked the same crop grown in South East Asia. The official claimed that large scale production in Asia has significant environmental impacts and leads to deforestation.

The author failed to note that around half the area of palm oil cultivation in Malaysia is cultivated by smallholders, and that Malaysia still maintains over 60 percent of its land as forest cover, with relatively low levels of forest change. Malaysia’s proportional forest loss is certainly considerably less than most developed countries since the industrial revolution.

It is a concern that aid agency officials ignore the significant contribution of the palm oil industry to economic development in South East Asia. The crop may be indigenous to Africa, but the Asian smallholder cooperative model and private sector investment is one of the key factors behind viable industry operations currently being undertaken in Africa.

South East Asia operators investing in Africa are generally welcomed by national governments and local populations. International development ‘experts’ should be aware of the significant successes of Asian investment in African agricultural projects, and their contribution to improving living conditions for rural communities and infrastructure building.

Unfortunately this misinformed position may be expected from DFID, given the British government’s “dysfunctional aid” agenda which has moved away from using funding to support economic growth to increasingly focus on measures that do not address the causes and suffering resulting from poverty.