The Palm Oil Dilemma. A Phyrrus Victory in Mitigating Climate Change

Table of Contents

1. Abstract

2. Introduction
2.1 Status quo- agricultural, economic and trade relations

3. Biodiversity Issues
3.1 The Oil Palm on the march
3.2 At the heart of the problem: Deforestation
3.3 A Case study; The Sumatran Orangutan (Pongo abelii)

4. Impacts on Climate Change
4.1 Palm Oil as Biofuel Feedstock
4.2 The Carbon Balance
4.3 The worst case scenario: Peatland converted to plantations
4.4 REDD - Reducing Emissions from Deforestation and Degradation

5. First Mitigation Attempts
5.1 Mitigation measures and the immense potential
5.2 RSPO- the Roundtable on Sustainable Palm Oil
5.3 Scientific research as a ground to act upon
5.4 Best Management Practices

6. Corruption, disinformation & Public awareness

7. Socioeconomic Implications

8. Conclusion

References

1. Abstract

In recent years palm oil , due to its versatile usages in the food and mechanic industry, experienced a rapidly growing demand on the world market. Market researchers predict an even increasing importance of the already leading oil seed crop, because of its role as a feedstock for biofuel. Despite its unexcelled yield per unit of cultivated area, oil palm Elaeis guineensis is among the most controversially discussed agricultural products. There is a confusingly high number of stakeholders involved, and strong lobbying from both, proponents and opponents of palm oil, make any impartial balancing of the potential uses and/or destructiveness a difficult task. Beyond dispute is the fact, that with the growing demand, ecologically justifiable acreage becomes increasingly scarce which enhances the pressure for land conversion. Unfortunately, the climatic tolerance limits of E. guineensis restrict its successful cultivation to tropical realms, eco-sensitive areas with the highest biodiversity levels. Scientists watch with despair how monocultures are spreading at an ever-increasing pace, often replacing food crops and subsistence farming plots nourishing local people, and even more often at the expense of the world´s few virgin forests remnants. Various policies and strategies on an international (REDD, CDM, RSPO) and national (national laws) level have been pronounced and partially implemented, to ensure a more sustainable palm oil production. Currently however political incapacity, corruption, loopholes and beguilements, paralyze the intentions to capitalize the factual benefits of palm oil as a productive feedstock for renewable energy, and as an economy and welfare booster for less developed areas. Under present conditions an increased productivity of palm oil is overpaid for dearly, by the local people and the international community with widespread deforestation, resulting GHG (Green House Gas) emissions, an incredible loss of biodiversity and ecological integrity. In short, palm oil has great potential to help meeting the growing energy demand in a more sustainable way, but it is a long way to go and currently the impacts crucially outweigh the benefits.

2. Introduction

2.1 Status quo- agricultural, economic and trade relations

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Fig. 1 (FAO 2009b)

The Palm oil, Elaeis guineensis is native to coastal West Africa. It was first cultivated around 5,000 BP (Wilcove 2008) and introduced to Southeast Asian countries in the 1870s. Decades later, its economic potential was realized, and palm oil gradually developed into an important cash crop. The lucrative cultivation is restricted to tropical realms with evenly distributed rainfall of 2000 mm per year and year-round temperatures of 25 to 33°C (Basiron 2007). Rather few countries meet these conditions, which may be one of the reasons why only two countries, Malaysia and Indonesia, account for 86 % of the global palm oil production and trade (Basiron 2007). Substantially fewer amounts are produced in Nigeria, Thailand and Columbia (Reinhardt et al. 2007, FAO 2009b) (Fig.1).

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In 2005, E. guineensis has replaced its main competitor, the soy bean Glycine max in its leading role as an oil seed crop on the world markets (Thoenes et al. 2007, Murphy 2007). The global production and trade of palm oil have been constantly rising from the 1970s onwards (Fig.2) (Thoenes 2006) only curbed by the economic crisis in 2008. In the same year palm oil accounted for a third of the 130 million tons of vegetable oil produced worldwide (WWF 2009). Summarized the main factors and circumstances widely considered responsible for this growing popularity are listed below (Fitzherbert et al. 2008, Thoenes 2006, Kessler et al. 2007);

High productiveness - Palm oil reaches the highest yield per unit of area and time of all oil seeds

Low production costs - Due to low labor costs in the main producing countries, palm oil realizes competitively low prices on the world market.

