The Oil Palm

Innovation Driving Growth of the Palm Oil Industry

Innovation in the palm oil industry continues to provide unique opportunities for a crop that boasts the highest efficiencies among internationally traded commodities. MYBIOMASS Sdn Bhd Managing Director Puvaneswari Ramasamy is looking to harness the potential from residue waste generated by the industry, notably empty fruit bunches, trunks, fronds and other by-products of palm oil cultivation and processing. In addition to generating energy with recovered palm biomass, companies such as MYBIOMASS are also exploring opportunities for using palm biomass as a feedstock for high-value chemicals.

New innovations were also introduced at the International Conference on Oil Palm and Environment (ICOPE) tofurther increase the sustainability of the industry. This includes the development of “designer plants,” which can be genetically altered to increase yields and to produce low saturated fat palm oil. And an environmental expert announced the discovery of microbes that could reduce the greenhouse gas footprint of oil palm plantations, by reducing emissions and improving carbon sequestration.

And while institutional initiatives such as the Global Science and Innovation Advisory Council (GSIAC) are looking to transform the industry, even small producers, such as a smallholder from Parit Pechah in Muar who has created organic fertilizer from empty fruit bunches, are finding innovative ways of exploiting waste from palm oil production.

Exporting Prosperity through the Palm Oil Industry

Recognition of Malaysia’s successful poverty alleviation through development of the palm oil industry continues to spread throughout the developing world, with the Philippines the most recent country to look to Malaysia as a model for sustainable development. The Philippine Palm Oil Development Council Inc. (PPDCI) recently commented on the need to include oil palm as a high yield value crop under the country’s National Greening Program (NGP), calling the oil palm, “Asia’s miracle farm tree,” and working with domestic non-governmental organisations (NGO) to bring prosperity to rural producers.

Even the US stands to benefit from the international trade in palm oil, with a new refinery being planned in the state of California for the US edible oil market.

And the importance of palm oil to global food security was highlighted at the Palm & Lauric Oils Conference & Exhibition Price Outlook 2012 in Kuala Lumpur. In noting the importance of the industry to feeding the world’s growing population, Datuk Carl Bek-Nielsen of United Plantations Bhd stated that “Oil palm’s contribution as a stabilising crop to global food security is now undisputed.”

Meanwhile, a recent report released by United Nations’ Food & Agriculture Organisation (FAO) has warned that food prices a rising anew. As a result, calls by environmental NGOs are being shown to be profoundly misguided, if not dangerous for developing world populations, according to Malaysian Palm Oil Board chairman Datuk Seri Shahrir Samad. Minister Samad stated that palm oil has done more to enhance food security than any other crop.

NGO Goal to Undermine Palm Oil Industry in Full Display at RSPO General Assembly

The NGO campaign against the palm oil industry was also in full display the RSPO General Assembly on March 8,with all resolutions to support palm oil producers put forth by the Malaysian Palm Oil Association rejected. Resolutions proposed by producers included a moratorium on RSPO certification until there has been sufficient uptake of existing supply, as well as reforming the RSPO’s governance to make it more balanced for producers.

Speaking on the sidelines of the General Assembly, producers expressed dismay and disillusion with the RSPO,  with one member stating that, “[the RSPO] has lost direction of what it had set out to do and has instead become a club for multinational companies, consumers and non-government organisations (NGOs).” Meanwhile, commentators such as the Malaysia Star’s Hanim Adnan have also been noting the growing dissatisfaction among producers in the RSPO, reflecting growing dissatisfaction with the slow uptake of certified palm oil and the introduction of alternative certification schemes such as the Indonesian Sustainable Palm Oil certificate and the Malaysian Sustainable Palm Oil certification scheme currently under discussion.

Meanwhile, the supply of certified palm oil continues to outpace demand. In 2011, supply of RSPO certified palm oil was more than twice the uptake, despite numerous multinationals issuing pledges to source 100% RSPO certified palm oil.

Malaysia and Indonesia Respond to US’s EPA Decision against Palm Oil

Amidst a public comment period over the US’s Environmental Protection Agency’s (EPA) action against palm biodiesel, Indonesia and Malaysia are seeking to correct the agency’s claim that palm oil is not sustainable, noting a series of inaccuracies contained in the EPA’s calculations. Rosediana Suharto of the Indonesian Palm Oil Commission has criticized the modeling used by the EPA, noting that it is not consistent with other modeling undertaken of GHG emissions from biofuels.

MPOC CEO Tan Sri Dr Yusof Basiron highlighted the inaccuracy of the EPA‘s modeling in an editorial in the Malaysia Star, noting that the EPA ignored the carbon sequestration of oil palm plantations that have made the Malaysian agriculture sector carbon negative.

Appeals to the EPA’s action are being submitted by the Malaysian and Indonesian governments and industry bodies as part of the EPA’s open comment period which has been extended until April 27.

Continued Conservation Demonstrates Palm Oil Industry’s Commitment to Sustainability

Despite the challenges of distortions and misperceptions currently being faced by the palm oil industry, efforts to ensure conservation and maintain the industry’s sustainability continue unabated in Malaysia. The State of Sarawak recently announced that it is looking to turn 1 million hectares of natural forest into totally protected areas, such as national parks and wildlife sanctuaries, and another 6 million hectares into permanent forests.

And the Sabah Forestry Department announced that despite significant agriculture development to replace the state’s forestry sector, some 60 percent of the state’s land remains under forest cover.

