Agrofuels in Asia: Fuelling poverty, conflict, deforestation

Almuth Ernsting

Even before the current stampede into agrofuels, Indonesia was beginning to contribute significantly to the emission of greenhouse gases, not through its lifestyle, but through the drying and burning of peat. Emissions of peat lands are currently not included in official statistics. If they were, Indonesia would rank third among emitters (behind the USA and China), rather than 21st, where it is currently placed.1 If all the carbon in South-east Asia’s peat, possibly as much as 50 billion tonnes, were allowed to enter the atmosphere it would make a highly significant contribution to global warming. [2]

Large-scale peat drainage started in 1996 with Suharto’s disastrous Mega Rice Project in central Kalimantan (the Indonesian part of the island of Borneo) and continued with the expansion of timber and oil-palm plantations. Before the plantations could be created, the area had to be drained and, as this happened, the peat began to oxidise and to emit carbon dioxide into the atmosphere. At the same time, the peat began to desiccate, turning into a tinder box that would ignite during the dry season. In 1997 and 1998 fires raged through 6 per cent of Indonesia, burning 11.7 million hectares of land. During these fires Indonesia’s peat released into the atmosphere a huge amount of carbon dioxide, equivalent to 13–40 per cent of global fossil fuel emissions that year. Peter Aldhous, editor of the science journal Nature, used quite uncharacteristic language to describe the impact of the burnings in Borneo: ”He [Suharto] succeeded only in creating a smouldering heap of ash that blights the lives of local people – and threatens to destabilize the global climate by belching vast quantities of carbon dioxide into the atmosphere.” [3]

Since then, peat drainage and annual fires have continued to emit up to 1 billion tonnes of carbon into the atmosphere every year, and peat drainage is now accelerating with the creation of further oil-palm and timber plantations. The destruction to date already gives cause for grave concern yet much worse undoubtedly lies ahead. Palm oil is by far the most energy-efficient feedstock for biodiesel. Yields from palm-oil diesel are five times higher than those from rapeseed oil and three times higher than those from jatropha. This means that the present agrofuels frenzy is likely to lead to an uncontrolled expansion in palm-oil production in many parts of South-east Asia. Just over half (55 per cent) of the region’s peatlands remain undrained, and it seems almost inevitable that over the next few years almost all of it will be transformed into giant biodiesel plantations, mainly of oil palm. Barring a policy U-turn, this will lead to an additional 42–50 billion tonnes of carbon being belched into the atmosphere in the coming years. This could well make it impossible to stabilise the global climate, even if fossil fuel emissions are cut drastically. [4]

It seems scarcely credible, but this suicidal policy is being promoted as part of a global strategy to mitigate global warming. In an extraordinary exercise in blinkered thinking, parties to the Kyoto Protocol can ignore the carbon emissions caused by the destruction of peat and fund South-east Asia’s palm-oil and biomass industry through the Clean Development Mechanism (CDM), which has as one of its key planks the promotion of agrofuels. The agrofuel market is being artificially boosted by government targets, subsidies and other incentives, with little attention being paid to where agrofuel crops are being planted and the environmental damage their cultivation may cause.

The Kyoto Protocol gives Annex I countries (that is, industrial countries that have signed up to Kyoto) a strong incentive to set agrofuel targets: instead of having to reduce fuel use or force the automobile industry to make only fuel-efficient cars, countries can claim that they have reduced their greenhouse gas emissions by using agrofuels. Even though the true carbon emissions from the deforestation and peat drainage linked to agrofuel production can far exceed those of the mineral oil they replace, they don’t have to be counted because they happen in the global South, where there are no caps on carbon emissions. Agrofuels thus allow rich countries to claim credits for ”emission reductions” when they have effectively exported them and, overall, helped to accelerate global warming.

So far, no CDM funding has been granted to manufacture liquid agrofuels, be it ethanol or biodiesel, but discussions are under way about making them eligible for large-scale carbon credits. The issue is controversial and a UN panel of experts (Methodology Panel) is recommending that the first application for carbon credits for palm-oil production for biodiesel in South-east Asia be refused because it could lead to more deforestation. [5] However, political pressures are strong and this recommendation could be ignored.

