A burning issue: palm oil shows promise as a biofuel, but the environmental cost of production can be high.

Tour guide Asok Kesavan has brought his multinational group of tourists to see some of the oil palm plantations in the countryside in his homeland, Malaysia. He asks his driver to stop the bus and the tourists unload briefly for a walk through the rows of palm. There are many, many rows. "This is not a family business. These are big private companies and Malaysia is the largest explorer and producer of palm oil," Kesavan says, pointing out the grape-like clusters of ripening fruit that nestle between trunk and branches like an overflowing treasure chest. The oil is used for everything from margarine to cosmetics, and it is exported worldwide. "We are the only country to sell oil to the Middle East," he jokes.

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Palm oil is one of the world's leading agricultural commodities. The two biggest producers, Malaysia and Indonesia, account for 84 percent of the world's palm oil production and ring up sales of US$11 billion annually. But as Asok Kesavan knows, lucrative crops can bring trouble. He has seen the fires and the smog, just like his countrymen and millions of others in Indonesia, Singapore, and the rest of Southeast Asia. Plantation owners slash and burn existing vegetation to clear the way for more and more palm, rows and rows sown in place of once-lavish and ancient rainforests. The forests, obliterated by fire, are replaced by hectares of monoculture, and the ground beneath is kept clear of even shade-tolerant native species.

Bad as it already is, this situation may be set to worsen. The world can only use so much lipstick but its appetite for energy seems insatiable, and palm oil may be the Next Big Thing in energy. As biofuels take center stage and governments mandate their use--ironically for the environmental benefits--additional forest destruction, and the attendant loss of wildlife and proliferation of smoke-filled skies, are likely to ensue.

Hot Oil

The World Rainforest Movement (WRM) believes that plans for new plantations in Indonesia are already in the works. "Existing regional plans have already allotted a further 20 million hectares for oil palm plantations, mainly in Sumatra, Kalimantan, Sulawesi, and West Papua," WRM noted in a recent bulletin, "and new plans are currently under discussion to establish the world's largest palm oil plantation of 1.8 million hectares in the heart of Borneo."

Ellie Brown, lead author of the U.S. Center for Science in the Public Interest (CSPI) report Cruel Oil: How Palm Oil Harms Health, Rainforest & Wildlife, says the owners of these palm oil plantations will be largely either big business or government. "In Indonesia, half of the plantations are owned by private companies, which are often part of large conglomerates; the remainder are owned either by the state (17 percent) or by smallholders (33 percent), she writes. "Smallholders are farmers who own a few acres each in a section of a large company's plantation. Although they tend their own oil palm trees, they depend on the company for planting, pesticides, fertilizers, sale of the palm fruits (at a price set by the company), and initial processing in the company's on-site mill." And in countries where state-owned land is the norm, many of these plantations are affiliated with the state. "Especially in Malaysia and Indonesia, which have the lion's share of the global market, national governments have made mammoth tracts of land readily available for companies to establish oil palm plantations," writes Brown.

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The biofuel boom is spurring companies to turn more and more of these vast areas into oil palm plantations. John Buchanan, senior director of business practices with the U.S.-based NGO Conservation International, says that palm oil's energy efficiency as a biofuel makes it very attractive to investors. "One of the common measures used to look at the factor or efficiency of a biofuel crop is a ratio--the number of units of energy put in, to get how many units of energy out," he says. "It's a key factor because in some of these crops, for example corn and ethanol, it's not a whole lot of savings. It's about 1 unit of fossil fuel only getting about 1.4 units of ethanol on the back end. Palm oil, on the other hand, ranges from about 5.6 to 9.6. So if palm oil were traded freely, palm is going to be more profitable." WRM notes that demand for palm oil is expected to double worldwide by 2020, and the Indonesian government reportedly has announced that it will designate 40 percent of its oil palm crop for biofuel production.

U.S. companies have long been eyeing the palm oil market for biofuel. Last December, the Illinois-based agro-giant Archer Daniels Midland (ADM) acquired shares of Singapore-based Wilmar International, a palm oil plantation operator and oil producer. The move made ADM the second-largest shareholder in the company. "ADM is making a big push and they're very bullish on the biofuels," said Buchanan.

The market may well deliver a windfall for palm oil investors. "The barriers to entering the biodiesel market for palm oil are very low," says Harry Boyle of the London research firm New Energy Finance. "It's not difficult and it's not expensive. To build a plant to process palm oil into biodiesel is pretty easy." He notes that the only hindrance to unlimited market potential may be shipping costs.

Paying the Piper

There are other costs, however, that markets often ignore. The oil palm grows only in tropical climates, the same climate that harbors some of the most biodiverse and abundant rainforests in the world. "The impacts on biodiversity are huge," says Ricardo Carrere of the WRM international secretariat in Montevideo, Uruguay. "Many animal species particular to tropical forests need extensive areas of forest to survive and to be able to reproduce, so when all of these forests are burned and then planted to one single species, that provides the animal with no food. Then many species tend to disappear or their numbers decrease substantially. At the same time, all of the local flora disappear because the plantation owners don't want anything to grow underneath, and we're talking in terms of tens of thousands or hundreds of thousands of hectares. There are enormous areas of land where the diverse tropical rainforest is being replaced by a monoculture."