Governmental furtherance - In its economic development, palm oil production has been politically supported and experienced investments in all related processes, that led to a overall high efficiency impelling the sector

Limited byproducts - The processing of palm oil fruits is relatively independent from byproduct markets (merely palmkernel meal)

Market concentration- The limited number of actors (producing countries and major involved trade companies) constituted a syndicated oligopoly, which allowed for high efficiency and low transaction costs.

Favorable properties - Palm oil is of growing importance in the food, cosmetic and detergent industry due to its nutritional and chemical features.

Biofuel feedstock - The international growing demand for renewable energy sources drastically increased the demand for palm oil as a low-cost raw material.

(See respective sections for more detailed information)

Fig. 2 (Thoenes 2006) Global Palm oil production and trade over the past 50 years

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In its scopes of applications Palm Oil is very versatile. Its favorable nutritional and chemical properties make it a common ingredient in a variety of everyday food products, cosmetics and detergents. About 90% of the worlds consumed palm oil is used for edible purposes (Corley et al. 2003), found in about 50% of all packaged food products in supermarkets today (WWF 2009). Cholesterol free, raw palm oil is the richest dietary source of provitamin A carotenes and contains other valuable minor constituents such as vitamin E, ubiquinones and sterols (Ping et al. 2000) and is therefore regarded as an important mean to tackle Vitamin A deficiencies (Benade 2003) and stabilize food security in developing countries. While, being an alternative to trans-fats which are closely associated with heart disease, contributed to its popularity especially in Western countries. Expanding populations and ascending living and nutritional standards in India and China trigger a seemingly insatiable demand on the markets of Asia (Murphy 2007). It is not surprising then, that the EU and China are the principal importers of palm oil. Despite its growing importance in the food industry sector, the utilization for oleo chemical and biodiesel production will soon exceed the remaining 10% significantly, and will contribute further to rising market demand and likely prices, the primary incentive for enhanced production. In 2008 the worldwide production amounted to almost 39 million tons (FAO 2009b), and is predicted to double by 2030 and to triple by 2050 (Greenpeace 2009a). For instance Indonesia is planning to add another 4 to the existing 6 million hectares by 2015, as a reaction to predicted biofuel demands.

Overall, output in Malaysia and Indonesia is forecast to rise by 9 and 12 percent respectively. In the case of Malaysia, growth is expected to be mostly sustained by yield improvements, whereas in Indonesia it is the expansion in mature area that should drive the expansion (Greenpeace 2009b).

The two major worries related to the predicted production increase of palm oil are; that plantation expansions will exert direct pressure on forested areas and its biodiversity, and secondly that the conversion of agricultural land, formerly used for staple food cultivation will lead to rising food prices, compromise food security and ultimately result in the expansion of food production into forest frontiers (Fargione et al. 2008, Fitzherbert et al. 2008, Reinhardt et al. 2007).

3. Biodiversity Issues

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Fig.3: (RSPO 2007) Productivity and energy balance in GJ/ha of major oil crops.

3.1 The Oil Palm on the march

With its 4 tones/ha/a of potential yield, year-round fruit bearing and a productive span of 25–30 years, the oil palm is the most effective plant for oil seed production (Murphy 2007, RSPO 2007). Therefore it has been adjudicated as a valuable mean to reduce land use pressure, as it needs less area per unit vegetable oil produced (WWF 2009), and to have a lower environmental impact than the other oil crops in general (Murphy 2007). This underpinned by the energy balance, which weighs the energy inputs used for instance to produce fertilizers, pesticides and fuel for machinery against the crops output, and is most positive for palm oil compared with other oil bearing fruits (RSPO 2007, Reinhardt et al. 2007). Consequently, these results imply reduced pollutant emissions per produced energy unit and spares water, soil and air quality (Tan et al. 2009, MPOC 2007).