Ambitious expansion plans

Malaysia expanded oil-palm plantations to 4.17 million hectares in 2006, with the most rapid expansion in Sarawak and Sabah on Borneo. The country is the world’s largest producer and exporter of palm oil, with a 45 per cent share in global palm-oil production, compared to Indonesia’s 39 per cent. Malaysia’s per hectare yields are about twice as high as Indonesia’s, and production is more intensive, with a high use of fertilisers and pesticides (including the highly poisonous paraquat – now used legally again after a four-year national ban).

Indonesia, however, intends to overtake Malaysia. Over the next 20 years, it plans to increase palm-oil production 43-fold, with the area under cultivation expanding from 6.4 million hectares in 2006 to 26 million hectares in 2025. [6] Plans for large-scale sugar-cane and jatropha plantations, also for agrofuels, are being drawn up at the same time. [7] But the expansion may not be quite as fast as the government hopes. Some 12 million more hectares have already been deforested, supposedly for oil palms, but have not been planted. This has fed suspicions that some of the companies are primarily interested not in agrofuels but in quick profits from timber sales. Indeed, Indonesia’s palm-oil yields continue to be well below the global average, and it is by no means certain that the plantation owners will heed the government’s exhortations to invest the money required to achieve large productivity increases. Much will depend on the global biodiesel market, which is the main driver of palm-oil prices. At the moment high palm-oil prices are promoting investment in oil-palm plantations, mills and biodiesel refineries, and the government keeps granting new concessions for large areas of land directly in response to high biodiesel demand and crude palm-oil prices. In 2006, media reports about strategic alliance talks between Indonesia and Malaysia were published which suggested plans for a crude palm-oil cartel, though no final decisions have been announced so far. [8]

For the moment at least, there is little need for a cartel. Rising palm-oil prices are accelerating expansion in mainland Malaysia, West Papua and Sulawesi, and the agrofuel industry is establishing a foothold elsewhere in South-east Asia. Cargill, for example, is increasing its investment in oil-palm plantations and mills in Papua New Guinea, and the PNG government is drawing up a strategy for turning the country into a major agrofuel producer. Thailand is importing palm oil and expanding its own plantations, and the number of oil-palm plantations in the Philippines is also growing – though Indonesia’s expansion plans are by far the most ambitious in South-east Asia. While Malaysia and Indonesia are also looking at other agrofuel feedstocks, such as sugar cane and jatropha, their biofuel strategies rely primarily on palm-oil expansion.

Local communities pay the cost

“It’s as if we were ghosts on our own land. We have been so pierced through by the spines of the oil palm that we are almost dead, left haunting what once was our own land”  [9]

The people of Indonesia and Malaysia will pay twice for this misguided “climate strategy”: rapid global warming will threaten the lives of ever larger numbers of Indonesians, with 2,000 islands at risk of being submerged in coming decades; and many communities will lose their livelihoods as millions of hectares of land are turned into agrofuel plantations. Indigenous and local communities will be disproportionately affected, because palm-oil expansion is happening largely at the expense of rainforests, peatlands and lands under “customary rights”, i.e. belonging to them. At a meeting of the UN Permanent Forum on Indigenous Issues in May, chairwoman Victoria Tauli-Corpuz warned that 60 million indigenous people worldwide, 5 million of them in West Kalimantan, are likely to be driven off their land in the near future to make way for agrofuel plantations. [10] Many of them have already had their lives severely disrupted by logging, and in some ways the agrofuels boom is no more than the intensification of a model of destruction already under way. Many of the palm-oil and biodiesel companies belong, in fact, to groups which have been profiting from logging and the timber trade for decades.

The agrofuel frenzy is sounding the death knell for most of the region’s forests, many of which have already been heavily felled. The United Nations Environment Programme warns that, within 15 years, 98 per cent of Borneo’s and Sumatra’s rainforests – some of the most biodiverse ecosystems on earth – will have been destroyed. The total number of people living in classified “State Forest Areas” in Indonesia could be as high as 90 million, and of these, according to Watch Indonesia, some 45 million depend on the rainforests for their food and livelihoods. [11] Indonesia’s government hopes that palm-oil expansion for biodiesel will create 5 million jobs, a figure that Watch Indonesia believes could be far higher, perhaps even twice this. Even so, this would leave 35 million people facing destitution. According to Marianne Klute of Watch Indonesia, “Sumatra already resembles a single mega-plantation. Now Kalimantan is being transformed into a kind of greenhouse where fuel is produced for the energy needs of the industrial countries”. [12]