A century ago, according to CSPI, 80 to 90 percent of Indonesia was covered by tropical rainforest. In 1997, only half was. At this rate, CSPI estimates, "virtually all Indonesian lowland tropical forests--which are the richest in plant and animal species--will be gone by 2010." Between 1985 and 2000, the group says, 87 percent of all deforestation in Malaysia was due to oil palm plantations.

Among the animal species vanishing in the rainforest destruction are the Sumatran tiger and rhinoceros, Asian elephant, orangutans, wild ox, barding deer, giant flying squirrel, proboscis monkey, gibbons, langurs, and clouded leopard; "... a species extinction spasm of planetary proportions," writes Ellie Brown in her report. The rainforest destruction and species elimination is directly attributed to these plantation burns: "Borneo's orangutan population was reduced by one-third in just one year, 1997, when almost 8,000 orangutans were either burned to death or were massacred when they tried to escape fires."

Human beings are not exempt from the destruction either. During the hot months (July through October) the effect of the smoke and smog on Southeast Asia is easy to see, and smell. Pollutant Standards Index (PSI) readings reached as high as 150 last year in Singapore during the months before monsoon rains squelched the fires. (Asian newspapers advise readers not to go outside on days when the PSI crosses 100--which is frequently--due to risks of respiratory distress and disease, lung cancer, heart attack, and stroke.) In Indonesia and Malaysia, long-time business owners had to close shop for good due to health impacts, and airports were closed for days on end due to low visibility. The fires had a major impact on regional markets: the Asian Development Bank estimated regional business losses from the 1997-98 fires at over US$9 billion.

But Carrere says that the impact on human health and welfare extends beyond the effect of lost revenues. "This is not environmentally friendly at all. It's genocide of local populations," he says. "What happens in many tropical countries is the land and the forest belongs to the state. However, in those forests there are a number of communities that have always been there and had no land title because they existed before the state, even before the colonizers came, so those lands belong to these people. But the state says no, this belongs to the state, so they give concessions first to the logging companies and then to the plantation companies. People resist ... because they are protecting their land and their means of livelihood, so ... people are put in jail ... and are killed and tortured. Rights abuses are happening throughout the tropics, particularly with biofuel plantations."

And oil palm plantations make the land itself hazardous. "They drain the wetland areas because oil palm needs it [less] humid to be able to grow properly, so water trenches are made so water flows out of the plantation," says Carrere. "At the same time, they use a lot of pesticides, agrochemicals, so that's the same water that's leaving the area and flowing into the region's rivers." Rich organic peat is often set afire and burns for days deep below the surface of the land.

Finally, there is the cost of palm oil plantations to the climate itself--the very thing biofuels are supposed to help. Renyi Zhang of Texas A & M University and his colleagues conducted a three-year study of satellite imagery in the Pacific region. They compared images taken between 1984 and 1994 with images from 1994 to 2005 and determined that deep convective clouds had increased between 20 and 50 percent due to pollution from Asia. These high-altitude storm clouds, seeded by microscopic pollutant particles, are expected to result in more brutal thunderstorms and more severe rainfall, especially through the winter months, in areas already too familiar with extreme weather disasters. Zhang's team also projected that as more of the pollutants travel on these more energetic, large storms with warmer air currents from the tropics, the deposited soot could accelerate the melting of polar ice.

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Pointing the Finger

The obvious question is, exactly who is setting these fires, and why are they not being brought to justice? Andrew Ng, secretary-general of the Roundtable on Sustainable Palm Oil (RSPO), an organization of large oil palm companies, oil palm trade associations, retailers, manufacturers, environmental and conservation NGOs, and social and development NGOs, says that finding the fire starters is harder than it sounds. "Finding the source of the fires, the fact is that it's quite nebulous in a sense. It's all just smoke, isn't it? At the end of the day, that's all you see in the sky," Ng says. "For every fire that you find, the source of it is quite difficult to trace. Sometimes you can trace it back to [an] estate. Sometimes you trace it from outside of the estate coming from the adjacent communities of land where they prepare the annual crops. So trying to find many small little sources, the hot spots here and there that create the big fires, is hard."

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But Ricardo Carrere argues that the inability to find the fire starters may itself just be so much metaphorical smoke. "Even the companies have been identified by name. And nothing happens because these companies have very strong links with government," he says. "They want this plant and it doesn't matter if the company is punished or not. It's the returns." Corruption in the Malaysian and Indonesian governments is nothing new, and certainly the lure of a lucrative crop is cause for these governments to turn a blind eye. In 2004, the civil society NGO Transparency International ranked Indonesia as the 13th most corrupt country in the world--that the country's plantation and forestry sectors are in fact rife with corruption, collusion, and nepotism. Singapore's Straits Times newspaper last October reported that the logging firms are "believed to be owned by or linked to people with ties to the ruling elite and the military."

