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Nov. 8, 2016

Indonesia has a lot to gain by combating climate change and spearheading efforts in the renewable energy space. Recent developments in its palm oil industry, part of the biofuel industry, have challenged the country to rethink sustainable alternatives.

Indonesia is one of the countries that will be most severely affected by climate change, and climate impacts are already being felt. Changes such as increasing surface temperatures of water and decreasing amounts of rainfalls will inevitably hamper social welfare and economic growth, which counter the country`s stated aims to achieve societal progress. Before 1960, droughts occurred every 4th year, while now they are documented every 3rd year. In addition, the predicted rise in sea level poses a significant threat to populations located along Indonesia’s 81,000 km coastline. Food security and water availability will be negatively affected, thus imposing a challenge for future Indonesian peoples.

Extraction of palm oil for use as a biofuel is a step in right direction. However, the industry that has emerged proves there are structural challenges that need be addressed for new, renewable energy to be entirely sustainable. Although crude palm oil is commonly known to be used for food and the alike worldwide, it also provides opportunities for rather different applications, as it can be processed into biodiesel. Oil palms render significantly higher yields than those of soybeans and grape seeds, making palm oil a favorable option in terms of efficiency and maximizing revenues. At present, palm oil comprises 5% of total biodiesel production globally, a number that is expected to increase proportionately with increasing demand in Indonesia and worldwide.

Social and economic progress must be taken into account when considering the expansion of biofuels production. Seemingly, biofuels facilitate energy security, rural economic development, poverty reduction, and export capabilities. Thus the government of Indonesia has involved itself greatly with palm oil development beginning in 2006, when it was still at a nascent stage. Today, state-provided incentives such as direct subsidies, support of production infrastructure, and investment loans perpetuate the close tie between government and industry.

Meanwhile, the production of palm oil persists as one of the world’s greatest contributors to climate change. In 2007, the World Bank estimated Indonesia is generally placed as the 4th largest GHG emitter globally. This is mainly due to the palm oil industry. In 2013, 18 million hectares of land had been cleared in order to plant palm trees. Yet, merely 6 million hectares were used for this purpose. Supposedly, these areas have instead been used for cheap extraction of timber.

Moreover, the industry has given rise to social inequality. Cultivation of palm trees is labor-intensive, which led the government, under the rule of President Suharto, to expand the current transmigration scheme. Under this scheme, citizens of populated cities were moved to smaller villages where they would be able to work on plantations. The Indonesian government has claimed that the structure and implications of the program violated human rights, and although its existence ceased after a period, new violations of laborers` rights have emerged.

There are nevertheless initiatives that aim to enhance the industry. For example, the World Wildlife Fund founded the Roundtable on Sustainable Palm Oil in 2003, which analyzes the atrocities in the industry. Furthermore, criticism regarding land conversions and carbon emissions led the Indonesian state to initiate a 4-year moratorium to inhibit land conversions. Despite that effort, deforestation doubled during the same period. According to Rijkswaterstaat, the government has claimed that the loss will be compensated by reforestation.

Clearly, the biofuel industry in Indonesia, which is currently based on heavy extraction and processing, poses significant challenges. Although palm oil plantations have existed in Indonesia for almost a century, their recent expansion has countered the government’s goals for social and environmental improvement. The ingrained exploitation of the ecological system and forests are worrying, in addition to the social consequences. Significant efforts will need to be taken by the government and the private sector to improve the industry as it is – a task that is, considering what is at stake, of utmost importance.