Can Palm Oil Enter the Circular Economy?

Its waste product should be the next big thing in bioenergy, scientists say.

Palm oil is the wonderstuff of fats. It makes our cookies crunchier, shampoo bubblier and lipstick smoother, all for a fraction of the price of other oils. However, a recent media storm has cast a shadow on the industry. Headlines have exposed the mass deforestation at the hands of palm oil production, and all the gory social and environmental issues that comes with it.

To add to the fire, the two biggest exporters of palm oil- Malaysia and Indonesia, are currently battling to overturn an EU ruling to phase out palm oil as a bioenergy source by 2030. The European bloc came to its decision after palm oil overshot its 10 percent limit on environmental compromises, by an additional 35 percent, according to a report. Has the EU ruled too soon?

In the race to make palm oil production more equitable and environmentally friendlier, Center for International Forestry Research (CIFOR) has explored the use of its waste product as bioenergy.

In 2017 Indonesia produced 38 million tons of crude palm oil (CPO). Though CPO has become an important stock of biodiesel for both its domestic and export markets, its waste product- palm oil mill effluent (POME) – has failed to capture the attention of the energy sector. Last year, only eight percent of Indonesia’s potential electricity generation from POME was used. This is perhaps unsurprising, given that less than 10 percent of Indonesia’s palm oil mills actually have biomass processing plants on site.

“We are looking at why, with clear business opportunities, environmental and social benefits, few businesses are interested in developing palm oil mill effluent (POME) for energy,” said CIFOR scientist, Ahmad Dermawan.

In Indonesia, thirty million people are currently living without electricity, with millions more experiencing blackouts and unreliable connection. Enter another shade of gray into the palm oil debate: the poverty-energy trap. In this cycle, poor people can’t access electricity, and without it are more likely to remain in poverty. According to Dermawan, the potential of a palm oil circular-economy is palpable: “Just by using a product that is usually considered as waste, we can prevent further deforestation and help lift rural Indonesia out of poverty,” he says.

The good news is that domestic national policy is in place to accelerate production. President of Indonesia, Joko Widodo’s government has set targets for renewable energy to make up 23 percent of Indonesia’s total energy use by 2025, which according to Indonesian Association of Biofuel Producers (APROBI), bioenergy will account for 10 percent of this target. And since 2016, a blending regulation has required all liquid fuels to be made up of at least 20 percent of biodiesel, some of which will be used for electricity generation.


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Can palm oil enter the circular economy?

Norway Shifting Away From Palm Oil Biofuel

Norway saw drop in palm oil consumption following new regulations limiting sales in response to concerns about deforestation for plantations.

The decrease has been lauded by a Norwegian rainforest advocacy group, which called it a “big win for rainforests.” Indonesia and Malaysia, the world’s two biggest palm oil producers, have warned of retaliation if a Europe-wide phase-out of the commodity from biofuels by 2030 goes ahead.

The consumption of palm oil-based biofuels fell 70 percent in Norway last year, following a government policy change on the purchase of the commodity that is being blamed for rampant deforestation in Indonesia and Malaysia.

In 2017, the Norwegian government issued the new policy in response to mounting concern that palm oil production is having a disastrous impact on forests in the countries in which it is produced.

By last month, it appeared to have had a significant impact, when the Norwegian Environment Agency (NEA) announced a 25 percent decline in the trade of biofuels from about 657 million liters (174 million gallons) in 2017, to 497 million liters (131 million gallons) traded in 2018.

“The decrease is primarily due to a sharp reduction in imports of palm oil from 317 million liters [84 million gallons] in 2017 to 93 million liters [25 million gallons] in 2018,” it said, or a drop of 70 percent.

Once lauded as a green alternative to traditional forms of fuel and food oils, palm oil has fallen out of favor with environmentalists, who decry that deforestation and destruction of peatlands have increased to make way for the plantations.

Oil palm plantations, though green to the eye, contribute to a larger carbon footprint than the forests they replace, as they can only store an average of about 40 tons of carbon per hectare compared to 400 tons for a hectare of forest.

In a statement, Nils Hermann Ranum, head of Rainforest Foundation Norway’s (RFN) drivers of deforestation program, celebrated the decrease in palm oil biofuel consumption, calling it “a big win for rainforests and the climate when we stop burning palm oil for fuel.”

“To combat climate change and stop the burning of the world’s rainforests, we need solutions that deliver. Consumption of biofuels based on palm oil and other high deforestation risk feedstocks adds fuel to the fire and must end,” he said, urging the EU “to follow suit.”

The Norwegian legislation was followed earlier this year by EU proposals to completely phase out the use of palm oil biofuel by 2030. That move drew the ire of the Indonesian and Malaysian governments, which said small, independent farmers would be the most hurt, and vowed to introduce retaliatory measures on European exports to their countries.

The EU phase-out plan does, however, make exceptions for palm oil produced on already unused land, and for smallholder farmers — but only those with fewer than 2 hectares (5 acres) of plantation land. Malaysia responded by insisting that farmers operating on 5 hectares (12 acres) should also be considered small-scale.

In April, Malaysian Primary Industries Minister Teresa Kok spearheaded a “Love My Palm Oil” event in parliament, and was quoted by the Bernama news agency that the government would “definitely do something” if the EU proceeds with the phase-out.

Earlier this month, the Indonesian trade minister, Enggartiasto Lukita, was quoted as saying that his government would be willing to file a lawsuit with the World Trade Organization against the EU if imports of palm oil are banned.

But Ranum from the RFN insisted that the portrayal of the policy changes are being incorrectly perceived “as a ‘ban’ on palm oil,” when in fact they represent “a removal of incentives to use biofuels based on feedstocks with a high risk of indirect land-use change (deforestation) to comply with renewable energy mandates, on the basis that they fail to deliver reductions in greenhouse gas emissions.”

Figures from the Malaysian Palm Oil Council show that there was a drop of nearly 4.5 percent in exports to Europe between January and April compared to the same period last year, which was attributed in part to new regulations on the acceptable levels of a contaminant that can be found in palm oil.

In Norway, an increase in the consumption of advanced, or second-generation biofuels — those made using waste products, animal feed or other residues — was seen as a positive step, according to the NEA.

“A total of 190 million liters [50 million gallons] of advanced [biofuel] (almost 40 per cent) were sold,” the NEA said. This was up from 138 million liters (36 million gallons) of advanced biofuel sold in 2017, or 21 percent of total biofuel sold, the NEA said.

About the reporter: Lauren Crothers is a photo editor at and a New York City-based freelance journalist with extensive reporting experience in Southeast Asia. You can find her on Twitter at @laurencro.


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Norway sees sharp drop in palm oil biofuel consumption after ban on government purchasing