Of late there has been much reporting in the media questioning the sustainability of Malaysian palm oil production turning it into the whipping boy of Europe and the US. This article analyses the chronological events leading up to this state of affairs to examine if the backlash is indeed unfair and if there is a way forward to get past this impasse.
Granted, we have much to thank the palm oil industry. It has contributed greatly to the nation’s GDP and reduced the poverty rate in Malaysia.
However, we often read that the success of the industry did not come without a price:
Today, we are so successful but we went through so many challenges. “Because of the success of our palm oil, countries that produce other vegetable oils attacked us …
“Because we are so competitive, that’s why they are always targeting palm oil …
– Datuk Seri Mah Siew Keong, Minister, Plantation Industries and Commodities, Malaysia
As may be expected, the palm oil industry’s potential adverse impact on environment and climate change will strike anyone knowledgeable out there who is concerned about the fact that as palm oil production was being scaled up, simultaneously, rainforests were being displaced on a massive magnitude. Further, there are growing concerns about food safety among European and American households who as consumers have a heightened awareness about such issues.
When did the attacks start and why are they continuing?
As far back as the 1980s, the palm oil industry first came under fire when international environmentalists became aware of, and brought to the attention of governments and public at large, of the vast destruction of tropical rain forests in order to plant oil palm.
The Earth Summit also known as the “UN Conference on Environment and Development” in the year 1992 (some 25 years ago) in Rio de Janeiro, Brazil, raised awareness of deforestation linked to climate change. Since then, oil palm cultivation has gained prominence as an important contributor to climate change by way of land use change including deforestation and cultivation on peatlands.
Then in 2002, the Malaysian government initiated the Biomass Power Cogeneration in Palm Oil Industry (BIOGEN) project which was supported by UNDP and the Global Environment Facility (GEF). Through this project the government and the industry learnt of the big potential to reduce the carbon footprint of palm oil production through the energy content of its biomass residue at the palm oil mills.
During the COP15 Climate Change Conference 2009 at Copenhagen, Denmark, the Prime Minister pledged that “Malaysia is adopting an indicator of a voluntary reduction of up to 40 percent in terms of emissions intensity of GDP by the year 2020 compared to 2005 levels.”
Six years ago, reports surfaced suggesting that palm oil has a potentially carcinogenic contaminant in particularly high levels. Thanks to the reports, the government and industry got together and are now working together towards adopting processing technologies that aim to reduce or eliminate the contaminants in palm oil.
Then last year (2016), against the backdrop of the Paris Accord on Climate Change, the French government wanted to raise taxes on Malaysian palm oil. But the Malaysian government managed to save the day by lobbying and this proposal was eventually defeated in the French parliament.
More recently, a resolution by the European Parliament has called for the European Union, EU to phase out – by 2020 – the use of vegetable oils in biodiesel that are allegedly produced in an unsustainable way, converting rainforests or peatlands into oil palm plantations. The resolution further calls for development of a single certification scheme to guarantee that only sustainably produced palm oil enters the EU market. This resolution particularly targets palm oil and might affect the exports of palm oil to Europe and eventually other developed countries.
Lately, France has declared that the use of palm oil as a source of biofuel will be restricted.
Thus the whole episode has been a debacle for decades since the 1980s and throughout this time the palm oil producers have dismissed these environmental concerns as trade issues.
Is the Western consumers’ imposition of restrictions on palm oil consumption justifiable?
It is clear that Western consumers are acting out of their concern for the adverse impact on environment and climate change by their consumption of palm oil, since they tend to have higher levels of general environmental awareness. Their quest for environmental protection and food safety has been to-date largely ignored by the producers.
The stick and carrot approach has not worked with the palm oil producers.
To some extent we may label the resolution as discriminatory because all the palm oil that goes into Europe will need to have a European certificate but, importantly, one which will not be required for other oils. Perhaps this is because the other vegetable oils do not involve land use change such as deforestation and cultivation on peatlands which are the main culprits of high carbon emissions.
With increasing global demand for vegetable oils for both food and biofuels, we cannot escape from the question of what raw materials are the most competitive ones from an environmental standpoint. Application of nitrogen fertilizers is by far the most important source of greenhouse gas (GHG) emissions in production of feedstock for biofuels, as long as land use changes are not part of the analysis. While palm oil has high nitrogen productivity, land use change by way deforestation and cultivation of oil palm on peatlands, unfortunately, far negates the productivity of nitrogen in this crop in terms of high carbon footprint.
When peatland is cleared for plantations, the underlying peat needs to be drained, releasing GHG into the atmosphere, which in Malaysia averages very high emission rates of above 55 tonnes CO2 eq per hectare per year contributing to climate change. These carbon dioxide emissions will continue for decades until all the carbon is exhausted through the emissions, adding to the carbon footprint account of palm oil production.
