By Eliot Martin
Palm oil production has been grabbing headlines in recent years for the deforestation in ecologically sensitive areas it is purported to cause. While keen to the challenges of climate change and environmental degradation, several speakers at Indonesia's COP24 Pavilion events on the morning of December 7, 2018, pushed back against the prevailing dialogue of palm oil production being primarily destructive. Instead, palm oil production was touted as a boon to rural development and potential opportunity to meet other sustainable development objectives. Indeed, the Indonesian palm oil value chain highlights difficult trade-offs which developing countries face when lacking adequate international financial and institutional support for meeting environmental objectives.
According to speakers at this morning’s events, rural poverty has plagued Indonesia for decades, and the profitability of palm oil production in recent years has offered a promising way to help support livelihoods in the world's fourth most populous country. With proper management, palm oil has been viewed not only as a path to earning a livelihood for those with marginal incomes, but less land-intensive than alternative crops because palm oil productivity per hectare is multiples greater than any other oilseed. Because of its economic development potential, and relative ecological benevolence, the Indonesian government adopted a policy of granting land development rights for parcels less than 5 hectares for palm oil farms. Encouraged by the success of their peers’ palm oil farms, bolstered by policy support, and unimpeded by effective legal protections for forests, many smallholders have entered the market following unsustainable practices.
For some of the speakers from Indonesia, the economic development offered by resource exploitation was seen as a right. It was recognized that the world's most developed countries long ago depleted their natural resources to make way for development, and that similar pathways may be their only means of achieving the same prosperity. This position is guided by harsh economic realities rather than hubris, as the same speakers who advocated for land development, cherished sustainability initiatives. The Indonesian government too seems caught at the cross-hairs of preventing further deforestation and fostering economic growth. For the time being, the pendulum seems to have shifted towards a favoring of meeting environmental commitments.
It was expressed that Indonesia currently faces a three-year moratorium on deforestation/granting of further land development rights by presidential decree. Furthermore, the government has established a sustainability certification scheme for palm oil in partnership with domestic civil society partners and UKAID. The government has set the ambitious goal of having all its palm oil farms certified by its Indonesian Sustainable Palm Oil (ISPO) brand in under a decade (it’s worth noting that there are labor standards as well as environmental standards included in the program). In realization of the ambition of the effort, ISPO is attempting to work with buyers to get commitments only to purchase sustainable palm oil, such that sustainability certification can be the new minimum environmental standard. While a large portion of the success of the effort may rest on demand to assure there truly is only one palm oil market in the future, certification does offer potential economic incentive through slight price premiums.
According to one speaker from the Indonesian government, as the moratorium stands, approximately one-third of the country’s land-area is set aside for conservation. She claimed this was more than generous given the country’s massive population and development imperative. However, there are countervailing forces which continue to undermine stated good-will in balancing development and sustainability objectives. At the broadest level, the moratorium policy is doomed to be limited in its efficacy because it lacks clear legal definition of what is and isn't included—estimates for the amount of land covered varied by tens of millions of hectares. This complicates already limited enforcement mechanisms. Another challenge posed for achieving balance is imposed by demand expansion policy. In an effort to stabilize and increase palm oil prices, meet renewable energy production objectives, and improve nutrition, the development of palm oil biofuels and fortified cooking palm oil have been pursued. While supportive of sustainable development objectives in some ways, this also creates greater economic incentive for deforestation.
Indonesia now finds itself in a no-win position with a commodity that has become the backbone of its rural economy. The most promising path forward for the Indonesian people, and the planet may be reliant on a broad coalition of stakeholders from beyond its borders. Commitments are needed from companies to only purchase sustainable palm oil to shift demand signals. Greater financial and technical support will likely be needed to scale certification, enable firm legal protections and enforcements of land use, and promote sustainable intensification of existing farms. Indonesia isn’t going to compromise the gains to be had from palm oil production, and the word can’t afford the loss of Indonesia’s forests and ecosystems. This is just one of many cases which illustrate the complexities of sustainable development and the imperative that negotiators from around the world face in leaving Katowice with concrete next steps to implementing the Paris Agreement. While intergovernmental action is necessary, this case also illustrates the importance of thinking beyond broad level climate negotiations, involving varied stakeholders in the formation of specific policy actions and creation of more just markets. Greater capital investments and multi-stakeholder accounting for economic and legal levers at various levels of socio-economic structures are ultimately necessary to achieve economic-environmental win-wins.