The long way to sustainability

Indonesia’s biodiesel production still relies on palm oil – with staggering environmental and social consequences. Christina Schott reports.

It’s a long way to the house of Pak Suriansyah, a three-hour drive from the Central Kalimantan capital Palangkaraya to the village of Pundu in Cempaga Hulu district. At some point the monotonous landscape along the Trans-Kalimantan Highway changes from mostly idle and deforested land to oil palm plantations stretching as far as the eye can see.

Weekender/Paul Kadarisman

In the middle of this green desert, Suriansyah’s land appears like an oasis to us. The 65-year-old is seated in front of his new, simple wooden house surrounded by rubber trees, waiting for us. He leans on two big bags of rice – harvested from his own paddies. His wife, Minangsih, prepares lunch: cassava, chili, eggplants and cucumbers grown in the vegetable garden behind the house, and eggs from the clutch of chickens scurrying around us.

“We’re fine here,” Suriansyah smiles, “much better than most of our neighbors who sold their land to the plantation.”

The grandfather of four is the last farmer in his village working his own land. Everybody else has sold their plots to plantation companies, giving in to the undeniable lure of a 30-fold increase in the price of land over the past 15 years. Around Suriansyah’s 7 hectares stretch at least 26,000 hectares of young oil palm plantations owned by PT Bumitama Gunajaya Agro. The subsidiary of Malaysian palm oil giant IOI Corporation reportedly wants to produce its feedstock for European-bound biodiesel here.

Energy crops for biofuels have become a lucrative new market across Southeast Asia. There is biodiesel from palm oil, coconut oil and jatropha nuts, and bioethanol from sugarcane and cassava. With new and increasing quotas for the use of biofuels in China, India, Europe and the United States, the market has almost exploded. Indonesia, too, introduced an obligatory mandate for biofuels. By 2025, biodiesel must replace 20 percent of national diesel consumption and bioethanol 15 percent of national gasoline consumption.

There’s a long way to go, since the 2009 quotas of 1 to 5 percent were hardly fulfilled – partly because producers couldn’t get enough feedstock, but also because biofuels still can’t compete commercially on the national market with fossil fuels that are heavily subsidized by the state.

Nevertheless, the government is investing more and more in the development of biofuels, because it understands they present a big opportunity to crack new export markets. It’s also strategic for the development of poorer regions, creating jobs and improving the national energy supply. Palm oil is considered one of the cheapest feedstock options in this field. And because Indonesia is the world’s biggest palm oil producer, the country’s biofuel production is concentrated around this crop.

To meet the expected increase in demand, the government has licensed 9.7 million hectares of oil palm plantations, with 7.9 million hectares already planted by 2009. Some sources even mention plans for the establishment up to 20 million hectares of palm oil plantations through 2025 – an area the size of England, the Netherlands and Switzerland combined.

To set up these plantations, however, more often than not rainforests and along with them traditional agroforestry and farmland are destroyed. Since the giant plantations in Sumatra are fast reaching their geographical limits, the plantation companies are concentrating more and more on Kalimantan and Papua.

“In Central Kalimantan alone, one of the most important habitats of the orangutan, there were 1.2 million hectares of oil palms planted by 2008 – half of it just recently due to the new boom,” says Nordin, founder of the environmental organization Save Our Borneo. “Altogether, around four times as many plantations are planned for the province, 70 percent of it in forest areas.”

Although until 2008 only 4 percent of Indonesia’s palm oil production was used for biodiesel, the new quotas in many European and Asian countries are one of the main drivers for the staggering expansion plans of Indonesian oil palm plantations. Most of the cheap vegetable oil still goes into food and cosmetics such as margarine, chocolate bars, soap or lipstick. But whereas global palm oil consumption has doubled over the last decade, the food and cosmetics industry alone could never account for the demand created by those large expansion plans.

“The demand for biodiesel serves as an excuse to establish new plantations. The companies are actually racing for new cultivation areas,” says Arief Wicaksono, political adviser for Greenpeace in Southeast Asia.

“The increasing market for biodiesel is, of course, a reason for the expansion,” acknowledges Mukti Sardjono, director general of estate crops at the Indonesian Agriculture Ministry. “Palm oil plays a strategic role in Indonesia: The state obtains revenues, the farmers gain more income, and the economic development in the regions is supported by new job opportunities.”

Many local and international NGOs argue that traditional agroforestry provides a livelihood for more people than oil palm plantations do, and likewise for sugarcane plantations. Having been promised good jobs and huge profits, local communities often sell their land, but never receive what they expect, they say. Most residents who previously made a relatively comfortable living through communal production forestry are now eking out an existence as day laborers – if they’re lucky. The permanent laborers are usually migrant workers from Java and Sumatra who follow the companies across the archipelago.

