Friday, 4 December 2009

Malaysia and palm oil plantations

Malaysia is cleaning up its wasteful palm oil industry in an effort to position itself as a world leader in biofuels
Leo Lewis

The rolling lanes above the small town of Kota Tinggi are flanked by heavy industry at its most lush. All around is something coldly commercial, given a sweltering jungle disguise. Every mile offers a strange new glimpse of Malaysia’s palm oil industry — immense, controversial and an irresistible contributor to GDP. The big question is just where Asia’s great biofuel gambit stands in the quest for cleaner energy.
Palm oil production is riddled with contradictions and waste. Along one road sit palm trunks piled in a stack the size of a substantial block of flats. Now rotting, they were felled last year when they reached the end of their 21-year useful life. Down another path sprawls a stagnant lagoon of POME — palm oil mill effluent — silently exuding methane and stinking of decay.
In places, it is easy to spot the abrupt lines where plantations have encroached, in some cases illegally, on protected strips of rainforest. Every so often, a choking plume of smoke from burning palm kernels hits the back of the throat. “Could have used it to feed animals,” says a worker prodding the blaze with a hoe, “but there was too much to handle.”
There is, of course, nothing new about all this. The palm oil industry has been at the heart of the Malaysian and Indonesian economies for decades, and its inefficiencies regularly shock the outside world. But much is changing. Scale has followed the potential rewards, and both have soared in line with the breathless growth of China and the lucrative global fundamentals of energy. Banking on the price of crude palm oil surging another 15 per cent in the coming months, IOI, Malaysia’s second biggest palm oil producer, has recently unveiled plans for a huge expansion of its refinery capacity in Pasir Gudang, close to Singapore.

At the summit in Copenhagen, biofuels are certain to feature prominently, promoted as the literal growing of energy on trees. That perception is tightly bound up with palm oil, largely because it is the most economical edible oil to produce. When crude oil prices surged, palm oil seemed the ideal alternative. But a United Nations Environment Programme report published earlier this year shows that the numbers do not add up. Peatlands, which naturally sequester carbon, are often drained to make way for new palm plantations: when the peat is burned, it generates several times more CO2 than the burning of the same weight of coal.
While many at Copenhagen will be talking about nuclear, wind or solar, South-East Asia will want to make biofuels a centrepiece. Delegates at the climate change talks will be presented with bullish forecasts, including the prediction that global use of biofuels will double by 2015. Mixed with petrol, ethanol will represent 12 to 14 per cent of the global supply of vehicle fuel in five years, Hart Energy Consulting declared in a recent report. Palm oil biodiesel, it added, will dominate.
Proponents of biofuels may also strongly play down the many objections to palm oil as raw material for biofuel. Not least of these is the argument that palm oil, being edible and indeed widely consumed, is too valuable a commodity to burn alongside diesel in fuel tanks as the world works out how to feed its billions. The resource competition between stomachs and combustion engines, especially over palm oil, has already profoundly distorted world food and fuel markets. When subsidies are stirred into the mix, entire food systems can be destabilised.
In anticipation of this, and to counter longstanding criticism of both the way palm oil is produced and emission statistics that suggest it is far from clean, Asia’s biofuel industry is humming with talk of innovation. If all the inedible offcuts of palm oil — those logs, kernels and effluent ponds — could be harnessed to productive ends, then the whole proposition might make more sense.
Perhaps, but don’t count on it, says Oliver Mauss, the Singapore-based director of Asia Resource Partners and a developer of many “alternative” biofuels. “Of course there are many things you could do to make palm oil less wasteful, and even to exploit that waste as new sources of biofuel,” he says. But with the price of crude oil constantly fluctuating and the corruption that surrounds a lot of the palm oil supply chain between plantation and refinery, “even if you make it all sustainable, it doesn’t solve everything”, he adds.
That view has not dented the biofuel ambitions of either the South-East Asian countries or interested companies around the world. In Singapore, a few kilometres south of IOI’s new facility, a Finnish company will open the world’s biggest biofuel refinery next year. It is plants like this, the Association of Southeast Asian Nations said last month, that will define the region as the global biofuel hub.
Asked if palm oil could make Malaysia the Saudi Arabia of biofuels, as the more excitable proponents suggest, the plantation worker in Kota Tinggi shrugs, then continues shovelling palm kernels on to a fire.