Not surprisingly, the land appropriation is generating conflict. By the end of 2006 there had already been some 350 conflicts in Indonesia. Indonesian NGO Sawit Watch recently warned in an Open Letter to the European Union: “These unresolved conflicts will get worse if the current biofuels policy is put in place. They will deprive further local communities and indigenous peoples of their lands and livelihoods.” [13] Thousands of communities, formerly self-sufficient in food from forest ecosystems and traditional agriculture, now have to purchase rice on the domestic market, putting further pressure on Indonesia’s rice supply, which is already under strain from global warming and land conversion to non-agricultural developments.

Sawit Watch has shown that most of the concessions for oil-palm cultivation are unconstitutional in that they take no account of the customary rights officially enshrined in Indonesia’s constitution. In March 2007 the organisation Save Our Borneo said that the customary rights of 2,000 Dayak communities in central Kalimantan were threatened by palm-oil expansion plans. There are regular reports of human rights abuses – imprisonment as well as murders – against those resisting land takeovers by companies or protesting about poor working conditions. The aggressive expansion of oil palm is likely to exacerbate the human rights situation, particularly in areas, such as Aceh or West Papua, where there are already conflicts over other issues.

About one third of oil-palm plantations in Indonesia are held by smallholders, and the government’s expansion plans foresee a scheme by which a large plantation will lie at the centre of each production unit, surrounded by a large number of much smaller plots. Many smallholders have been pressured into accepting land title deeds for less than half the area they were cultivating previously. Moreover, the smallholders are rapidly losing their autonomy, for they incur debts converting their land to oil-palm plantations and then become dependent on the plantation owners for the crushing and sale of their produce. When interviewed by Sawit Watch, many said that palm oil did not offer them a sustainable livelihood. [14]

Malaysia, meanwhile, does not fully recognise customary or indigenous land rights, and land conflicts are particularly common in West Malaysia and Sarawak, where plantations are being established on land claimed by indigenous Orang Asli and Dayak communities. The government plans to develop one million hectares of oil palms in Sarawak on land under Native Customary Rights.

Who is behind South-east Asia’s agrofuel industry?

South-east Asia’s agrofuel industry is barely two years old, yet it has already provoked an extraordinary investment frenzy and attracted billions of dollars of national and international capital investment. Both the Malaysian and Indonesian governments are supporting the expansion of the industry with tax breaks, subsidies, state company investment and domestic agrofuel targets, and both have ring-fenced 40 per cent of crude palm oil for biodiesel. By the end of 2005, Malaysia had 58 licensed agrofuel investors, the largest of which were the Malaysian companies Golden Hope, IOI Corporation, Kulim and Carotino. In Indonesia the largest investment deal was clinched at the beginning of 2005, when PT Smart (Sinar Mas Group) finalised a US$5.5-billion investment deal with China National Offshore Oil Corporation (CNOOC) and Hong Kong Energy. Another large Indonesian business group, Raja Garuda Mas, announced a US$4-billion investment deal in May this year, which includes oil-palm plantations and a new biodiesel refinery on Sumatra.

Sinar Mas, Raja Garuda Mas and the Salim Group were amongst Suharto’s cronies. Having lost some of their power after Suharto was overthrown, they have now strengthened their position under decentralisation and, according to some reports, operate as a state within a state, dividing up Kalimantan among themselves and ruling with the help of paramilitaries. They have close links with China, and all three groups gained notoriety in the destructive timber trade. APP and APRIL, the companies that bear much of the responsibility for the destruction of Sumatra’s rainforests, now form part of groups which are destroying Kalimantan’s and West Papua’s forests for palm oil (extracting and selling the timber in the process). [15] While the palm-oil biodiesel boom reinforces the power of old elites, new players are also entering the market, sometimes forming close links with older business groups.

