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Sustainable trade and peatland management for emissions reduction and community livelihoods

Challenges and opportunities in Indonesia
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Aerial view of canal blocking in Dompas, Riau. CIFOR/Mokhamad Edliadi

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Growing and trading commodities while protecting and sustainably managing forests and other natural ecosystems from agricultural encroachment is crucial for meeting development and climate targets both nationally and internationally.

Although they pose environmental risks, agricultural commodities also improve livelihoods by contributing to economic development, poverty alleviation and food security.

They were a major topic last month at the COP26 climate summit in Glasgow, as leaders of  more than 25 countries – including Indonesia – signed a joint statement affirming their commitment to the Forests, Agriculture and Commodity Trade Dialogue, establishing trade and market development, smallholder support, traceability and transparency, and research, development and innovation as key areas of focus.

On the sidelines of COP26, a talk show moderated by Niken Sakuntaladewi from Indonesia’s Ministry of Environment and Forestry covered related topics in the Indonesia Pavilion, examining aspects of the country’s complex trade in agricultural commodities.

In Indonesia, the Trade, Development and Environment Hub (TRADE Hub) focuses on two agricultural commodities — palm oil and coffee — in collaboration with the Center for International Forestry Research and World Agroforestry (CIFOR-ICRAF), Wildlife Conservation Society, Research Center for Climate Change, and Indonesia’s Institute Pertanian Bogor University (Bogor Agricultural University) and University of Lampung.

Neil Burgess, chief scientist with the U.N. Environment Programme’s World Conservation Monitoring Centre and principal investigator with TRADE Hub, said: “We’re gathering data on agricultural commodities and wildlife trade in Brazil, China, Congo Basin, Indonesia and elsewhere to better inform trade agreements and trading companies. We want to learn how, for example, does the palm-oil trade link to deforestation and emissions and rural incomes.”

Key risk commodities identified by the Grantham Institute on Climate Change and the Environment are palm oil, beef, cocoa, coffee and maize. How these interact with climate is closely linked to policies in consuming countries and institutions in producing countries.

“Palm-oil consumption in the European Union [EU] is driven by policy rather than consumer preferences, driving distant impacts,” said Elizabeth Robinson, director of the institute. “The EU sets targets for bioenergy renewables, for example, which increases demand. Reduced demand in the EU is similarly driven by policy – now there’s a discussion about a phasing out ban by 2030. I think they are focusing too much on the oil rather than on stopping deforestation. It has led to losses for producers, conflicts between governments and clashes in the field.”

Trade agreements are increasingly using “non-tariff measures” to influence producing countries, she added. For example, the Indonesian–European Free Trade Association’s Free Trade Agreement has tariff reduction linked to forest protection, which, she said, raises issues of sovereignty.

The Association of South-East Asian Nations [ASEAN] issued an ASEAN Joint Statement on Climate Change to COP26, calling for increased ambition and opportunities to finance implementation, said Associate Professor Simon Tay, chairperson, Singapore Institute of International Affairs.

“We need our own ‘ASEAN Climate Community’ to scale up action,” he said. “Carbon markets are necessary for pushing our ambitions forward beyond the NDCs (Nationally Determined Contributions). We must also find nature-based solutions with high-quality, verified carbon credits, twinning growth with carbon responsibility. We also have to look at how concessions for palm oil and other commodities can be better managed to reduce emissions, make livelihoods possible for communities and bring in the right kinds of investments.”

Michael Brady, principal scientist and leader of the Value Chains, Finance and Investment research group at CIFOR-ICRAF, researched agreements in the region as part of Measurable Action for Haze-Free Sustainable Land Management in Southeast Asia, a joint project with the International Fund for Agricultural Development and Global Environment Centre that is implemented by the ASEAN Secretariat, CIFOR and the Global Environment Centre.

“There are 23 million hectares of peatland in Southeast Asia, 38 percent of the world’s tropical peat, with Indonesia and Malaysia holding 99 percent,” he said. “Climate change has exacerbated fires used for clearing peatland with serious impact from transboundary haze on health, trade, production, transport, fisheries, crops, loss of life and determent of foreign investors.”

The 2015 fires were estimated to incur losses of $16 billion, he said. “This is a cross-cutting issue for ASEAN, which has established several policy frameworks. The ASEAN Agreement on Transboundary Haze Pollution provides a strong political basis, requiring member states’ cooperation to prevent and monitor haze, provide information and institute legislation.”

He listed factors for reducing fires and protecting peatlands. Regionally: coordination between state and non-state actors; and a consistent approach to methodologies, data and estimates for monitoring. Nationally: leadership providing support; coordinated prevention; comprehensive policies; improved data; and a common understanding.

Herry Purnomo, scientist with both CIFOR-ICRAF and IPB, who coordinates TRADE Hub Indonesia, welcomed the COP26 pledge to end deforestation and Indonesia’s pledge for forests to be a net carbon sink, both by 2030.

“But how?” he asked. “These are complex sourcing areas and destinations, flows of money, levels and types of employment and emissions. Around 2 million hectares of oil-palm plantations in Sumatra and Kalimantan are on peatlands. How to deal with this?”

TRADE Hub Indonesia’s simulations found that business-as-usual would lead to increases in oil-palm plantations, volume of exports, incomes and employment but also emissions unless peatlands were protected.

“Commitments can decrease deforestation as we have seen in South Sumatra,” said Purnomo, “and emissions can be reduced locally using intercropping and canal blocking.”

However, sometimes there will be no option but to swap plantations on peatlands to other land, he said.

Tiur Rumondang, Director of Assurance, Roundtable for Sustainable Palm Oil (RSPO), explained that their certification aimed to reduce emissions and improve livelihoods.

“For sustainable palm oil to be the norm, there must be, first, a competitive and sustainable sector; second, sustainable livelihoods and poverty reduction, human rights; and third, protected and enhanced ecosystems. RSPO certification includes guidance to achieve these. In the 2018 RSPO P&C standard, we stipulated that sustainable oil palm should not be on peatlands.”

She highlighted that RSPO’s smallholders’ credit scheme annually disbursed IDR 29 billion (approximately $2 million) to 33 independent groups of more than 8000 smallholders. In 2019, sustainable palm-oil practices by members reduced emissions by 1.4 million tonnes and conserved more than 230,000 hectares of highly valuable forests. Tiur admitted that the number of certified groups was small — 1–2 percent — but last year saw a 180 percent increase in membership.

“Once we have a champion organization, such as FORTASBI [Forum Petani Kelapa Sawit Berkelanjutan Indonesia/Indonesian Sustainable Palm Oil Farmers Forum], that provides programmes for smallholders,” she said, “engagement is spread wider. But if we want to be faster, we need data about where smallholders are located.”

Asked by the moderator for summaries, Robinson said that from the EU perspective it is important to work with producing countries toward the same ends; Tay noted the urgency to cooperate to avoid contention; Purnomo said that zero net deforestation by 2030 in Indonesia was highly possible; Brady said that an integrated approach was needed, including regionally; and Rumondang said that from the perspective of practitioners of sustainable palm oil, certainty is needed from government.

The TRADE Hub is funded by the UK Research and Innovation Global Challenges Research Fund and led by the UN Environment Programme’s World Conservation Monitoring Centre. Indonesia is one of the locations of a country hub and research activities.

For more information on this topic, please contact Herry Purnomo at h.purnomo@cgiar.org.
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