Ethical Performance
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Indonesia gets palm oil project

March 2009

Oil palm companies in Indonesia are being encouraged to start new plantations on degraded soil instead of cleared forest land. In the same project the World Resources Institute (WRI), a US-based environmental think tank, is trying to protect the forests that oil palm companies want to clear for plantations.
The WRI aims to bring the existing forestry under the certification of the Forest Stewardship Council (FSC), a German environmental group, and is conducting the two operations in its palm oil, timber, carbon offset project, known as POTICO.
It reports that Indonesia has at least 20 million hectares of degraded land suitable for oil palm, yet companies continue to push their plantations into natural forests and thus fuel illegal logging.

Under POTICO a set of investors would finance one or more companies to switch their concessions from oil palm to timber and then contract with another business to log selectively in accordance with FSC standards. FSC-certified timber would provide an interim cash flow for four years, after which the oil palm plantations should generate good yields.

Illegal logging for timber and wood pulp has been a principal cause of deforestation in Indonesia for many years. However, oil palm plantations have now also emerged as a big threat.

At the same time Indonesia has become the largest producer of palm oil, and the Food and Agriculture Organization estimates that it has the second highest amount of annual forest loss in the world. As a result, Indonesia is the world’s third largest emitter of greenhouse gases after the US and China.

The problem is intensified, says the International Institute for Environment and Development, because the Indonesian government is stimulating further expansion of palm oil by offering incentives and subsidies. Many of the country’s forests are on peatlands and the cumulative carbon dioxide emissions could be significant.

Jonathan Lash, WRI president, said: ‘Deforestation is having a significant impact on people, biodiversity and the climate. Project POTICO will relieve pressure on Indonesia’s virgin tropical rainforests, reduce greenhouse gas emissions from forest clearing, and prevent the loss of biodiversity in forests slated for conversion to oil palm plantations.’

The project is funded largely by the US forest products company NewPage.

World Resources Institute | Asia | Palm Oil

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