Legislation and palm oil: South America and Southeast Asia

On October 4 2012, Sophia Gnych and Philip Rothrock of ZSL spoke with Rhett Butler, the founder of the environmental news organization Mongabay.com, to discuss policies and legislation related to palm oil in Indonesia and Brazil. Rhett has extensive experience in the field tropical forest conservation and the environmental impacts of the palm oil industry. Mongabay.com reports on a wide range of environmental topics including consistent coverage of issues relating to the palm oil industry.

Keywords: palm oil policies, land use planning, concession data, Indonesia, Brazil, smallholder equity in mills

1. In your experience, what are the key pieces of legislation that have had the largest impact on sustainability within the palm oil industry?
On the supply side, the EU has ongoing discussions on their biofuel policy, and similarly the U.S. Environmental Protection Agency (EPA) has been discussing greenhouse gas emissions and environmental safeguards related to palm oil. While these policies are not legislation yet, they will have a big impact on biofuels. Right now, the palm oil industry mostly sells palm oil for food and cosmetic products, but in the future it is hoping to greatly expand palm oil sales to make biofuels. This will be the future of palm oil.

Palm oil seedlings

Palm oil seedlings ©Mongabay.com/Rhett Butler

Brazil provides an interesting model from a legislative standpoint. While, Brazil’s laws are not always evenly enforced, it has some very progressive safeguards for palm oil production, mandating smallholder participation and all sorts of other environmental regulations.

I am not sure if we can use Indonesia’s system (Indonesian Sustainable Palm Oil (ISPO)) as a model right now because it is hard to say what kind of impact it is going to have. Malaysia is establishing its own palm oil certification based on legality rather than on sustainability criteria and Indonesia is doing something similar. The establishment of these legal certification systems indicates that there is a lot of non-compliance. Indonesia already has plenty of land use laws, but they are not enforced very well. Protecting High Conservation Value (HCV) areas is incredibly important and needs to be addressed within legislation.

2. What are some of the largest barriers for ensuring forest conservation policies are implemented?
One of the largest barriers to forest conservation is the basic economic motivation for oil palm developers and smallholders. It is a lot more profitable to convert an area of forest into an oil palm plantation than to conserve the forest. Many goods and services produced by forests are limited to informal markets. This has always been the challenge. Right now, standing forests have limited market value so it is hard to put a value on forests.

A big issue in Indonesia is that the Ministries of Forestry and Agriculture tend to dole out large forested areas rather than degraded land for palm oil development. Companies are more interested in the forested land so that they can get a clear title to it and do not have to deal with local communities.  Also, oil palm companies can use the proceeds from logging to help kickstart their plantations. The natural progression is for logging companies to become plantation companies. I think this indicates the need for governments to develop appropriate land allocation systems.

Deforestation for oil palm plantations in Borneo

Deforestation for oil palm plantations in Borneo ©Mongabay.com/Rhett Butler

Both Indonesia and Brazil have a lot of problems with corruption. There is a need for transparency—for concession data to be posted online or made publically available. But it can be especially difficult to get people to comply with this request. If this information was made available, interested parties could more easily investigate why concessions were granted and/or who owns which concessions. Progress in transparency has been made in other commodity industries, such as the logging sector in Brazil. Indonesia is still behind on making improvements in transparency, but the REDD+ Taskforce has been pushing to make that data more publically available.

3. What policies and programmes can governments develop to protect the land rights of smallholders?
One important thing is recognising traditional use. In Indonesia, traditional land use is not always recognised by the state. There are signs that this may be changing, but historically that has been the norm. Sometimes companies will come in, lease a concession, and convert a community forest into oil palm plantation. As a result, conflicts can arise and the displaced community may move into protected areas such as national parks after losing their forests. That is just messy. Therefore, it is really important to recognise local land rights and tenure. There is also a need for cracking down on schemes between palm oil companies and smallholders that are abusive and employ debt bondage. Offering paths for smallholders in palm oil production and ensuring that their rights are protected is incredibly important.

Oil palm plantation worker ©Mongabay.com/Rhett Butler

One model that might be interesting to test is for palm oil developers and smallholders/local communities to form more collaborative partnerships or cooperatives where communities have an ownership stake in the palm oil processing mill or are employed more formally. For example, a community might own degraded grassland areas, which could be converted into an oil palm plantation. The community would maintain ownership rights of that land and hold equity stakes in the palm oil processing mill. In contrast with this scenario, the problem with some plasma schemes is that you essentially have indentured servants or debt bondage situations where the local people get a poor deal when negotiating control of their land with palm oil developers. They sell fruit bunches for whatever the palm oil company will pay for them, and the oil palm producers make all of the profits. The previously mentioned option would be a way to make it more equitable. Governments could support those kinds of initiatives.

4. Are there any financial levers that governments can use to provide incentives for best practice in the oil palm industry?
In Brazil, there are subsidised loans or low interest loans for plantation owners to abide by certain criteria. This provides a financial lever to try to encourage good behaviour within the industry. Essentially, if you register your property and comply with environmental laws, including maintaining forest cover, than you qualify for cheaper loans.

In terms of importing governments, India and the Netherlands have discussed offering some sort of tariff exemption for certified palm oil. That would be a potential way to encourage certified sustainable palm oil production, because growers could sell CSPO without the tariffs. Another incentive could come from payments for ecosystem services to encourage conservation of forest areas and displacement of oil palm expansion to non-forest lands. In Indonesia, there is a lot of grassland, where there is potential for expansion. Of course on degraded grassland there can be more land tenure and land rights issues that companies must address. One idea for overcoming this barrier is the model that I mentioned before, where communities have equity stakes in mills.