Yet, stagnating yields have characterized average plantation output over the past decade (Murphy 2007), and reason suggests that the predicted further increasing demands will therefore be met with agricultural expansion at the cost of tropical forested areas. Agricultural expansion and intensification are known driving forces of habitat destruction, fragmentation and other major threats to biodiversity (Danielsen et al. 2008, Fitzherbert et al. 2008, Kessler et al. 2007). Unfortunately, in the case of palm oil, suitable cultivation areas coincide with fragile and valuable remnants of wilderness. Nevertheless, in order to meet the growth in global demand, palm oil producers are expanding plantation sides at the cost of remaining primary forests in designated biodiversity hotspots; Sundaland and Wallacea in Southeast Asia, as well as in the Guinean Forest in West Africa (Fitzherbert et al. 2008, Mittermeier et al. 2004). Fitzherbert et al. (2008) estimated the effects of palm oil expansion by a survey of literature, which compared biodiversity in forests and plantations. In the latter, only 15% the species across all taxa dwelling in forests could be encountered. However, the few species that do occur are disturbance tolerant generalists of low conservation concern (Danielsen et al. 2008). Also, such an encounter of an individual does not necessarily mean that oil palm plantations provide suitable habitats for the respective species, as many individuals are likely to simply transmigrate through plantations in an increasingly fragmented landscape.

Fig.4: (Fitzherbert et al. 2008)

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Again, the named studies reduced the claims of oil palm stakeholders, that plantations are actually beneficial for biodiversity to absurdity (Koh and Wilcove 2008 a). A major area of concern is the Indomalayan archipelago, which harbors a disproportionately high share of biodiversity. Indonesia`s 17,000 islands have been isolated for millennia so unsurprisingly it has extraordinary species richness and levels of endemism (Nellemann et al. 2007). Cannon et al. (2008) modeled the biogeographic development of the Sundashelf since the last glaciation maximum (LGM) and showed that current evergreen rainforest distributions are merely remnants and its communities are therefore in a refugial stage. These results imply that most species are passing through significant population bottlenecks and emphasize the urgency of conservation and management efforts to maintain these.

The expansion of oil palm and subsequent habitat destruction is explicitly named in the IUCN red list as a threat to the following vertebrate species; the Sumatran tiger (Panthera tigris ssp. sumatrae), Sumatran Orangutan (Pongo abelii), Bornean Orangutan (Pongo pygmaeus), Bornean Gibbon (Hylobates muelleri), Bay Cat (Pardofelis badia), Western Tarsier (Tarsius bancanus) and the Bornean Banded Langur (Presbytis chrysomelas).This is but a minute fraction of species directly affected by palm oil expansion. A total of 280 species listed by IUCN in the categories CR, EN, VU, and LR/cd are hit if the search criteria restricts the threats to palm oil related issues (agricultural intensification, assess roads etc.). This accounts for Malaysia and Indonesia alone, while oil palm has also been reported to replace forests in Thailand, Myanmar, and Papua New Guinea (Fitzherbert et al. 2008).

A juxtaposition of the global areas suitable for further oil palm cultivation with areas of high endemism and, depicts a worrisome accordance (Fig.4). Despite the acknowledged overall value and vulnerability of the ecozones in question, they will be in the focus of oil palm expansion to a growing extent. Increased demand and consequential land-use pressure already put many species at the edge of extinction risk, and will have devastating effects in the near future, if the current ways of proceeding will not change drastically.

3.2 At the heart of the problem: Deforestation

Fig.5: Deforestation process on Borneo 1900–2005 & projections towards 2020 (Nellemann et al. 2007)

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Indonesia is not only rich in terms of species diversity but also in ecosystems. Its major forest types range from evergreen lowland dipterocarp forests in Sumatra and Kalimantan to seasonal monsoon forests and savanna grasslands and also nondipterocarp lowland forests and alpine areas in Papua. Most of these habitats are under serious threat from legal or illegal logging (Nellemann et al. 2007). Data and Figures from many sources confirm this frightening picture (Danielsen et al. 2008, Fitzherbert et al. 2008, Koh and Wilcove 2008, Koh 2007). In 1950 Indonesia was still densely forested, while today is experiencing an unprecedented and still accelerating rate (1996; 2 mil. ha/a) of tropical forest loss in the world. The World Bank estimates, that 60% of the lowland tropical rainforests, the richest in timber resources and biodiversity, of Kalimantan and Sumatra was destroyed between 1985 and 1997 alone (FWI/GFW 2002) and is predicted to disappear almost entirely by 2022, if current trends continue (Nellemann et al. 2007,Greenpeace 2009b)

