Palm Oil Monitor Weekly Update – 1st October 2019

COMMENT: EU aid lobby seems happy to ban palm oil. How about fighting fires instead?

This year’s haze event has been highlighted by a number of aid agencies, campaigners  and politicians around the world, particularly in the West. But this is not a new problem. The haze event of 1997 – more than 20 years ago – prompted the ASEAN Transboundary Haze agreement.

And since then, Western nations have tipped literally billions into environmental aid for Indonesia, including an extremely misguided attempt to pay Indonesian farmers not to farm – in the name of preventing emissions. With some exceptions, these programs have not been aimed at preventing fires or even managing fires once they have started.

Why has the Western aid lobby got this strategy so wrong?

A consistent and flawed narrative to come from Commission-funded NGOs and EU Parliamentarians is that oil palm plantations damage the lives and livelihoods of local communities in Indonesia.  This is then used as an excuse to place trade bans on or lobby for boycotts against palm oil in the name of development.

But in the haze and fire situation, we have a well-defined problem: Indonesia doesn’t have the capacity to deal with its fire problem, which causes social, environmental and economic problems locally and regionally, as well as environmental problems globally. Even at a more basic level, this year there have been reports from Indonesia’s National Disaster Management Agency (BNPB) that responsible local officials have not been attending fire management meetings.

Putting EU resources to work on firefighting capacity would produce a more tangible environmental result than continued lobbying for trade bans. It really comes down to this: does the aid lobby prioritise practical impact on the ground, or increasing its media profile through scare stories and dramatic demands?

 

Timmermans Puts His Green Gloves On

The ongoing battle between the EU and palm oil exporters has taken a back seat over the past month – largely because of fires and haze. However, in Brussels, it’s quite obvious that the bloc’s technocrats aren’t just talking about a ‘Green Deal’, they’re getting on a footing for a ‘Green Trade War’.

Dutchman Frans Timmermans has been nominated as Executive Vice-President-Commissioner Designate for the European Green Deal.

A letter from Commission President Ursula von der Leyen to Timmermans earlier this month said Timmermans “will ensure we mainstream biodiversity priorities across all policy areas, notably trade, industry, agriculture and maritime affairs.”

This is already playing out. According to Politico, Timmermans’ statements at the UN Climate Summit pointed towards a very clear direction on regulating trade on environmental grounds. According to Timmermans, the EU will:

“encourage the consumption of products from deforestation-free supply chains … This may soon lead to new EU-wide regulations with the aim to ensure that only deforestation-free products could be sold and consumed in the EU market.”

He’s also pointing towards labelling, stating:

“I want [consumers] to be able to see if their food contributed to deforestation or not, and labeling is one very efficient way for doing that.”

For those who haven’t been paying attention, this is very much part of the EU’s Action Plan on Deforestation. The Action Plan very much laid out a demand-side strategy for dealing with imported commodities that the EU says are linked to deforestation – with palm oil being singled out for the most criticism.

But the EU is looking at other measures that may have an impact on production within the bloc. Timmermans is looking at reforestation programs across the EU that will have an impact on farm incomes and output. That might involve paying farmers to reforest cropland or pasture to receive agricultural or environmental payments.

Let me be very clear … this means quite something for the EU’s Common Agricultural Policy. We need to rethink quite a number of things. We’re already moving in the right direction but not yet with the right speed.

At this stage, it’s not clear what direction that EU is moving with this, but given the historical levels of deforestation across Europe stretching back centuries, perhaps this makes a lot of sense.

 

Fire Update

Readers in Singapore and KL will be feeling a sense of relief that skies were visible towards the end of last week.

The number of fire alerts for the past week has dropped off slightly compared with earlier weeks. Here’s a summary:

  • Malaysia had 517 alerts to Thursday September 25, with 76 inside oil palm plantations, 72 in logging concessions and 134 in other plantation area (e.g. rubber).
  • Indonesia had 59,159 alerts, with 10,007 inside oil palm plantations, a total of 15,438 in roundwood/pulpwood concessions, and a total of 405 inside RSPO-certified concessions.
  • Globally, Brazil had 139,228 alerts and Mozambique had 89,869. Germany had 630 alerts, Italy had 595, France had 501 and Australian had 14,883.

Let’s just repeat that:

  • Malaysia had fewer fire alerts than Germany or Italy;
  • There were fewer fire alerts in oil palm areas than in all of Australia.

Yes, fires equal haze, but oil palm does not equal fires.  Most people in the region – who have to deal with the awful consequences of the fires – have wised up to the faulty palm oil haze link.

With some exceptions …

 

Greenpeace persists with the palm-haze link

Despite the faulty logic, Greenpeace Malaysia is persisting with the palm-haze narrative in KL. Its target on this occasion is Malaysia’s Genting plantations, while also mentioning Malaysian palm oil companies such as subsidiaries of IOI Corporation Bhd, Sime Darby Plantations, Kuala Lumpur Kepong Berhad (KLK), and TDM Berhad.

But Greenpeace’s primary target is Genting. Why? Because it is the only Malaysian company that has reported fires in its plantation areas across the strait in Indonesia, and it just happens to be the Malaysian company with the highest number.

But let’s put the Genting numbers – as reported by Greenpeace – into context.  It is reporting that Genting had 297 fire alerts across its Indonesian concessions up to September 16. Note that this is for an entire year.  However, as of September 25, this number is 222.

In roughly time (up to September 25), there were 425,991 alerts across Indonesia, with 57,074 in oil palm concessions. So Genting’s plantation areas have been host to –at most —  for 0.05% of fires across Indonesia, and 0.38% of fires in oil palm concessions over the past year.

