Eco-friendly palm oil could help alleviate poverty in Indonesia
Palm oil is not a failure as a biofuel
Rhett A. Butler
[part 1 | part 2] April 4, 2007
The Associated Press (AP) recently quoted Marcel Silvius, a renowned
climate expert at Wetlands International in the Netherlands, as saying
palm oil is a failure as a biofuel. This would be a misleading statement
and one that doesn't help efforts to devise a workable solution to the
multitude of issues surrounding the use of palm oil.
While I don't know the context of Mr. Silvius's remark (such comments
are often taken out of context) and recognize him as an excellent
tropical ecologist and writer, his quote as it stands in the AP article
makes it easier for critics to dismiss environmental arguments on
oil-palm development in Southeast Asia.
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.
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
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
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.
Offering palm oil producers a carrot
Vast areas of natural forest have been converted for soy farms in the
Amazon and oil-palm plantations in Asia. However, on a relative basis,
oil palm may be more ecologically sound due to its higher oil yield than
soy. In theory, because oil palm can produce as much as 30 times more
oil per unit of area, it could require less land clearing. Of course,
planting oil palm on previously deforested land would be a preferable
Since demand for palm oil isn't going to go away, 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 Sustainable 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
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. (Since deforestation produces
greenhouse gases, reducing forest clearing cuts global warming emissions.)
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
Now's the time to act. Almost everyone will be better off from greener
As traditionally practiced in Southeast Asia, oil-palm cultivation is
responsible for widespread deforestation that reduces biodiversity,
degrades important ecological services, worsens climate change, and
traps workers in inequitable conditions sometimes analogous to slavery.
This doesn't have to be the case. Following examples set forth by the
Roundtable on Sustainable Palm Oil and firms like Golden Hope
Plantations Berhad, a Malaysian palm-oil producer, oil palm can be
cultivated in a manner that helps mitigate climate change, preserves
biodiversity, and brings economic opportunities to desperately poor
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.
Rainforest clearing for an oil palm plantation in Borneo. Seen from
above and at ground level. Photos by Rhett A. Butler.
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.
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
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)
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.
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
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.
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.
Social Impact of Palm Oil in Borneo [source: mongabay.com]
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.
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.