Other important investors in palm-oil biodiesel are the older Indonesian Bakrie group, also amongst the Suharto cronies but without links to China, and large Malaysian and Singaporean companies, such as Wilmar International. In May 2007, the Chinese company CNOOC announced plans to build three biodiesel refineries in West Kalimantan, apparently as the sole shareholder. Multinational companies such as Archer Daniels Midland (ADM) and Cargill are also investing directly in South-east Asia, while energy companies such as Shell, Neste Oil, Greenergy International and BioX Group are either entering into partnerships with other palm-oil biodiesel companies or, as is more often the case, importing large quantities of South-east Asian palm oil. The booming sector is attracting large amounts of major venture capital, with fund holders such as the Carlyle Group and Riverside Holdings making multi-billion-dollar investments in biodiesel companies which intend to import crude or refined palm oil for biodiesel. This investment will soon be boosted by international financial organisations: both the World Bank and the Asian Development Bank have said that they will prioritise funding for agrofuel production in developing nations.

The main markets for South-east Asia’s palm oil for biodiesel are China and Europe. India continues to be amongst the three main palm-oil importers, though it prefers home-grown jatropha to imported feedstocks for agrofuels. This policy has angered South-east Asian governments yet, even without India importing biodiesel, global demand for palm-oil biodiesel already outstrips the growth in supply. Palm oil is used not just for biodiesel but increasingly for heat and energy production: in Germany most combined heat and power generators run on palm oil, [16] while BioX in the Netherlands is about to open two power plants which will use palm oil. In the US, Imperium Renewables is building the first large biodiesel refinery to handle large amounts of palm oil from Malaysia, while Australia opened its first palm-oil biodiesel refinery in November 2006. This year’s ASEAN Conference reaffirmed strong regional support for agrofuels, a position which was warmly welcomed by the European Union.

Despite the heavy investment, the agrofuel industry does not see palm oil as more than a transitional fuel source, which should be replaced by more efficient cellulosic ethanol within 15 years. From their point of view, this is just as well, for soil erosion and fires will ensure that South-east Asia’s biodiesel boom is short-lived. Biodiesel plantations are expanding quickly on the 20 million hectares of peat lands and, once peat oxidation is complete, no soil will be left. The white sandy soil in other parts of Borneo will fare little better. According to US academics Lucas and Tadeus Patzek, soil erodes in mountainous parts of Indonesia 30 times faster than in the US. [17]

“Sustainable agrofuels”: false promises and solutions

There are few open defenders of rainforest destruction for the production of agrofuels, and the environmental devastation caused by palm-oil expansion in Indonesia has become an embarrassment for many agrofuel companies and lobbyists. So much so that two leading UK agrofuel companies (D1 Oils and Greenergy Biofuels Ltd) do not mention their use of palm oil on the main pages of their websites. The Malaysian government, under strong influence from the Malaysian Palm Oil Board, tries to deflect criticism to their southern neighbour, Indonesia, and claims that neither deforestation for palm oil nor peat fires are happening in its country, despite satellite evidence to the contrary. In response to the critics, several governments and companies are developing “sustainability standards”, so far without any involvement of southern NGOs. Proposals discussed in Europe range from a total import ban on palm oil (rejected by the European Parliament and the European Commission), via mandatory certification with the possibility of selective import bans, proposed by the Dutch Cramer Commission, to the mere self-reporting requirement promoted by the UK’s Low Carbon Vehicle Partnership.

At the international level, the Roundtable on Sustainable Biofuels, in consultation with industry, is drawing up ‘standards’, again without any southern NGO participation. The main proposal seems to be to divert production away from primary forest to “degraded wastelands” – even though those wastelands are very often community or small farmers’ lands – or to logged forest, even though this is still rich in biodiversity compared to the green deserts of oil-palm plantations. Even these inadequate standards would rely on the goodwill of corporations like Sinar Mas and Raja Garuda Mas, renowned for having in the past broken every single agreement to protect national parks and so-called “high conservation value forests”.

Another idea is that biodiesel should be made from rapeseed, seen as a sustainable alternative to palm oil. Although this is not a satisfactory solution from an environmental point of view – because, according to the European Environment Agency, oilseed-rape monoculture is seriously harming Europe’s biodiversity – it is at least true that Europe has no rainforests to destroy. However, the underlying argument in favour of rapeseed oil – namely, that it will reduce demand for palm oil – does not appear to be valid. The Food and Agriculture Organisation believes that, on the contrary, the increased use of rapeseed for biodiesel production has become one of the driving forces behind the rise in palm-oil prices worldwide. This is because food and chemical companies are increasingly turning to palm oil now that rapeseed and other alternative vegetable oils are being used for fuel. [18] This means that the expansion in rapeseed-oil biodiesel in Europe is now one of the driving forces for rainforest destruction in South-east Asia.