Government officials deny responsibility. Malaysian officials last October blamed not the large plantations, but instead poor farmers who use fire to clear their land. On the other hand, the Center for International Forestry Research studied satellite photos of the burns that took place in Indonesia in 1997-98 and compared these photos to Indonesian land-use maps. They found that 75 percent of the hot spots in Kalimantan were in oil palm plantation and logging concessions.

One government official, Malaysian Environment Minister Azmi Khalid, believes the culprits are the big companies, and says so. "Open burning for land-clearing is the cause of the haze. In Kalimantan alone, there are now one million hectares of palm oil plantations," he said, noting that 16 companies were under investigation in connection with the fires last October. Still, these companies have never been brought to justice. During the previous prolonged period of haze in Southeast Asia, in 1997 and 1998, 176 companies were publicly identified as violators. Only five were brought to court. One was found guilty.

Corruption is only one part of the reason. Ng says the other part of the equation is the difficulty of enforcement. "Indonesia and Malaysia both have an excellent system of laws and within those laws the punitive measures are very good. But the problem that you have is enforcement, because of the lack of resources available for ensuring that government agencies have enough manpower to go out there and educate the public in these areas, and to monitor these areas and ensure that control continues," he says. "Unless people are willing to put money into these things, you're going to see the fires crop up again this year. We're going to have a dry spell in a couple of months time [June, July] and they'll keep going on until there's nothing left to burn because fire is really the only practical, in a sense, and I put that in quotation marks, way to clear land."

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Ng's group has established a set of global guidelines for sustainable palm oil production, including compliance with all local, national, and international laws and regulations, and ensuring a flow of information from plantation owners to RSPO stakeholders for verification of methods. RSPO has also drawn up a zero-burn policy for plantation operators who are members. Ng says that zero burn is a win-win situation. "Ask anyone in the palm oil plantation industry and they'll tell you that it's actually far better for the land not to burn, not just from the point of view of carbon emissions, but zero burn actually gives you long-term benefits," he argues. "When you do zero burn, you recycle all of the planting material and reintroduce it back into the soil. That gives you long-term input into the soil for fertility."

The RSPO is not the only organization pressing to reduce and eliminate oil palm burns. Representatives from Singapore, Malaysia, Indonesia, Brunei, and Thailand met last November to set policy and budgets for dealing with burns and haze. During this summit they set aside funds to provide incentives to farmers to abandon slash-and-burn land clearing, and strengthened enforcement of burn laws against plantation companies and forest concessionaires caught violating them. For example, Indonesia says it will increase funding for law enforcement and train its police force, prosecutors, and judges to crack down on forest fire violations.

If these measures work, the evidence of success, or failure, will appear in the skies--literally as smoke signals. "I don't think we can solve this within a year. It will take a long-term solution," said Singapore Environment and Water Resources Minister Yaacob Ibrahim during the talks. "We will have to see if farmers are prepared to change habits, whether the Indonesian authorities are prepared to clamp down on errant plantation owners. By and large we are quite happy [with the talks' results], but obviously the devil is in the details." Ng agrees: "Depending on how bad the fires are, I guess we'll find out if the fires are an issue that will again be brought up as in the previous times," he said of this coming November's negotiations.

Many countries aren't waiting for the companies and governments in Southeast Asia to sort it all out and are instead taking matters into their own hands. This past April, scientists and policymakers from over 100 counties met in Brussels to discuss global warming, and palm oil as a biofuel figured into their equation. Dutch companies such as Biox and Essent have either scrutinized or completely halted palm oil production until they can verify that their suppliers did not burn forests in the growing process. "From the start, we knew we can't stay in business if we can't prove that production is sustainable," said Biox executive Arjen Brinkmann. Britain's largest electricity supplier, RWE npower [sic], announced that it too has decided against using palm oil for biofuel after a year of study due to the prevalence of unsustainable growing methods. In January the European Parliament considered a ban on imports of nonsustainable palm oil as well, even though it is anxious to reduce fossil fuel consumption.

This coming year's haze is predicted to be even worse than last year's. Ricardo Carrere suggests that the real culprits ultimately are energy consumers. "On one hand, all of the governments of the world are saying we need sustainable development, we need to conserve water, we need to conserve biodiversity and climate and all the rest. But on the other hand, all the economic policies go in the opposite direction," he says. "It's not that biofuels are wrong. It's the unsustainable consumption that is wrong. Too much energy is being used and there's no way that by producing biofuels it is going to be able to feed all of those cars in the [global] North. Consumers cannot keep using energy in an unsustainable manner."

Heather Augustyn is a freelance writer who spent five weeks in Singapore, Malaysia, and Indonesia during the fall 2006 burns. She has written for E! The Environmental Magazine, EarthTimes.org, Shore Magazine, The Village Voice, and In These Times.

For more information about issues raised in this story, visit www.worldwatch.org/ww/palm-oil.