Major Palm OIl Company Will Halt Indonesia Forest Destruction

The world’s second largest palm oil company has agreed to a new standard to conserve vulnerable carbon-rich forests and peatlands in Indonesia, according Geneva-based nonprofit The Forest Trust (TFT).

TFT said it will partner with Golden Agri-Resources Limited (GAR) (GARPF.PK) to help the palm-oil company save vulnerable forests while remaining profitable. With annual revenues of US$2.3 billion, GAR is the largest palm oil producer in Indonesia, the world’s leading palm oil-producing country.

Palm oil is an increasingly important ingredient of many consumer and commercial products such as cosmetics, biofuels, edible cooking oils, sweets, chocolates and many other foods. More than 40 million tons of palm oil worth $20 billion is produced each year. The growing production of palm oil brings environmental perils but also promise. A hectare of oil palm can yield six times more oil than a hectare of canola, making it far cheaper and more attractive to producers in countries like Indonesia, and an important resource for a growing world population.

Oil palm plantations also require fewer petrochemical inputs than other oil plants, and can be grown on land that is already environmentally degraded. Since the early 1980s, however, the total area of land allocated for oil palm production has more than tripled globally, reaching nearly 14 million hectares in 2007. Most of this expansion has occurred in Indonesia.

"Without better stewardship, the phenomenal growth of the palm oil industry could spell disaster for local communities, biodiversity, and climate change as palm plantations encroach further and further into forested areas," said Scott Poynton, TFT’s executive director.

GAR agreed to change its development practices after international corporations Unilever and Nestle cancelled contracts for palm oil. Greenpeace also led a campaign that highlighted the role of GAR and its Indonesian plantations in driving deforestation.

The partnership with TFT establishes a Forest Conservation Policy and a set of measures to ensure that GAR’s plantations are not developed at the expense of carbon rich forests, or on peatlands-major carbon storage sites. TFT’s involvement will also prevent the plantations from contributing to the destruction of forests that are particularly valuable in terms of environmental preservation, biodiversity, landscape, or importance to local livelihoods.

A key commitment by GAR is a pledge not to clear ‘High Carbon Storage’ forest. Under the company’s new plans, they have set a provisional threshold and will not be developing land that contains over 35 tons of carbon per hectare. Importantly, this provisional figure is in line with figures for low carbon development recommended to the Indonesian Government by their own advisors.

"Today’s agreement represents a revolutionary moment in the drive to conserve forests. It’s about going to the root causes of deforestation; we have shown that the destruction of forests is anchored deeply in the supply chains of the products we consume in industrialized nations and we are showing we can do something about that," Poynton said.

The agreement between GAR and TFT goes into effect immediately and is expected to bring substantive change to Indonesian forests by the end of 2011, Poynton said.