Paying to Preserve High Carbon Stock

A draft report by the Sustainable Palm Oil Manifesto (SPOM) High Carbon Stock Study (HCSS) group has received a small amount of press attention since it was released in mid-August.

The draft report is a culmination of months of work by a dedicated group of researchers from a diverse range of backgrounds. Notably, it is being led by Jonathon Porritt, former leader of Friends of the Earth in the UK.

The study has been presented as something of a foil to an attempt by a coordinated effort by large Indonesian companies, Greenpeace and The Forest Trust to unilaterally define what ‘High Carbon Stock’ (HCS) is, and what it should mean for oil palm plantations and palm oil purchasers around the world.

Indeed, the release of the study prompted Greenpeace director John Sauven to state that the HCSS “is trying to undermine the High Carbon Stock Approach … The SPOM group have proposed their own, weaker definitions that would open the door to extensive deforestation by stealth. This underhand tactic cannot be allowed to succeed.”

The HSC Approach is of course NGO-driven. Greenpeace appears to be saying it’s our way or the highway.

A major flaw of Greenpeace’s criticism is that the HCSS actually attempts to balance socio-economic concerns with environmental concerns, which has been noticeably absent from the model developed by Greenpeace.

The HCSS states that it “aims specifically to address how to reliably estimate [greenhouse gas] emissions caused by oil palm development, and how to combine these with socio-economic consideration and other factors when making land use decisions”.

But an interesting point that is brought up by this last statement is that ultimately land-use decisions – on a large scale – are dependent on the government.

More recently, the interaction between governments, environmentalists and the private sector has become more apparent. Two Indonesian officials have remarked on their government’s doubts about recent ‘no deforestation’ pledge by Indonesian companies on the grounds that this impacts local communities.

Opportunity cost

Marcus Colchester of the Forest People’s Programme has made very interesting points about the incentives and the actors around HCS. Colchester states that a new system being proposed would dissuade companies from cutting by using higher conservation values.

This method would also provide the companies with an incentive to hand these areas to local communities – who are quite likely to use this land for agriculture. Similarly, if the policies are implemented at government level, the land is also likely to be given to communities.

This means that, if environmentalists want to conserve these areas, they will need to offer locals a strong incentive to protect the land instead of developing it. This, of course, presents a range of new problems.

The opportunity cost for a smallholder or community of smallholders on forest land that can potentially be planted with oil palm is massive. Estimates of the net present value of smallholder oil palm plantations in Sumatra are in excess of US$7,000 per ha, according to one estimate.

So the question for governments – and the private sector – is whether they can afford this cost. For the private sector, can this cost be absorbed and have its operations remain profitable? For governments, is there a dividend apart from the environmental one?

If governments decide to impose costs on the private sector, companies can simply withdraw their capital – meaning foregone revenue and investment. These costs, then, can only be imposed if there’s another source of revenue for the government – will this be aid money from nations such as Norway?

What HCS underlines is that for many Western environmentalists, there is a fanciful notion that not developing land for agriculture somehow has no costs attached to it, or is a ‘pain-free’ route. This notion has turned out to be wrong, time and again.

When governments and NGOs originally pushed the idea for REDD – reduced emissions from deforestation and forest degradation – the system underpinning it was one in which wealthy countries would financially compensate poor countries for foregone opportunities by not converting forests.

But under HCS, this system – and any compensation – doesn’t exist, meaning that poor countries, and the communities within them, are being asked to hold themselves back, while getting nothing in return. It’s no surprise, then, that some officials in developing countries have objected to it so strongly.

Certainly, there are no costs for the Western environmentalists. But for governments and people in developing countries, it’s a completely different story.

Other questions

Despite these comments from various campaigners, there are still some findings in the draft report that the industry needs to take seriously, and which have been raised by the MPOC.

First, the conversion threshold throughout the study is not entirely consistent. The measurements used for carbon biomass throughout the study vary, depending on both the number and the measure used. Moreover, the practicalities of measuring of root biomass are not taken into account.

Second, the draft report indicates that any planting on peatlands is forbidden. However, this doesn’t take into account the possibility of planting on degraded peatland and there is potentially a net benefit.

This leads to a bigger question: if there is degraded peat, how much should the negative impact of simply leaving it – potentially leading to further negative environmental impacts – be taken into account? The practical costs of peatland restoration are something that should be taken into account. This can be said of environmental remediation more broadly.

Third, there is something close to a prescription for planting to take place almost entirely on grassland and scrubland, but the fact of the matter is that these land classifications are generally absent from tropical developing countries.

Finally, the submission raises the possibility of perverse outcomes. One of the main problems in placing restrictions on how oil palm – and oil palm only – may be planted is that it simply leaves the door open for other crops that for whatever reason environmentalists don’t see as being as controversial. This will mean that the land in question will still suffer precisely the carbon loss that environmental campaigners are trying to avoid.

This also leads the possibility that alternative crops – such as banana plantations – will not provide benefits to local communities in the same way. This may be because the type of crop requires sufficient volumes, transport infrastructure or agricultural extension services that aren’t available to local smallholders.

A simple thought experiment illustrates this: if the world banned palm oil tomorrow, what would happen? Farmers and companies would plant something else. And it would in all likelihood provide lower social and economic benefits to the communities and countries in which it is planted.

This is ultimately the danger of the HCS study and others like it: that environmental concerns and subsequent measures neither solve the environmental problem, nor provide a social and economic benefit.

 

Dr Yusof Basiron

CEO, MPOC