Pullout. Potential of Palm Oil for Developing Countries and Role in the Food and Fuel Debate 1. Limited arable land-bank

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1 KDN No: PP 10311/10/2009 (022649) VOL.6 ISSUE 2 (April-June), 2009 Pullout Dr Yusof Basiron* and Dr Yew Foong Kheong** *CEO, Malaysian Palm Oil Council yusof@mpoc.org.my ceopalmoil.blogspot.com **Senior Fellow, Malaysian Palm Oil Council yew@mpoc.org.my Potential of Palm Oil for Developing Countries and Role in the Food and Fuel Debate 1 Agricultural production has become more complex in recent times. Firstly, an increasing quantity of food including oils and fats has to be produced to feed the spiralling world population. Expanding crop production requires arable land to be opened up for cultivation, leading to pressure from competing demands for use of the land ( Secondly, sustainable land management (Dumanski and Smyth, 1993) is required to ensure that scarce resources can be used on continuous basis. Much arable land is lost through unsustainable use, resulting in soil degradation from erosion and desertification. Limited arable land-bank The world population is increasing at an amazing rate of 211,000 people per day or 77 million per year ( It grew from 2 billion in 1922 ( to 6.6 billion in 2005 (Figure 1), and is projected to swell to 8 billion in 2030 and 9 billion in 2042 ( academy.com/globalleader/trends.htm). Arable land comprises only 10% of the world s total land area of 150 million km 2 ( and nearly all of the Furthermore, concerns over climate change now demand sustainable practices in crop cultivation, in a manner that minimises life cycle greenhouse gas (GHG) emissions. Another response is the use of vegetable oils as feedstock in bio-fuel production. The feedstock is from palm oil (Yusof, 2005; Choo et al, 2005), rapeseed ( and maize (Bourne, 2007). However, their use has raised anxiety about possible shortages for food applications and increased prices. The tropics with abundant sunshine and rainfall are well suited to agriculture. And, as many tropical countries are developing countries, agriculture is often used to spearhead their development. This paper will therefore discuss the role played by oil palm with regard to food, fuel and development. 1 This is an edited version of the paper presented at the Palm Oil The Sustainable 21 st Century Oil conference held from March 23-24, 2009 in London, and organised by The Royal Society, UK.

2 2 productive land is already exploited. In fact, cropland per capita is declining worldwide. Arable land per capita decreased from 7.5 x10-3 km 2 in 1922 to 2.27 x10-3 km 2 in 2005 (Table 1). This will diminish to 1.88 x10-3 km 2 in 2030 and to 1.67 x10-3 km 2 by Therefore, it is vital to use this scarce resource rationally for food and fuel production. Oil palm, soybean, rapeseed and sunflower seed are the four primary sources of vegetable oil (Table 2). Together they satisfy million tonnes or 81.4% of world demand. Palm oil currently holds a share of 31%, followed by soybean (28%), rapeseed (14%) and sunflower oil (8%). Higher land productivity of the oil palm means that it requires less land to produce the same amount of oil than other major oil crops. The current combined production of million tonnes of palm, soybean, rapeseed and sunflower oil is obtained from a total area of 177 million ha (Table 3). Oil palm uses the smallest acreage of 11.6 million ha, followed by sunflower (26 million ha), rapeseed (33 million ha) and soybean (106 million ha). The oil palm is a perennial crop, while soybean and rapeseed are annuals. The oil palm has the best land productivity and highest yield of oil per hectare of all oil crops (Corley and Tinker, 2003). It produces 3.68 tonnes/ha/year (Figure 2), compared to rapeseed (0.59), sunflower seed (0.42) and soybean (0.36). This works out to 10 times more oil per hectare than soybean, six times more than rapeseed and almost nine times more than sunflower seed. If oil palm, being the most efficient oil crop, is given the sole role in producing vegetable oil to feed the world, it would only need 30.3 million ha of land (Table 4) now. This means that an excess of million ha of land almost six times the size of UK or about 1% of the total world land area can then be allocated for other landuse purposes. If the current global harvested area of 177 million ha were occupied by oil palm alone, 651 million tonnes of oil would be produced. This would amount to almost five times the current global vegetable oil requirement. Since only 137 million tonnes of oil are now needed for food (Table 5), the balance of 514 million tonnes could be put to other uses, such as producing bio-fuels. In

3 3 In recent years, the palm oil industry has embarked on trapping methane when it was realised that this is a GHG with high global warming potential. Mills that trap methane also gain carbon credits as the activity qualifies as a Clean Development Mechanism (CDM) project under the Kyoto Protocol (Yapp, 2008). fact, the combined world requirement for million tonnes of vegetable oil for food and bio-fuel today would require only 39 million ha of land if cultivated with oil palm. A production of 651 million tonnes of palm oil per year would even be sufficient to meet world demand for food and bio-fuels in 2030, estimated at 263 million tonnes. There will then be a surplus of 388 million tonnes of CPO for other purposes. Furthermore, no new land would have to be cleared for vegetable oil production. The palm oil industry is the world leader in sustainability certification systems. The Roundtable on Sustainable Palm Oil (RSPO) was established in 2004 and has more than 300 members comprising growers, processors, traders, manufacturers, retailers, banks, environmental NGOs and social NGOs (Jan Kees, 2008). Oil palm leader in sustainability Oil palm can be cultivated sustainably (Yusof, 2007). In Malaysia, it is grown on legal agricultural land which is distinct from gazetted permanent forest reserve land (Lee and Panton, 1971). Sustainable and responsible methods are applied in palm oil production (Yusof et al, 2008; Lee et al, 2007). Some of the Good Agricultural Practices include the use of zero burning or controlled burning techniques in clearing land; integrated pest management; and treatment of wastewater at palm oil mills to reduce levels of chemical oxygen demand and biological oxygen demand before discharge into waterways (Table 6). Two Malaysian companies United Plantations Bhd and Sime Darby Plantation Sdn Bhd were the first to obtain RSPO certification. United Plantations Bhd delivered the first batch of sustainable palm oil at the end of In January 2009, food manufacturer Danisco announced the availability of the world s first sustainable emulsifier, manufactured from sustainable palm oil. Other oilseed producers are now following palm oil s leadership in achieving sustainability the soybean industry, for instance, has set up the Roundtable on Responsible Soy ( Mitigating climate change The use of fossil fuels in the transport, industrial and building sectors is the prime source of anthropogenic GHG emissions. According to IPCC (2007), emission