Malaysia will be badly affected if the European Parliament resolution comes into being. The government and the palm oil industry are shocked. Why target palm oil when we claim we too are serious about sustainability because didn’t we come up with the Malaysian Sustainable Palm Oil (MSPO) certification which will be made mandatory in 2019? In fact the industry is pinning a lot of its hopes on the MSPO. In addition, we have never ceased to point out 56% of the land area in Malaysia is under natural forest cover. After all, carbon and biodiversity conservation correlates closely with our national Sustainable Development Goals and addressing climate change.
With all this affirmative action under our belt, why then is the Malaysian palm oil industry today still largely linked to deforestation and the extinction of endangered wildlife such as orang utans, tigers and elephants?
Between the COP15 Conference at Copenhagen in 2009 and the COP21 Paris Accord on Climate Change in 2015, that is, in a short span of just about 6 years, the planted area of oil palm has increased by a whopping million hectares as government statistics indicate. We do not know the extent of natural forest felling or peatland drainage involved in the increased planted area.
Could it be that the western world doesn’t buy the fact that more than half of our country’s forests are reserved and gazetted for protection? Why should this be the case? Could it be perhaps that the ground realities via satellite images tell a different story?
Despite the industry’s rhetoric, one wonders if there is a coalition of political and agribusiness interests that are putting “profits” well ahead of “planet” despite all the sloganism spewed?
To be fair, the western world does acknowledge and has always acknowledged that the palm oil industry has played a pivotal role in developing countries such as Malaysia, Indonesia, Latin America and Africa, contributing not only to vital export earnings but also lifting farmers and smallholders out of poverty.
So why this backlash from Europe now? Aren’t they supposed to be our friends? It would appear that Europe’s grievance perhaps has something to do with not just the overall degradation of the planet in general, for example the pollution of rivers, depletion of biodiversity and loss of habitats and species, but something that can and would affect them directly. Case in point – carbon emissions. An ounce of carbon emissions from the Malaysian palm oil industry has the power to have a detrimental effect on global warming that can hit any country, since we all share the same air space, be it Asia, Europe or the US. No one will be spared.
Every cloud has a silver lining
Demand for biofuels
Over the years, palm oil has expanded in its appeal not only as the most widely used vegetable oil in the world and found in nearly half of all packaged products in the supermarket but to become an important weapon to tackle global warming and climate change via its potential to replace fossil fuels.
In fact, when the world turned its focus to biodiesel as one solution or pathway to combat the woes of burning fossil-based fuels, named as the culprit of global warming, the US and Europe did have a healthy appetite for palm oil, including that sourced from Malaysia, a fact supported by their offer of lucrative huge subsidies for palm oil.
But … the subsidies come with a condition to encourage sustainability in a big way. In order to qualify, palm oil exporting countries would have to ensure that burning their palm oil / biodiesel has a lower carbon emission than burning fossil fuels. So the support from the western world has been there for quite some time. Not only was palm oil from Malaysia welcomed with open arms, lucrative subsidies were dangled. Therefore, palm oil producers could not have missed the writing on the wall when developed countries had long declared their stand on carbon emissions in the life cycle analysis of any product, including that of palm oil.
The same voices that give new impetus to palm oil growth are also deafening in demanding that the industry must strive to attain higher levels of sustainability and transparency throughout the entire supply chain. Hence the recent Amsterdam Declaration that requires palm oil producers to meet the Roundtable on Sustainable Palm Oil (RSPO) standards.
How does the MSPO certification differ from the established Geneva-based Roundtable on Sustainable Palm Oil (RSPO) certification?
The official Malaysian stand is that the Europeans need to be convinced or need further convincing that the MSPO is an all-inclusive certification that would safeguard the environment and palm oil quality. What is the issue the palm oil producers find against RSPO certification that Europe demands? What is the issue that European consumers find against MSPO certification that Europe rebuffs? Only if the certification scheme is credible can the European consumers trust the commitments and product claims of the certified producers, especially concerning carbon footprint of the product.
The RSPO has clearly explained and strongly worded its principles, criteria, indicators, guidance and requirements for compliance with environmental provisions. It is a voluntary scheme by thousands of buyers and producers.
Competitiveness of palm oil vis-à-vis other vegetable oils
After the European Parliament’s nearly unanimous vote in April this year, seeking to end imports of non-sustainable palm oil for biofuels by the end of the decade, we have to accept the fact that Malaysian palm oil is not attractive for the biofuel market in Europe and USA due to its high carbon footprint.
