Palm Oil Monitor Weekly Update – 17th September

NYDF: Another year, another commitment

The New York Declaration on Forests (NYDF) has released its first five-year assessment report, and it’s pretty sobering reading for those who were present when the 2014 declaration was signed.

For those who weren’t around then, the NYDF was a set of commitments that were agreed to by a relatively small number of national governments (37), and around 53 companies. The NYDF was partly the initiative of the Norwegian Government, but it was largely pushed by political strategist Glenn Hurowitz, who headed up the firm Climate Advisers and is now part of anti-palm oil Foreign Agent registered lobbying outfit Waxman Strategies.

The aim of the NYDF was to halve deforestation by 2020. That’s just a few weeks away, and the bad news is that the target isn’t even close. According to an assessment report commissioned by the NYDF’s secretariat, tree cover loss has increased by 43% since then. This is even with the injection of more than USD 22 billion being thrown at the problem in the form of climate and deforestation programs.

The interim report of the NYDF – released nearly three years ago now – was one of the first pieces of research picked up by policymakers that pointed out palm oil really isn’t a big contributor to deforestation. It demonstrated – with very fancy graphics – that the deforestation footprints of commodities such as beef, soy and maize are significantly higher.

Despite this, the new assessment report still keeps its focus on palm oil. Sometimes it’s even positive – it points out that palm oil companies are not only making more commitments than other commodity companies, but also the commitments made by palm oil companies are generally more robust. For palm oil, it’s around 54%, compared with 26% for soy and 20% for beef.

But arguably the best data is that on primary deforestation in Indonesia. Primary forest loss for palm plantations has been falling since 2009 – and it is now a smaller driver of forest losses there than timber and small-scale agriculture.

This leads into an additional point in the report that in our view isn’t emphasised enough: the disconnect between smallholder livelihoods and lofty Western consumer-facing goals. It goes through these points as follows.

First, poverty drives deforestation:

Poverty can also drive forest loss. A lack of livelihood alternatives and increased population pressures often trigger unsustainable forest use to meet basic needs. For example, shifting agriculture shapes over a quarter of all forested land in the Democratic Republic of Congo and accounts for 70 percent of total tree cover loss in that country … in the absence of alternatives, the clearing of trees to produce charcoal and cash crops remains one of the few opportunities for the rural poor to earn cash, fuelled by the demand from growing cities.

Second, poor smallholders are a major part of the palm supply chain:

Some commodity supply chains, such as beef and soy in Brazil, involve large agribusinesses, whereas others, such as palm oil in Indonesia, significantly involve smallholders. The various forms and complexity of these supply chains make it difficult to define generally applicable strategies that address deforestation.

And third, these two factors mean that poverty can remain unaddressed in deforestation commitments:

Most companies only engage with their direct suppliers to ensure compliance with their sourcing requirements. This leaves millions of smallholders — who form a significant production base in the palm oil sector in Indonesia and the cocoa sector in West Africa — lacking the adequate technical and financial capacity to meet deforestation-free supply-chain goals

This is something that we – and other voices in the palm sector – have been voicing for years.

A case that is often brought up is the fact that Unilever had to cut thousands of smallholders from its supply chain in 2013 to meet traceability commitments. After a backlash, this prompted some larger manufacturers to put more effort into supporting smallholders.

Despite this, the truth behind smallholders and consumer-facing commitments has been largely disregarded by Western NGOs, lobbyists and policymakers as nothing more than industry advocacy.

The most recent case is in the RED, when the exemption in the Delegated Act for a narrow set of smallholders was dismissed as a ‘loophole’ for large plantation operators by European NGOs. Transport and Environment on multiple occasions, and Members of the European Parliament Katerina Konecna and Bas Eickhout, during a public meeting of the European Parliament Environment Committee on the RED Delegated Act on 20^th February 2019, publicly disregarded, the role of smallholders in the first place. Mr Bernd Kuepker from the EU Commission’s Directorate General for Environment, in charge of the RED, also diminished the definition of smallholders during an Expert Group Meeting on 5^th March 2019.

If the goals of rural smallholders and larger industry coincide, does that make those goals unworthy? If so, someone should probably let European rapeseed farmers know.

