Palm Oil Monitor – Weekly Update 1st October 2018

Indonesia Tries Another Moratorium

The Indonesian government has said that it has put in place a presidential instruction that halts new palm oil developments for three years.

Various environmental groups have welcomed the announcement, but it should be viewed with a degree of scepticism.

First, it’s a presidential instruction or ‘inpres’. This means it is a declaration from the office of the President, rather than a piece of legislation created by the President (‘Perpres’). This is of utmost significance. ‘Inpres’ declarations are best described as lower-level laws in Indonesia’s legal hierarchy.

Often these lower-level laws lack implementing regulation from the relevant ministry, and/or the relevant sub-national government. These means that although it is a legal instrument, the lack of regulation means it can’t be implemented.

Second, even with implementing regulation, that doesn’t mean the laws themselves are enforceable, meaning compliance might be low.

Any number of decrees may be issued from Jakarta that will require implementing regulation from provincial authorities. But as has sometimes been the case, the provinces can have an adversarial relationship with Jakarta.

Added to this is that resources for compliance and enforcement aren’t always there. Indonesia is a big country, but has limited resources. Provincial heads may simply not have the fiscal means to support large-scale reviews of oil palm plantation permits.

Third, we’ve been here before. In 2009, in the lead-up to the Copenhagen climate conference, President Yudhoyono issued what was effectively a moratorium on forest clearing. This was partnered with a USD 1 billion grant from the government of Norway as an incentive payment. But the fact of the matter was that the moratorium simply did not slow forest loss. In the six years after the announcement forest loss increased.

So why has the announcement been made now?

The EU’s planned restrictions on palm oil biofuels for the Renewable Energy Directive are without doubt causing producer nations a high degree of concern. Much of the language that the EU is using concerns risk of land use change (direct or indirect) in high carbon stock forests. A moratorium – if enforceable – would lower that perceived risk.

 Wilmar vs Greenpeace Heats Up

Wilmar and Greenpeace appear to have stepped up their war of words – and actions. Wilmar, for its part, has gone on a media blitz, pointing out that many of Greenpeace’s accusations are incorrect or outdated. However, factual accuracy has never been Greenpeace’s strong suit, and facts, no matter how compelling, are not going to force Greenpeace to back down.

Greenpeace has stepped up its public action, ‘occupying’ a Wilmar refinery in Sulawesi.  This is straight out of the Greenpeace playbook – from several years ago.

The question is this: who is Greenpeace attempting to convince with this additional action?

As we noted last week, Greenpeace is seeking greater support for its High Carbon Stock Approach methodology.

Wilmar was already implementing ‘no deforestation, no peat, no exploitation’ within its own plantations; it was already asking suppliers to comply with the same policies, and there are limits to how quickly companies can change supply chain practices. Their key demand was having access to having all supply chain information.

The point of leverage Greenpeace has is with purchasers in Western companies and in Western markets. Do purchasers think this new action is acceptable? One comment in the Straits Times last week stood out:

There is growing frustration among activists that big plantation companies, including pulp and paper suppliers, are, in effect, having their cake and eating it too by announcing big sustainability goals in order to hold on to brands such as Nestle and Unilever, only to hide misdeeds among their opaque supplier networks.

It may be the case that purchasers are for the most part satisfied with most efforts so far and understand that minor tweaks to RSPO no deforestation policies will only provide incremental environmental and economic gains. Having purchasers care more about the technical difference between a broad ‘no deforestation’ approach and the complexities of HCSA may be a tough sell. Consider also that companies like Nestle have announced that they will use satellites to monitor suppliers for deforestation. In these cases, who needs Greenpeace?

Swiss Farmers Swing and Miss

The Swiss Senate rejected a proposal to leave palm oil off the negotiating table in its future agreements with Indonesia and Malaysia as part of EFTA bloc (European Free Trade Agreement), comprising Switzerland, Norway, Iceland and Liechtenstein.

Senators rightly pointed out that forcing palm oil off the table would lead to a collapse in negotiations. That said, the palm oil trade between Malaysia and Switzerland is small, hitting around 35,000 tonnes annually. The bulk of this goes to the food industry.

The biggest opponents to palm oil in Switzerland are, unsurprisingly, rapeseed producers. There are around 8,000 producers growing on 15,000 ha.

This is not a significant number of farmers compared with the millions of oil palm growers across Southeast Asia. However, as the Belgian dispute over farming in the Canada Europe FTA showed, a small number of farmers can have a big impact in inward-looking European markets.

The Senate did, however, instruct negotiators to seek provisions on sustainable production of palm oil and the development of international standards for sustainable production. This second point is promising. The introduction of an ISO-endorsed standard for palm oil could be very welcome, particularly when international disputes over sustainability emerge. The starting point would likely be the MSPO.

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