The ecological impact of oil palm depends crucially on the extent to which its expansion causes deforestation (Fitzherbert et al 2008). It has been repeatedly claimed by governmental officials and producing companies such as the Malaysian Palm Oil Council (MPOC) and interrelated scientists (Basiron 2007, Tan et al 2009), that new plantations are almost exclusively being erected on already degraded land, or the pre-existing croplands that have been replanted (Fitzherbert et al. 2008, Koh and Wilcove 2008 b). While this might hold true for traditional plantation areas where palm oil cultivation is long established such as the Malaysian regions Perak and Pahang, with an average growth factor of 14% and a total area increase of 38 respectively 80 thousand ha of the commodity, the overview draws a different picture. A study assessing the impacts of palm oil expansion over a ten-year period (Kessler et al. 2007) came up with an overall palm oil growth rate of 41% in Malaysia (+ 1.600.000 ha) and 52% (+2.300.000 ha) in Indonesia. Reason suggests that this growth can hardly be met with crop shifting, and degraded land is in many cases simply deforested land that was fallow for a vague period after legal or illegal logging. Koh and Wilcove (2008 a) used FAO data to falsify these claims of the palm oil lobby. They showed that during the period 1990-2005 more than 50% of the oil palm expansion in Indonesia, holding the sad record of the fastest rate of increase forests being converted into oil palm plantations (UNDP 2007), and Malaysia occurred at the expense of forests (Fig 6).The effects on biodiversity in such a biogeographically special region with high levels of endemism species richness and species of high conservation concern are of course devastating (IUCN 2009).

Venter et al. (2009) overlaid two maps of Kalimantan, one depicting planned and ongoing oil palm developments, the other forest coverage. The results showed of 8.09 million hectare appropriated to oil palm extension plans, 3.34 million hectare were forested land and 0.38 million hectare peat forests. This habitat destruction would directly affect 40 out of 46 threatened mammal species at an average reduction of the species range of 5.9%.

Fig.6: Bar chart depicting the area loss of pristine forest due to oil palm plantation extensions in Malaysia and Indonesia, based on FAO data (Wilcove 2008)

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While still disputed a few years ago (Fitzherbert et al. 2008) and denied by palm oil stakeholders, it is a well-recognized fact among scientists, NGOs and governments alike, that the expansion of palm oil plantations is today´s pre-eminent driver of deforestation in tropical Southeast Asian countries (Danielsen et al. 2008, UNDP 2007). This development is even more daunting, as a recent study (Reinhardt et al. 2007) illustrated the existence of idle land, suitable for palm oil production. The assertions by the MPOC that palm oil palm expansions take place on idle land are false but feasible. However, the establishment of palm oil plantations on fallow land would initially cause high expenditures while excluding timber revenues. Only after a time period of 5 years the oil palm produces a good crop of fruit, and timber revenues are readily drawn as bridge-over finance. Logging companies use palm oil cultivation as an justification for clearcuts (UNDP 2007), while in many cases have little desire to establish plantations once the standing forest has been harvested (Soka et al. 2007, Nellemann et al. 2007, FWI/GFW 2002, Fitzherbert et al. 2008).

Deforestation is evidently the most devastating outcome of oil palm expansion, but by far not the only one. How this new economic sector triggers an entire cascade of ecosystem decay is best explained with a concrete example:

3.3 A Case study; The Sumatran Orangutan (Pongo abelii)

There is two species of Orangutans, the Sumatran Orangutan Pongo abelii and the Bornean Orangutan Pongo pygmaeus listed on the IUCN red list, the Sumatran Species falling into the CE (critically endangered) category, while the Orangutan native to Borneo is listed as EN (endangered). The different placements of the two species has manifold reasons, but can certainly be associated with the Bornean orangutans ability to tolerate habitat disturbance, while Pongo abelii densities decreased rashly even where selective logging was applied (Singleton et al. 2008).

