Tuesday, March 26, 2013

Palm Oil and Deforestation

by Duncan Gromko

Palm Oil Plantation; Source Achmad Rabin Taim
French Nutella lovers breathed a huge sigh of relief when the French Senate voted down a budget that would have included a "Nutella Tax." The French have been proposing a lot of new taxes, but why would they tax something as delicious as Nutella? Palm oil is a major ingredient in Nutella, and the proposed tax would actually triple taxes on any food that uses palm oil as an ingredient. Palm oil is a driver of deforestation, particularly in Southeast Asia, and the tax would discourage consumption of the oil.

Before I started studying forestry issues, my assumption was that timber harvest caused deforestation. It seems obvious: cutting down trees leads to less forests. But, while timber harvest does play an important role, globally it has a much smaller impact than conversion of forests to agricultural uses. To oversimplify, there is only so much arable land on the earth and, as more food is needed to feed more mouths, the forests on good land are removed to make way for fields.

Drivers of Deforestation; Source UCS
The Union of Concerned Scientists has an excellent report on drivers of deforestation across the world. It's important to recognize the different pressures that lead to forest loss in different parts of the world. The chart on the left shows sources of carbon emissions from deforestation; this is different than directly measuring the acreage of forests, but it's a fine proxy.

The purple represents industrial timber harvest. You can see that it does cause some deforestation, but a relatively small amount. Looking at the Latin America bar, pasture is by far the greatest driver, with croplands coming in second. In Latin America, croplands mostly means soybeans and sugarcane. Deforestation in Africa looks much different. The yellow represents shifting cultivation, also known as slash and burn. Small-scale farmers burn down forest in a small area, plant on it for a few seasons, and then move onto another part of the forest.  I'm a little surprised that the blue - fuelwood harvest - doesn't play a larger role in deforestation in Africa.

Shifting cultivation, fuelwood harvest, and industrial harvest all play a role in deforestation in Asia, but croplands dominates the picture. There are other crops besides palm oil (rice, corn, sweet potato), but palm oil is the big story. It also receives more negative attention because of bad press about child labor violations and killing of orangutans.

If palm oil is so bad, why does Indonesia produce so much - 25 million metric tons in 2012? Palm oil is an incredibly productive crop. A hectare of a palm oil plantation produces almost 6,000 liters of crude palm oil compared to 450 liters and 170 liters for soybean and corn. In some respects, if increasing crop yield can reduce global pressure on forests, it makes more sense to get cooking oil from palm oil than from corn oil. Plus, the productivity means that converting forests to palm oil plantations is hugely profitable. It's tough to tell Indonesia, a fast-growing country, but still one with significant poverty, that they shouldn't take advantage of a crop their generates such great income. Palm oil exports amounted to $19.7 billion in 2011.

The consensus solution to this dilemma is to encourage palm oil expansion onto degraded land instead of forested land. WRI estimates that there are 14 million hectares of degraded land in Indonesian Borneo alone. They have developed a tool - the Suitability Mapper - that uses spatial data to identify land that is low in forests, but still productive enough for palm oil plantations. The idea is that companies that want to demonstrate their sustainability can shift expansion entirely to degraded lands. The Roundtable on Sustainable Palm Oil (RSPO) allows members to certify their palm oil as sustainable. One criteria for certification is to not replace primary forest.

Of the many obstacles to this laudable vision is the lack of a price incentive for companies to get certified by RSPO. As of 2010, the premium for certified palm oil versus conventional palm oil was only 1% of the total cost. In strict dollars and cents, it might not be worth the cost of certification.

Which brings us back to the Nutella Tax. In order for the RSPO price premium to increase, Nutella consumers are going to have to be willing to pay more for sustainable palm oil. In Europe, it seems like awareness of palm oil is increasing, but the really tough sell is going to be in China, India, and Southeast Asia, where palm oil is used as a cooking oil by people without much disposable income. Are they going to be willing to pay more for sustainable palm oil? 

1 comment:

  1. Looks like you nailed it. Why won't companies buy more into products that do not cause deforestation?Simple answer is the majority of their customers have not demanded it.

    The few of us out there that are making demands for that are thrown little pieces of Green paper that is supposed to stand for sustainability.

    Pure greenwash.

    As for the premium costs of sutainable palm oil, the physical type, industry members tell us its approximatel $45 per ton. If you break that down into the individual packages, how much more would it cost? A few cents? Compared to the priceless loss of animal species and global warming?