Meanwhile, efforts to preserve the habitat of the pygmy elephant are progressing, with the launch of research projects and an expansion of the Lower Kinabatangan Wildlife Sanctuary. The program, funded in part by RM 5 million from the Malaysian Palm Oil Wildlife Conservation Fund, is expected to benefit 60 to 100 pygmy elephants that currently need to be relocated to established sanctuaries.

The beginning of 2012 has brought new opportunities and challenges for the palm oil industry. The palm oil industry has continued its efforts to support conservation amid a focused attack by non-governmental organizations.  Nevertheless, the Malaysian palm oil industry continues to demonstrate leadership in sustainable agriculture and working towards another successful year as a green food and energy provider to the world.

Support for Conservation

The Sabah Wildlife Conservation Colloquium (SWCC) was launched in January 2012 with stakeholders from across the political spectrum coming together to discuss the important steps being taken in SE Asia to support conservation. Minister Dompok applauded the palm oil industry for undertaking conservation efforts and funding wildlife preservation while calling for greater collaboration among stakeholders.  These efforts were also highlighted in an editorial and a letter in the Malaysia STAR by the Malaysian Palm Oil Council’s Dr Yusof Basiron in response to scurrilous attacks against the industry by environmental NGOs. As Dr Basiron stated in his editorial, “The Malaysian palm oil industry enthusiastically supports the will of the Malaysian people and the protection of wildlife across South-east Asia.” Dr Basiron went on to explain that, “for every hectare of land developed for palm oil production in Malaysia, four hectares are preserved as permanent forest.”  These commitments were clearly reflected at the SWCC, where participants came together to establish a habitat for the endangered pygmy elephant. This effort joins a number of other such commitments, such as the preservation of the orangutan and rhinoceroses.

Palm Oil Industry Meets Targets, Continues to Grow

The Malaysian Palm Oil Board (MPOB) announced that the palm oil industry had achieved all the key performance indicators of eight entry-point projects (EPPs) under the Government’s Palm Oil NKEA in 2011. This remarkable achievement was the result of the industry’s success in rolling out the latest innovations, such as the deployment of biogas capture, accelerating replanting of old plantations and increasing the oil extraction rate. Already 48 mills have been constructed with biogas capture, which is 133% higher than the target of 36 mills by the end of 2011.

And in an important development to support greater innovation and greater technology in the industry, the Sarawak Plantation Agriculture Development (SPAD) Sdn Bhd signed a Memorandum of Understanding with PT Citra Widya Education (CWE) to establish a training center for the palm oil industry. This center illustrates the kind of education that is being established to support the high-value skills necessary to achieve ambitious projects such as the National Biomass Strategy.

Thanks to these advances, Minister of Plantation Industries and Commodities Tan Sri Bernard Dompok announced that palm oil export earnings are expected to achieve RM 85 billion in 2012 due largely to increased yields.

US Environmental Protection Agency Distorts GHG Savings for Palm Oil

Joining the rising chorus of protectionism in the developed world, the US Environmental Protection Agency (EPA) announced that palm oil would not be recognized as a sustainable biofuel. The EPA claimed that palm oil’s GHG savings rate was only 17%, despite evidence demonstrating that palm oil far exceeds the 20% threshold for biofuels in the US.  MPOB’s research, published in the International Journal of Life Cycle Assessments, put the value between 60.4 and 74.7% depending on whether biogas capture was used in the mill process.

In an editorial responding to the announcement, former Ambassador James K. Glassman remarked that, “Palm oil would, of course, pose a threat to American oilseed farmers and biofuel producers,” thanks to its superior efficiency and low cost. It is therefore no surprise that “misguided protectionism and a preference for ideology over science” overwhelmed the compelling case for palm oil to be accepted as a biofuel in the US. Unfortunately, it appears that the EPA is following the protectionist lead of the EU.

Leaked EU Data on Biofuels Ignores Science, Justifies Protectionism

An EU report was leaked to the media, attributing GHG savings values to biofuels using an ILUC factor and misrepresenting the GHG savings values of all biodiesel feedstocks. This comes more than a year since the European Commission released a report declaring ILUC to be too uncertain to assess. And the values sharply contradict findings by other researchers by wide margins.

Meanwhile, numerous experts dismiss efforts to impose ILUC factors to biofuels as misguided and not reliable. Two reports by the European Biodiesel Board in October 2011 called these efforts uninformed. Copenhagen Economics found the uncertainties so dramatic that applying such a factor would cause significantly more harm by distorting demand.

Prior to the release of the “leaked report”, one of those researchers published an editorial in the New Straits Times explaining the conclusions of his findings. In his editorial, Dr Christoph Vietze noted from his research with Dr Gernot Pehnelt that “The more accurate default value for palm oil feedstock for electricity generation should be 52 per cent, and for transportation biodiesel between 38.5 per cent and 45 per cent, depending on the fossil fuel comparator.”

The EU is being met by increasing opposition for its application of non-tariff trade barriers. As Hanim Adnan reported in the Malaysia STAR, the EU risks being forced to defend itself before the WTO, a prospect that risks undermining the EU’s flagship biofuel policy. Even the US is looking to confront the EU’s protectionism.

Malaysia / Australia Free Trade Agreement

But while Malaysia confronts protectionism in the West, the country has achieved significant progress with its neighbor Australia as the two countries progress towards the signing of a Free Trade Agreement. This follows several months of debate in Australia over misguided labeling legislation advanced by NGOs that would have discriminated against palm oil. But with the legislation rejected in the country’s House of Representatives and the legislation’s lead sponsor, Senator Nick Xenophon, now rejecting the singling out of palm oil, Malaysia and Australia are looking forward to greater economic partnership to create prosperity.