US biofuel policy excludes Indonesian and Malaysian palm oil amid industry protests

Oil palm seedling, Indonesia. Photo by Yayan Indriatmoko/CIFOR

BALI, Indonesia (27 February, 2012)_Palm oil industry experts in Indonesia and Malaysia — two of the world’s largest producers — have criticised a recent analysis by the US Environmental Protection Agency (EPA) that biodiesel produced by palm oil does not qualify as a renewable fuel under the Renewable Fuel Standard (RFS) program.

The EPA’s Notice of Data Availability (NODA) concluded that biodiesel and renewable diesel produced from palm oil do not meet the minimum 20 percent lifecycle greenhouse gas reduction threshold needed to qualify as renewable fuel under the scheme.

However, the policy is not banning crude palm oil imports to the United States, assured Dennis Voboril from the Counselor Office of Agricultural Affairs at the U.S. Embassy in Jakarta.

In order to calculate lifecycle GHG emissions, the EPA utilised models which took into account energy and emissions inputs for fuel and feedstock production, distribution and use, as well as economic models that predict changes in agricultural market.

Speaking at the International Conference on Oil Palm and Environment (ICOPE) in Bali last week, Rosediana Suharto of the Indonesian Palm Oil Commission and Tan Yew Al of the Malaysian Palm Oil Board questioned the EPA’s decision that the greenhouse gas emission saving from palm oil produced in Indonesia and Malaysia is only 17 percent.

“The model (of study) used is not correct. [It] does not match that used by the European Union and creates uncertainty,” Suharto said.

Their main criticism was that the data used for analysis was out-of-date and projected high deforestation rates in Malaysia and Indonesia- a point that Yew Al strongly refuted.

“As far as the Rio 1992 summit goes, Malaysia committed to preserving 50 percent of land cover as forest. After 20 years we are still at 55 percent forest cover, that means we haven’t actually expanded oil palm based on opening up the forests,” she said.

“An increase in palm oil production need not necessarily come from land expansion.”

Suharto said Indonesia must strongly protest against NODA before it is legislated.

“As a major palm oil producer, Indonesia is concerned about this policy as the potential [for the US] biofuel market is huge,” she said.

While the US is not a major crude palm oil export market for Indonesia – exports currently amount to about 62,000 tons — it is a lucrative market, with the projected US biofuel demand from various kinds of vegetable oil tipped to reach 400 billion gallons by 2022.

Indonesia and Malaysia are the largest oil palm producing countries, supplying 90 percent of the world’s demand for palm oil. In both countries, there are huge economic benefits from oil palm, with seven million hectares under plantation in Indonesia producing 16 million tons of palm oil per annum. Oil palm companies are bringing in big profits, receiving USD$910 per ton in 2010, and the industry is said to employ 6 million people globally.

However, rampant deforestation and the conversion of carbon rich peat forests into oil palm plantations which accounts for 80 percent of all carbon emissions in Indonesia has raised alarm over efforts to reduce greenhouse gas emissions. A recent study by the Center for International Forestry Research quantified the atmospheric effects on changes in land use from biofuel production and found that for palm oil grown on peatlands, the carbon emissions generated from land conversion would take hundreds of years to reverse.

For commercial palm oil producers, obtaining certification under the International Roundtable on Sustainable Palm Oil (RSPO) is of utmost importance. RSPO certification is crucial for meeting the stringent sustainability regulations on palm oil being sold to large markets like the European Union.

In keeping with its promise to ensure that at least 10 percent of fuel consumed in the transport sector is derived from renewable sources (including biofuels) by 2020, the European Commission recently introduced voluntary certification schemes to verify compliance with the sustainability requirements of the EU’s renewable energy policy. However this may have deleterious impacts on rural livelihoods in producer countries such as Indonesia and Malaysia according to a recent CIFOR study.

The EPA has extended the deadline for public comments over its policy to March 28 to give more time for the palm oil producers and other stakeholders of the industry to provide inputs and suggestions.

Hugo Yon, Deputy Consul for economic affairs at the US Embassy in Indonesia said that the policy would be finalised after the public consultation period has been completed, but could not confirm when it would be enacted.

He urged the palm oil industry in Indonesia as well as other stakeholders to submit their comments to the EPA.