The New Commission: Bad News for Palm

European Commission President Ursula von der Leyen has announced her new Commission line-up for the next five years. The Commissioners-Designates will have to go through a grilling in the European Parliament who must give their consent – or not – before the new Commission takes office on 1^st November 2019. The selection for Trade Commissioner was probably never going to be met with applause by the palm oil sector, but the choice – former Agriculture Commissioner Phil Hogan – is going to mean a very difficult time for palm exporters.

Hogan has been a friend to European farmers for the past five years – and that was his job. Part of the rationale for his move into trade is that it will give European farmers a degree of confidence on trade policy.  Copa-Cogeca – the EU’s most powerful farmers group – has been explicitly lobbying for more influence in trade, and this was brought home when the Renewable Energy Directive trilogue took place. Copa-Cogeca went out its way to make sure EU farmers had a greater say:

“By definition, I would say that DG Agri most probably was not properly consulted. It’s more a political decision than a decision based on agronomical facts … We need to keep in mind that quite often when we talk about agricultural commodity markets, other Commission services are keen on putting their requirements and proposals in place; but it is quite often that DG Agri has to pick up the pieces and correct the situation.”

And on ILUC, Hogan has always been a supporter. In 2013, he stated:

ILUC is a challenging but important environmental dossier that seeks to limit the emissions due to indirect land-use change associated with the use of conventional biofuels. It is imperative to address this issue and options in that regard including steps to promote more advanced and sustainable feedstocks that do not create an additional demand for land.

In other words, we have a Trade Commissioner that is pro-EU agriculture, and pro-ILUC. Malaysia and Indonesia should be wary.

Moreover, former Vice-President Frans Timmermans will return, and will this time oversee all Climate Action policies. Vice-President Timmermans was a vocal opponent against palm oil during the RED negotiations, and his nomination will likely mean a difficult time, as he will reportedly be in charge of handling the implementation of the RED Delegated Act.

A Fire Update: Are we still blaming palm oil?

Despite the world’s fire crisis capturing the world’s attention, there still remains an uncritical focus on the link between fires and palm oil. This has largely come from NGOs and uncritical news websites.

Let’s just stand back for a moment and look critically at where the fires are in the world right now, and which of those grow palm oil.

Global Forest Watch remains the go-to source for raw data on all things forest-related. Here’s its global fire alert summary for the week of September 5 to September 12, broken down by the top-ten countries, with additional numbers for other countries, and Indonesian provinces.

If there doesn’t appear to be a correlation, that’s because there isn’t one. A case in point: Colombia produces significantly less palm oil than Malaysia, but has more than twice the fire alerts.

It might be argued that Indonesia is a special case, simply because it has large numbers of smallholders, relatively high poverty, weak tenure systems and overlapping jurisdictions that make land management difficult when compared a country such as Malaysia.

In which case, if the palm-fire theory is correct, there should be a correlation between palm plantation areas and fire alerts. But this doesn’t  appear to be the case , as demonstrated below with additional data from ArcGIS.

Now, we admit that a week isn’t a great sample – but that is precisely what is happening in the media, i.e. fires have emerged, so pundits are blaming palm oil. So we’ve attempted something else.

We’ve mapped the highest national-level number of fire alerts across the past 12 months against a property rights index from the DeSoto Institute.

Even at the macro policy level, it’s difficult to find any correlation. And believe us, we’d love to find a clear correlation between property rights regimes and fire alerts. Property rights appear to be weaker where there is a high incidence of fire, but Australia complicates that. It’s worth noting that in the annual sample, major palm producing countries don’t figure – at all.

Finally, we’ve looked at the most recent literature on Indonesia’s forest fires, and this paper from scholars at Stanford and Dartmouth published this year has a very good summary:

We find that El Nino explains most of the year-on-year variation in fire. The creation of new districts increases fire and exacerbates the impacts El Nino on fire. We also find that regional economic growth has gone hand-in-hand with the use of fire in rural districts. We proceed with a 30,000-village case study of the catastrophic 2015 fire season on Sumatra and Kalimantan and ask which villages, for a given level of spatial fire risk, are more likely to have fire. Villages more likely to burn tend to be more remote, considerably less developed, and have a history of using fire for agriculture.

The shorter story here is that fires – and the resultant haze — are particularly complex. The causes are myriad. Pointing fingers at one person, product or sector neither prevents fires nor puts them out. And it certainly doesn’t help prevention of future fires, if you’re focused on the wrong thing for ideological reasons instead of following the facts and data.