The criteria for these categories alone, state the imminent threat to these flagship species depending on high-quality primary forests; For P. abelii, a population decline of over 80% during the last 75 years (as an average equivalent to three generation length) has been recorded. The last estimate of 7,300 individuals occupying a forest area of roughly 20,5 million hectare (Singleton et al. 2008) was done in 2004 and is likely to be overrated since population trends are declining ever since. Most of its range is situated outside of protected areas, and thus particularly subject to the ubiquitous destruction and degradation of ecosystems (Nellemann et al. 2007). Corollary, the major contributing processes to the dramatic decline in individual numbers have been identified as habitat loss (mainly from conversion to oil palm plantations) and habitat degradation and fragmentation (Robertson et al. 2008). Unfortunately, these universally applicable threats to biodiversity do not exempt nature reserves. Satellite imagery showed that in Indonesia, 37 out of 41 national parks are affected by illegal logging to up to 50% of the total area, some of which are prime habitats of orangutans (Curran et al. 2004). As natural timber resources outside of borders become scarce, the incentives to exploit the large commercially valuable stocks within reserves are growing. Furthermore illegal national and international trade and poaching remain problematic, as Orangutans are long sellers as pets or bush meat, despite being listed on Appendix I of CITES and strictly protected under Indonesian domestic legislation. Insufficient numbers of rangers are employed due to fund shortages, and the few existing are mal equipped and trained, whilst confronted with huge areas to monitor and armed security staff, employed by illegal mining and logging companies, resorting to bribery or even violence if necessary (Nellemann et al. 2007).But the notion that all activities threatening the orangutan and its many fellow suffering species are illegal is misleading. At the root of the matter lies a much more complex structure with weak legal framework conditions, deficient law enforcement and corruption along with bureaucratic constraints all ignited by financial incentives, which antagonize any conservation measures effectively.

Palm oil drives deforestation both, with the primary motive to clear space for cultivation of the cash crop, but also as a partner to a timber and pulp industry that seeks access to new revenues (Venter et al. 2009). These industries have a strong lobby, and their products make up a substantial part of the country’s export revenues. The opportunity costs for the conservation of the landscapes within orangutan ranges instead of erecting further palm oil plantations are, under the given sociopolitical structures, too high.

A recent example demonstrates how corruption reduces conservation efforts to absurdity. A logging concession has been given to Asia Pulp & Paper (APP) and the Sinar Mas Group to clear 50.000 hectare of forest around the Bukit Tigapuluh National Park. Exactly this area is home to 100 critically endangered orangutans, which were successfully re-introduced from captivity into the wild after decades of scientific preparations. The logging will not only destroy their habitat in a nick of time, but will also adversely affect critically endangered Sumatran tigers and elephants.

Once a logging concession is issued, a fatal chain reaction is triggered; Deforestation induces severe fires, destroying further primary or secondary forests (Greenpeace 2009b). Access roads are needed to transport the logged timber to the next sawmill or harbor. The direct effects of these roads are, first the fragmentation of remaining forest stands and other biotopes (Robertson et al. 2008, Singleton et al. 2008) and second the entailment of laborers moving along. The increased population pressure ignites fatal conflicts with locals, when orangutans raid fruit crops at forest edges (Singleton et al. 2008), while small scale timber extraction and slash and burn practices for domestic uses, cause habitat degradation and ad to deforestation to a remarkable extent. Many casualties among Orangs are also due to starvation especially where oil palms replace fruit bearing trees (Nellemann et al. 2007), of vital importance for the frugivores. Additionally, population and habitat sizes have dropped below a threshold where self-enforcing, adverse biological and behavioral mechanisms engage. For instance, in the Sebangau swamp forests of central Borneo it was observed, that orangutans fled from illegal logging operations into less ideal habitat. The resulting overcrowding led to an increased death rate among young orangutans, and fewer births amongst females (Nellemann et al. 2007).

If, under biofuel-driven agricultural expansions, present trends continue, the minimum viable population (MVP) size will soon be undershot. If this species is to survive, it´s last strongholds will have to be protected more viselike. The Leuser Ecosystem conservation area, in the north of Sumatra Island encompasses 2.6 mill hectare and roughly 75% of the remaining Sumatran orangutans. A 900.000 hectare large mountainous section of it, the Gunung Leuser National Park, is a Man and Biosphere reserve as well as a part of the Tropical Rainforest Heritage of Sumatra World Heritage Cluster Site (Singleton et al. 2008), and therefore subject to fortified international leverage. Among other measures to prevent deforestation, degradation and fragmentation in Indonesia, the international fold should use this influence rigorously in order to keep all further harm from this loophole for the species of P. abelii.

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