5. How can governments design policies that support enforcement of laws related to conservation, and how can technologies such as GIS and other technologies aid these practices?
Getting plantations geo-referenced and posting their land use plan in some sort of database would be incredibly useful, because it would give people an idea of what companies are allowed and not allowed to convert. Once you have this type of data online, data from satellites can be used to ensure that companies are not cutting down forests that are part of the legal reserve. Remote sensing can increase transparency, but the key thing is to try to get that data from the ground. So how do you get that zoning information in a database and make sure it is up to date? You can match the raster data with the laws on the ground and make that data available to the public online. Mobile phones are another tool that can help. Everyone can capture data these days. Anyone can be a reporter or an activist. Images and other information can be used to determine if a company is cutting down forests illegally. For example, FORMA is a system that is being developed by WRI, which has a crowd sourcing element where people can report on deforestation by sending pictures or other information.

The government’s role is not so much to update the laws to account for new technologies as to make sure that the data points are entered into an accessible system. For example, a government might require by law that anytime a producer receives a concession they must input the coordinates into a registry. I am not sure if it would be best for the government to operate the registry, but at a minimum there should be a reporting requirement and ideally that data would be accessible to the public. Then NGOs and others could monitor it, as I do not think I trust governments to do so. Therefore, having those open access policies with a reporting requirement would be beneficial.

6. In your experience, what barriers have you observed when connecting international commitments to regional actions?
International commitments are the baseline for policy. Looking at Indonesia, President Susilo Bambang Yudhoyono has committed to some progressive targets, but the policy has been slow to develop. It can be problematic when a president unilaterally states a commitment or an idea for a commitment and then you have to deal with the realities of how to make that into policy. The moratorium provides a clear example of how difficult this can be.

Two key issues are stakeholder building and showing where the interests lie.  In Indonesia, for example, most of the palm oil discussion is coming from industry, which takes the position that as it has been licensed to cut down forests then it is alright to do so, particularly considering that developed countries have done this in the past. It is a one-sided argument, so you do not necessarily hear the position of other stakeholders such as communities, civil society groups, and other NGOs.  A lot of the criticism seems to come from the West. Palm oil companies tend to use this as a way to simplify the debate into East versus West and deflect attention away from their practices.  I have noticed that everyday people don’t really focus that much on fighting back, which is particularly important for counterbalancing claims from industry lobbyists (see mongabay article). Local NGOs should not just focus on it as an issue of neo-colonialism but as everyone being taken advantage of by palm oil companies. These are real issues affecting people here in Indonesia. It is a messy process, but I think having more involved dialogue could be really helpful.

7. How can the policy challenges experienced in Asia and South America inform emerging legislation related to palm oil?
I think at a high level the main issues that you are seeing in Southeast Asia and South America are zoning, land use planning, and best practice issues. I think the whole idea of HCV areas is critical to land use planning, especially when you are dividing up the forest and trying to figure out where to expand agriculture. Expansion needs to be diverted to heavily degraded forest areas or grasslands. I think the RSPO plays an important role in trying to address these issues.

Another thing you need to look at is market factors. What policies are needed for managing the markets? The EU’s biofuels policy is changing pretty radically but could be improved by including certain sourcing criteria requirements. For example, it would be valuable to have information on operational specifications and best practices required by the renewable energy directive for companies wishing to sell their palm oil for biodiesel in a given area in the EU. Government policy plays an important role but needs to be complemented by best practices within the market.

8. To conclude, in your opinion what does a sustainable oil palm plantation look like? Is it possible?
This depends on your definition of sustainability. Oil palm plantations can have a lower impact, but at the end of the day it is still a monoculture. Integrated pest management systems are never going to be foolproof in a monoculture system. You are always going to have to deal with pests, and you can only have so many owls before you need to use some pesticides. The same goes for fertilisers; you can always do more composting and things like that, but you can ever really eliminate the need for chemical inputs on an industrial scale. While you can never fully reconcile those issues, you can strive toward a less damaging oil palm plantation.

Certainly when compared to annual crops such as corn, oil palm crops can be less damaging because you have more vegetation cover, and perennial oil palm trees will store much more carbon across their lifetime (up to thirty years) than will perennials. More sustainable oil palm plantations would have few chemical inputs, little run-off into waterways, methane capture facilities to generate electricity, and well-protected HCV areas and riparian forests with no encroachment. The RSPO has set up some good standards for these issues.

Nitrogen-fixing cover crop and integrated pest management-friendly flowers in an oil palm plantation

Nitrogen-fixing cover crop and integrated pest management-friendly flowers in an oil palm plantation ©Mongabay.com/Rhett Butler

For palm oil plantations to be more sustainable, the land rights of local people must be respected and they should retain control over the way the land is developed. Given that 30–40% of palm oil production is classified as smallholder in Indonesia, maximising efficiency and yields is important for sustainability. One big dilemma is that if you can produce ten tons of palm oil per hectare in an intensive plantation and you can only produce two tons in a smallholder plantation that means it would take five times as much land to produce the same amount of palm oil.

There are opportunities for improvements in conservation and greater integration of oil palm into agroforestry or polyculture for smallholders. A few oil palm trees could be mix planted with other crops such as fruit trees. Also, there is an opportunity to try to integrate oil palms with livestock. There have already been some interesting projects in the Solomon Islands that deal with these issues. Essentially, one must look for opportunities where you can get more out of an area than just one commodity.

These opportunities would not be suitable for industrial use, as they tend to focus on maximising efficiency and yields. However, innovation can and does come from smallholders where they may have more flexibility to develop more wildlife-friendly approaches. It is generally the bottom of the market that has caused the most environmental damage, but they have the most flexibility in terms of experimentation.

Interview of: Rhett Butler
Position: Founder of Mongabay
Organisation: Mongabay.com
Date: 4th October 2012

Summary table:
Mongabay summary table