Palm oil and deforestation in Indonesia

Historical context

If the introduction of the oil palm in Asia took place in 1848, the actual production of palm oil began very quickly around 1858. The establishment of this production constitutes a major element in the development of agro-industry and will enable this country to become the world’s second largest producer of palm oil.

This new industry is experiencing rapid growth before the Second World War. The second world conflict will constitute a considerable obstacle to the flourishing of this activity.

In 1958, the plantations were initially nationalized before being retroceded by decree to Belgian, British and American companies in 1967. The sector will then again experience a boom from 1968 to 1996.

However, this growth will be poorly managed in the 1990s. The economic, financial and political crisis of 1998 will upset both the management of the forest environment and the development of the sector itself ³ .

Recent developments

Over the last 10 years, the rising standard of living of the Indonesian population has contributed to the expansion of this sector. Per capita fat consumption has more than doubled in Indonesia. The exceptional yield of the production technique of this crop and the control of its costs generated high revenues ⁴ .

Moreover, in a context of “energy revolution” and “new global green pact”, agrofuels have developed and are now presented as a solution to the many global crises: energy, global warming and economic recession. This environment has finally created a strong demand that favors the emergence of a new global market. This sector is therefore bringing actors eager to launch new land strategies aimed at redefining the original use of soils ² .

For its part, the Indonesian state supports the production of palm oil and agrofuels. However, experts and NGOs still doubt the effectiveness of this model based solely on exports. Indigenous people also oppose it. They are often criminalized by the government and especially accused of “antidevelopment”.

This market for palm oil and agrofuels is in an oligopoly situation. Only a few companies control the entire industry, with mostly Indonesian companies, 40% of them Malaysian. Some laws also limit the maximum size of farming areas to 100,000 ha . This regulatory engineering encourages some companies to create multiple sub-corporations to circumvent the legislation.

As far as financial institutions are concerned, they nonetheless play an important role in the palm oil market, where they encourage free trade, private investment and the granting of credit as instruments of economic development. ² .

Consequences

The development of palm oil export and agrofuels as well as the resulting growth have negative ecological and social impacts.

The use of fire as land preparation would be one of the main causes of deforestation and therefore of the decrease of biodiversity in Indonesia ⁴ .

Competition for the use of land causes property conflicts that highlight the unequal bargaining power between the parties involved, namely palm oil companies, state authorities and villagers ² .

Different measures and solutions to combat deforestation

With the aim of controlling CO ₂ emissions from deforestation and thus reducing the effects of climate change, the REDD system for reducing emissions from deforestation and forest degradation has been initiated worldwide. This is an opportunity for tropical forest-rich countries to create new sources of income through the provision of compensation, while protecting existing forests and rehabilitating degraded forests.

Indonesia was the first country to pass regulations for a REDD program in 2009.

However, this program is far from achieving its goals. A study of Indonesia’s financial governance and reforestation fund over the last 20 years is evidence of this. Its implementation requires rigorous management by the institutions and governments concerned to fight against corruption and fraud. Harmonizing incentive measures encouraging the development of new plantations for the paper and wood industry, ensuring sector accountability and equitable distribution of income are all important considerations in this framework ⁵ .

The RSPO ( Roundtable for Sustainable Palm Oil ), created in 2004, has taken shape to implement a policy of production, exchange and consumption of palm oil in a perspective of sustainable development. It is currently the best way for the sustainability of the sector ⁴ .

Indonesia has also followed the global trend by issuing laws for a mandatory mix of fossil fuels with agrofuels. It is in line with the European Union, which has been supporting the use of alternative energies since 2003 through several directives ² .

For their part, companies such as L’Oréal , Carrefour or Danone who use palm oil in their production chains have committed to source palm oil zero deforestation. It is estimated that today more than 75% of palm oil produced in the world passes through the hands of traders committed to zero deforestation targets ⁶ .

Notes and references