However unpalatable it may be to the agrofuel lobby, the truth is that there is no known policy mechanism by which it is possible to produce large amounts of agrofuels without devastating forests, farmlands and peatlands in South-east Asia and other regions in the global South. It is a basic law of economics that heavy demand will lead to higher prices, which will lead to greater supply. The only effective long-term solution is for the developed world to reduce its demand for fuels. Because they do not want to accept this basic truth, agrofuel advocates are, somewhat bizarrely, proposing the use of force to override market pressure. The United Nations Environment Programme, which is an enthusiastic supporter of agrofuel expansion, is calling for international funding for paramilitary “rangers” to patrol national parks and to protect Indonesia’s biodiversity. [19] The only way they can see of protecting species and high-biodiversity areas while promoting large-scale agrofuel expansion is to rely on the same paramilitary forces that until now have operated largely to enforce the rule of the palm-oil and timber companies.

Conclusion

Within less than two years, a multi-billion-dollar agrofuel industry has developed in Malaysia and Indonesia, using the world’s highest-yielding feedstock – palm oil. Their governments, supported by international investment, importing nations and international institutions, have drawn up a blueprint for converting large areas of their countries into mega-plantations to grow fuel for richer nations’ cars. The ecosystems being consigned to oblivion play a crucial role in regulating the carbon cycle. If we cannot protect them, then we cannot protect the global climate and thus our own future either. However, there is no way of stopping the destruction without reducing the global demand for palm oil. Ideally, this would require a global moratorium on monoculture agrofuels and on international trade in agrofuels, although a unilateral moratorium by Europe or any other large importer would go some way to dampen prices and thus investment.

References

1 http://tinyurl.com/yvmeth

2 Fred Pearce, The Last Generation,. Eden Project Books, 2006, p. 99

3 Peter Aldhous, “Land Remediation: Borneo is burning”, Nature, 6 January 2005, p. 13.

4 For references about plantation expansion and peatland emissions, see
http://tinyurl.com/yqf2lb

5 http://tinyurl.com/ys2u6f

6 For details of the expansion programme and the main investors in Indonesia, see Marianne Klute, “Green Gold Biodiesel: Players in Indonesia”, January 2007. http://tinyurl.com/33lb7r

7 Ibid.

8 http://tinyurl.com/2u43ay

9 Forest Peoples Programme and Sawit Watch, “Ghosts on our own land”, 2006, http://tinyurl.com/333yog

10 http://tinyurl.com/38rnf6

11 Forest Peoples Programme, Sawit Watch, HuMA and ICRAF, Bogor, “Promised Land: Palm Oil and Land Acquisition in Indonesia – Implications for Local Communities and Indigenous Peoples”, 2006, http://tinyurl.com/2tljpz

12 Watch Indonesia, “Fremdwort Nachhaltigkeit”, 2007, http://tinyurl.com/2w8a7n

13 Sawit Watch, “Open Letter: Palm oil for biofuels increases social conflicts and undermines land reform in Indonesia”, January 2007, http://tinyurl.com/yq5nur

14 Forest Peoples Programme and Sawit Watch, “Ghosts on our own land”, 2006, http://tinyurl.com/333yog

15 For details of the expansion programme and the main investors in Indonesia, see Marianne Klute, “Green Gold Biodiesel: Players in Indonesia”, January 2007, http://tinyurl.com/33lb7r

16 http://tinyurl.com/3xxros

17 Lucas and Tadeus Patzek, “The Disastrous Local and Global Impacts of Tropical Biofuel Production”, Energy Tribune, 6 March 2007, http://tinyurl.com/37z6gw

18 P. Thoenes, FAO Commodities and Trade Division, “Biofuels and Commodity Markets: Palm Oil Focus”, 2006, http://tinyurl.com/2kmgb5

19 UNEP, “The Last Stand of the Orangutan”, 2007, http://tinyurl.com/2m33d7