The irony is that palm oil is in an advantageous position compared to other vegetable oils by virtue of its high biomass residue accrued in its production. Nearly 75% of deliverables to the palm oil mill is output as biomass residue. This advantage can be used to reduce its carbon footprint to compete with any other vegetable oil but, to-date, this has not been exploited. This is despite renewable energy and diversification of energy supply for national security purposes were highlighted as far back as the 5th Malaysia plan (1986-1990) – some 31 years ago!
Recognition of the above potential has created new opportunities for market expansion and increased revenue for palm oil companies, that is, even greater economic success At least it is an opportunity for them to show their genuine concern for carbon emission issues in their fields.
However, in Malaysia, sadly, this huge reservoir of potential in the palm oil industry in general, and more specifically in palm oil mills, remains untapped. We’re still unable to qualify as a low-carbon biofuel to take advantage of the biofuel quota mandate in the EU and US, which would boost the demand for made-in-Malaysia biofuels, internationally as well as domestically.
And now it appears that that window of opportunity is closed with the EU Parliament vote.
One of the unexpected bonuses of climate change mitigation measures is the surfacing of surprising new opportunities and benefits to the palm oil industry which can work well towards strengthening the bottom line and nudging it towards a more positive image. And yet Malaysia is not able to grasp these opportunities. Why? And how far are we from making it? Is it way beyond our reach or is the gap bridgeable?
And yet the writing has been on the wall for a long time!
In Europe, any biofuel used in diesel mixtures to participate in the mandated quota must offer a 35% carbon reduction according to life-cycle analysis, whereas palm biodiesel only offers 17%. So at present we are unable to penetrate the European mandated market. However, this trend can be reversed using available technology which has the potential to actually bring about a further reduction of more than 35%. The technology even has the potential to give 2nd generation biofuels a run for their money.
The Renewable Energy Directive 2009/28/EC “RED” in Europe require a 35% GHG emission saving from the use of biofuels until 2017. However, from 1st January 2018, GHG emission savings from the use of biofuels was stipulated to be at least 50%. One would have assumed that the Malaysian palm oil industry has discounted the biofuels market in Europe, with the directive in place since 2009 and no effort made to reduce its carbon footprint.
In the case of the US, the U.S. Environmental Protection Agency EPA has ruled that Malaysian palm oil biodiesel does not qualify for renewable fuel substitution market because it can only reduce lifecycle GHG emissions by 17%. EPA requires at least a 20% reduction to qualify for its renewable fuel mandatory quota. This means in the case of the US, we only need to qualify for a further mere 3% reduction in lifecycle GHG emissions to qualify for its quotas.
However, Malaysian palm oil growers were embroiled in dispute over the findings instead of finding ways to reduce the carbon footprint through mitigation efforts. A minority of peer reviewers questioned EPA emission estimates for palm oil.
On the outcome of the peer review, the EPA of the USA has voiced to the Governments of Malaysia and Indonesia that clean energy generation using biomass residue at the palm oil mills is a way to reduce the carbon footprint of palm oil to qualify palm oil for biofuel use.
A peer study commissioned by United Plantations Berhad, a Denmark based reputable palm oil producer in Malaysia, once for all put to rest the controversy of carbon emission of palm oil production which shows that indeed the carbon footprint is very high and that Europe’s concern is justified.
And the good news is that a solution to build bridges with our traditional European partners already exists and is readily available.
Fight or flee?
In response, if not retaliation, both Malaysia and Indonesia plan to join forces to counter the above so-called ‘misguided’ attacks.
But what if?
But what if, instead of heading on a collision course vis-à-vis the Amsterdam Declaration, Malaysia could instead show that we are indeed sincere about our concern for the environment, so much so that the government is willing to partner with plantations and technology providers to initiate some local R&D that has the potential to make the whole palm oil production process practically carbon-neutral? That we too view sustainability issues seriously and are willing to step up to the plate to address the elephant in the room, rather than just dismiss it under the label of ‘unfair discrimination’?
Good news. Hope is not lost. Malaysia does have a solution to the current impasse which can demonstrate that we Malaysians are capable of engineering innovation; one that can even help mend our ties with our traditional trade partners – Europe and the US.
It can help us with our commitment to COP 21 as reproduced below:
MALAYSIA’S INTENDED NATIONALLY DETERMINED CONTRIBUTION
- Malaysia intends to reduce its greenhouse gas (GHG) emissions intensity of GDP by 45% by 2030 relative to the emissions intensity of GDP in 2005. This consist of 35% on an unconditional basis and a further 10% is condition upon receipt of climate finance, technology transfer and capacity building from developed countries.
- Malaysia has reiterated its commitment to retain 50% of its forest areas after signing an agreement with 195 countries at the Paris climate change talks (COP 21).
We need to prove that the above are not merely lip service.