That’s the story of the village of Lempasa in Sembuluh district, 200 kilometers west of Pak Suriansyah’s land. Here the oil palm plantations of the Singapore-based Wilmar Group stretch an estimated 100 kilometers toward the horizon.

“Before the oil palms, we lived from the forest, the river and our own farming. Today we have no choice but to labor in the plantations – for a fifth of our former income,” says local resident Syahroni.

The head of a large family sits chain smoking in his stilt house at the shore of Lake Sembuluh. He fishes to complement his small income, but even this is getting more and more difficult: “Half the fish caught in the lake are dead. That’s because of the fertilizers the plantations discharge into the water,” he claims. “Before, we were almost self-sufficient in our food production – now we have to buy everything from the shop, even the palm oil growing all around us.”

A study by the World Bank in July 2008 showed that the production of biofuels from food crops accounted for 75 percent of global food price increases. Consequently, hundreds of millions of people the world over were affected by extreme poverty. In Indonesia, too, prices of rice, soy, sugar and vegetable oil have increased significantly in the past two years. International organizations are thus increasingly favoring inedible energy crops like jatropha, a hardy plant that grows in almost any terrain and is easily processed even by smallholders. Indonesia has only just launched jatropha development projects, mostly in the east of the country.

While other social consequences of feedstock production for biofuels are still widely neglected, the food-versus-biofuel controversy has received plenty of international attention following riots sparked by increasing food prices in several developing countries. The international community is also increasingly alert to environmental issues, especially the destruction of rainforests. Western countries have started introducing certification mechanisms to guarantee sustainable production of biofuel feedstock. In Indonesia, the Roundtable for Sustainable Palm Oil is so far the only organization that certifies sustainable practices.

Nevertheless, Indonesian palm oil in recent years fell into disrepute due to its negative carbon balance. A study by Greenpeace claims Indonesia destroyed 28 million hectares of its rainforests since 1990 – mainly for the cultivation of oil palms – making it the world’s biggest deforester. The slash-and-burn method used to clear forests for plantations also exposes the rich peat soil beneath, releasing an estimated 1.8 billion tons of carbon dioxide a year into the atmosphere. Peat and forest fires are the second-biggest sources of manmade CO2 after transportation, and have made Indonesia the world’s third-biggest greenhouse gas producer after China and the United States. The Agriculture Ministry, however, continues to deny any link between palm oil production and deforestation in Indonesia.

The last patch of rainforest in Pak Suriansyah’s village was destroyed by fire in 2006.

“It doesn’t matter if the fire was deliberately set or not. The plantations would have eaten up the forest anyway,” says the farmer.

Almost all Suriansyah’s neighbors now labor for a pittance on the plantations, or work in the gold mine in the neighboring district. Many cannot afford to send their children to school anymore.

“That’s why I don’t want to sell my land. As long as I have a place to farm, I can feed my whole family and live in peace,” says the village’s lone holdout amid the oil palms.

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Biofuels in Indonesia:

In 2009, national biofuel consumption in Indonesia accounted for less than 1 percent. The target is to replace 20 percent of the national diesel consumption with biodiesel and 15 percent of all gasoline consumption with bioethanol by 2025. The government announced an investment plan worth US$22 billion for the promotion of biofuels and defined 5.25 million hectares of allegedly unused land for the development of biofuel plantations in 2007. In the same year, the government signed agreements with 59 foreign and local companies, which were ready to invest $12.4 billion to boost the production of biodiesel from palm oil.

Since the subsidy payments for biofuels depended on rising or falling oil prices, most of the biofuel producers, either stopped or reduced their production in 2008, because the costs couldn’t compete with the falling fossil oil prices after the global financial crisis. At the beginning of 2009, there was reportedly only one biodiesel production plant still operating. If the mandatory use of biofuels will be consequently implemented, the national production will probably rise again to an estimated 2.41 million kiloliters of biodiesel and 1.48 million kiloliters of bioethanol by 2010.

Up to now, all biodiesel in Indonesia is produced from palm oil. But there are ambitious plans for the development of other feedstocks, especially jatropha curcas, an inedible oily nut-producing shrub. Jatropha plantations shall be expanded by more than ten times from 121,200 hectares in 2007 to 1,540,000 hectares in 2010. Bioethanol in Indonesia is mainly derived from cassava and sugarcane, but doesn’t play an important role yet. Other future energy crops being researched, which could provide a more sustainable production, are: algae, sweet sorghum, sugar palms, rice husk and other crop residues.

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