In the past week, there have been 22 alerts in Genting areas. This is 0.037% of Indonesian fires 0.21% of Indonesian oil palm fires.

It’s also worth comparing Genting’s numbers to other companies – that Greenpeace didn’t go after in Malaysia.

Compared with Genting’s 22, Indonesia’s two largest palm producers have more than 1,000 alerts for the past week. For the year, Genting’s 222 compares with more than 4,000 for the two largest producers. And, ranking companies in Indonesia in terms of fire alerts over the past year, Genting comes in at 21 for the companies that can be identified. And there are some much bigger, higher-profile fish in there.

But underlying all of this is a simple point: fires on palm plantations are generally spread from community areas. Plantation owners will do everything they can to get those fires under control with the resources they have.

So, why has Greenpeace gone after Genting?

The first is probably to get attention. The organization needs a way to capitalise on the crisis now that Malaysians are generally aware that their own companies aren’t the problem, and that it’s squatters and a lack of fire-fighting and enforcement capacity in Indonesia.

For Greenpeace Malaysia not to be pushing a bandwagon at this time would be a missed opportunity, particularly given that this is the first major haze event since it established its KL office two years ago.

Second, RSPO’s RT is just around the corner. It’s no accident that Greenpeace appears to be pushing RSPO to investigate Genting.  This is unlikely to produce an outcome. The RSPO’s rules on fires are about making sure that you have the capacity to prevent and manage fires – within reason. Nonetheless, it will give Greenpeace some media time at what it likely to be a low-profile event.

But Greenpeace should probably read a great quote by CIFOR Director Robert Nasi:

“Instead of focusing our attention on fires that have already started, we would be better off paying more attention to prevention … Mismanagement and failure to prevent such a critical resource puts the livelihoods of hundreds of millions of people at risk.”

 

MSPO Gets a Boost

Malaysian Palm Oil Certification Council (MPOCC) CEO Chew Jit Seng has said that Malaysia needs to ‘go all out to promote MSPO’, particularly in the EU.

Chew tied his comments to the Amsterdam Declaration, which seeks to have all palm oil imported to the EU be certified sustainable by 2020.

“European leaders have stated that only sustainably produced palm oil can be allowed under the Amsterdam Declaration and I tell then MSPO is Malaysia’s answer … By 2020, palm oil shipments into Europe will be certified under MSPO and sustainably produced.”

The Amsterdam Declaration is not an EU-wide document; its signatories are Denmark, Germany, France, the United Kingdom, the Netherlands, Norway and Italy.

Although the Declaration states that it is seeking a sustainable supply chain, it does not specify which schemes it considers to be sustainable. Malaysia is seeking some level of official recognition by EU member states and the EU of MSPO as a sustainability standard that adheres to international norms for standard setting.

European authorities appear to remain reluctant, setting palm oil certification schemes up for specific criticism when examining ‘imported deforestation’. This is despite palm oil being the most certified commodity in the world, by far – whereas other commodities, with less certification commitments, have been labelled ‘low risk’ by Brussels.

 

RED: Is used cooking oil getting the palm treatment? 

About two months ago we ran a piece on the UK calls for used cooking oil (UCO) to be audited, in the belief that UCO being imported to Europe – and double-counted towards renewable targets – is in fact ‘laundered’ palm oil.

According to Euractiv, there is currently an ongoing investigation into a Dutch company for relabelling cooking oil as UCO, prompting an information session by the Dutch Government.

Like the UK report on ‘laundering’, there’s something of a misguided approach here. There is an inclination to point the finger at palm oil. But given there is an entire certification apparatus around UCO collection, processing  and verification, shouldn’t the finger be pointed at the collection and certification systems?

And as we’ve stated before, if used cooking oil is effectively twice as valuable in European renewable markets because its value has been distorted by the market subsidy, isn’t the subsidy effectively encouraging people to put more ‘used’ cooking oil into the system? Think of it this way: if you made used A4 office paper worth twice as much as unused A4 office paper, aren’t you just encouraging people to buy A4 paper and re-sell it?

 

IN BRIEF:

  • Is durian the next palm oil? Durian farmers in Malaysia are now being blamed for deforestation. New export conditions for Malaysian farmers and soaring demand in China have and continue to push prices up for durians – making them a particularly profitable crop. Some NGOs are now blaming them for deforestation. But is there a hitch as follows: Western lobbyists aren’t complaining about it (because durian doesn’t compete with European products) so presumably no-one in Brussels will actually pay attention?
  • China has imported more palm oil on a monthly basis than in the previous six years, according to Bloomberg. The demand surge is being driven by a drop-in soybean imports as the country’s pig herd is decimated by swine fever. The lower imports for feed mean there’s less oil in the market. China imported 590,000 tonnes in August, the most since 2012, and imports are up 59 per cent on the same period last year. Some EU NGOs have been calling on greater auditing of used cooking oil markets for the EU RED, linking higher imports of CPO to supposed fraud. They should perhaps take a look at what’s happening in China instead.
  • Thailand has firmed up its support for the local palm oil industry, mandating B10 biodiesel from January 1 next year, up from the current B7 standard. The measure is designed to provide assistance for local oil palm growers and the broader processing and consumer markets. The government provides support for farmers by way of price floors, but there’s also a ceiling for vegetable oil in the wholesale and retail markets. This tends to distort the market in every way possible. Providing biofuel support avoids that to some extent by placing any additional output into energy – rather than food – markets.
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