Can Palm Oil Demand Be Met Without Ruining Rainforests?
Bloomberg (13/12/2019) - Palm oil is one of the world’s most widely used and controversial commodities. Cheap, efficient and extraordinarily versatile, it’s found in thousands of everyday products, from cookies to shampoo to fuel. Yet surging cultivation of oil palm trees is linked to burning of tropical rainforests and the destruction of wildlife habitats in Southeast Asia. Environmental concerns have spurred the introduction of so-called sustainable palm oil, but its credibility has been questioned and it’s not clear yet whether there’s adequate market demand for the “greener” version.
1. Why is palm oil so controversial?
The use of palm oil in food products has doubled worldwide in the past 15 years. About half of all items in a supermarket are now likely to contain it, and global consumption could climb to more than 100 million tons per year by 2025, 50% more than in 2016, according to researcher Gro Intelligence. To meet the demand, critics say, some growers in Indonesia and Malaysia, which together account for 85% of global production, use “slash-and-burn” land clearance techniques that routinely blanket parts of Southeast Asia with stinging smoke. In 2015, forest fires in Indonesia alone pumped out more greenhouse gases per day than all sources in the U.S. The fires not only spew carbon dioxide into the atmosphere but also destroy significant carbon-absorbing forests and ground cover.
2. What’s being done about it?
In an effort to reduce demand for palm oil, the European Union is restricting the types of biofuels made from palm oil that can be counted toward the bloc’s renewable-energy goals and aims to phase out palm oil-based biofuel entirely by 2030. Indonesia and Malaysia have called the act discriminatory and vowed to challenge it at the World Trade Organization. Another approach is to promote environmentally-sound palm oil cultivation. That’s the purpose of the Roundtable on Sustainable Palm Oil, an alliance of buyers and sellers formalized in 2004 that promulgates standards for “certified sustainable” palm oil products. Among its rules: Primary forests cannot be cleared to make room for new palm plantations and growers must abide by fair labor practices. The organization’s 4,000 members include farmers, traders, processors, manufacturers, retailers, investors, and environmental and social groups.
3. How is the push for sustainability going?
Currently, about one-fifth of global palm oil is compliant with the Roundtable’s sustainability standards. However, the value of the label is somewhat disputed. In early November, Greenpeace called eco-friendly palm oil “a con” because some Roundtable members are still cutting down forests. More than a dozen environmental advocacy organizations also endorsed a new report concluding that violations of the agreed-upon standards by Roundtable members are “systematic and widespread.” The Roundtable refuted many of the report’s findings, saying that the organization is still the best global system “to tackle the issues in the areas of the world when oil palm is grown.” A year and a half earlier, an academic study that used data from Indonesian Borneo had found no significant difference between certified and non-certified oil palm plantations on measures of sustainability.
4. Does sustainable palm oil have a future?
Beyond the credibility issues, there are challenges to expanding the market. Part of the problem lies in the industry’s complex supply chain, with output from enormous plantations and hundreds of thousands of small farmers -- many too poor to bear the cost of compliance audits -- ending up in products made all over the world. Tracking oil from the field to the grocer’s shelf requires significant monitoring and added costs to prevent, for instance, the mixing of sustainably-grown oil with product that doesn’t meet the standard. Certified oil sells on average for about 5% more than the regular kind. Producers report that they’re only able to sell about half their certified oil as such because buyers balk at the premium; sellers dump the rest as conventional oil and forfeit the price difference. The Roundtable in November rolled out a program to spur the market by encouraging members who buy palm oil to increase their purchases year over year.
5. What’s being done to help small producers?
One challenge that has plagued the Roundtable is how to draw in small growers, known as smallholders. The rules to meet sustainability requirements can threaten the viability of these farmers, who make up about 40% of production in both Indonesia and Malaysia. To ease their burden and encourage compliance, the Roundtable in November introduced a new, separate standard for smallholders that allows them to meet sustainability regulations in phases and provides training and support along the way.
6. Why is palm oil so popular?
Oil pressed from the fleshy fruit that grows near the trunks of oil palm trees has a neutral taste, long shelf life and high smoking temperature. It’s used mainly for edible purposes such as cooking and confectionery-making, as well as for biofuel and animal feed. Oil pressed separately from the kernels inside the fruit is more saturated -- and thus semi-solid at room temperature -- and is used to make soaps, cosmetics and detergents. Oil palms can grow on a variety of soil, are resilient to short spells of drought or floods, and bear fruit year-round for decades. Palm oil also has a much higher yield per acre than alternatives -- up to ten times more than rapeseed, soybean, olive and sunflower oils. Its cultivation uses only about 7% of the world’s farming land but accounts for about 40% of total vegetable oil production, according to Oil World. That means that if palm oil were replaced with alternatives, more land would be needed to produce similar volumes.