4 4 from this source alone is 56.6% of the total GHG CO 2 equivalent load (Figure 3). The second cause of GHG emission arises from deforestation and decay of biomass, which contributes 17.3%. of land planted with oil palm, rather than other bio-fuel crops such as sunflower, jatropha, rapeseed and soybean (Figure 4). Palm bio-diesel from 1 ha of land would allow the VW Polo to run 109,000km, compared to 23,660km with rapeseed bio-diesel and only 8,000km using soybean bio-diesel. The use of bio-fuels to replace fossil fuels must result in a reduction of Life Cycle Analysis (LCA) GHG emissions. The EU, for instance, expects savings of at least 35% relative to use of fossil fuel. A total of 1,601kg CO 2 equivalent (CO 2e) of LCA GHG is emitted in the production of 1 tonne of palm bio-diesel and its economic co-products like palm kernel oil, palm kernel cake and empty fruit bunches (EFB). Palm kernel oil and palm kernel cake are used in food and industrial applications, while EFB are composted for organic fertilisers. Of the main sources of emissions, 51% or 824kg CO 2e/tonne CPO come from methane produced during milling; 20% or 315kg CO 2e/tonne CPO from production and use of fertilisers, including nitrogenous varieties; and 6% or 89kg CO 2e/tonne CPO from transportation and use of machinery (Table 7). One way to arrest global warming due to GHG CO 2 emissions is to substitute fossil fuels with bio-fuels. Many countries, particularly in the European Union (EU) as well as the US, have taken the lead to use bioenergy by setting up targets for renewable energy and fuels for the future. The targets range from 4-20% for next year (OECD, 2008). It is estimated that world biodiesel production will soar to 102 million tonnes in 2030 (Legge, 2008) from 7.6 million tonnes in 2007 (OECD, 2008). Preusser (2008) found that, on land-productivity basis, the biggest volume of bio-diesel is obtained from 1 ha

5 5 The use of palm bio-fuel thus prevents 2,627kg CO 2e from being released into the atmosphere, considering that production and use of fossil diesel emits 4,228kg CO 2e. A GHG emission savings of 62% is thus obtained from use of palm bio-fuel, which exceeds the threshold value of 35% stipulated in the EU Renewable Energy Directive. Palm oil should therefore be accepted as a bio-fuel source in the EU. There is great potential for further GHG emission savings from palm oil for example, the EFB can be composted while methane can be trapped and used as biogas. These activities reduce GHG emissions by 911kg CO 2e/tonne CPO. With the total at 3,538kg CO 2e/tonne, the savings are a remarkable 83.7%. are also reductions in particulates, and carbon monoxide and sulphur dioxide emissions (Choo et al, 2005). All bio-fuels are superior to fossil fuel as they are produced with lower LCA GHG emissions. Palm bio-fuel is the most environment friendly of the products (Figure 5). The LCA GHG emissions to produce 1 tonne of oil are 835kg CO 2e (oil palm), 1,387kg CO 2e (soybean), 1,562kg CO 2e (canola) and 4,288kg CO 2e (fossil fuel). These results have been obtained without including the fact that the oil palm sequesters CO 2. If this is taken into consideration and if methane is trapped as well, oil palm is found to be a net sequester not a net emitter of CO 2. In this case, the LCA study shows that tonnes of CO 2e are absorbed for every tonne of CPO produced for bio-fuel (Table 8). Current use of bio-fuels constitutes only a minor fraction of global transport fuel consumption. In 2007, global bio-fuel production amounted to 62 billion litres or 36 million tonnes of oil equivalent. This was about 1.8% of total global transport fuel consumption in energy terms (OECD, 2008). Palm oil contributes a small portion to bio-fuel supply. According to OECD (2007), palm oil, mainly supplied by Indonesia and Malaysia, constitutes only 1.2% of the world s bio-fuel production (Table 9). Bio-fuel vs fossil fuel The use of palm bio-fuel is an option for GHG mitigation in the energy sector (Yusof, 2005; Choo et al, 2005; Unnithan, 2008). Its use results in GHG emission reduction savings when compared to the use of fossil fuel (van Zutphen, 2007). In addition, diesel engines running on palm bio-diesel do not emit black exhaust fumes. There

6 6 Bio-fuels account for a meagre 5% of global demand for oils and fats (Sauthoff, 2008). The largest proportion of oils and fats, at 79%, is used for food, while the share taken up for animal feed and oleochemicals stands at 6% and 10% respectively (Figure 6). Backbone of economic growth Agriculture has always played an important role in developing countries, forming the spine of economic activity. Historically, many countries grew from humble rural farming communities into powerful industrialised nations. In Malaysia, just 52 years ago, the Federal Land Development Authority (Felda) was seen as a development agency for land settlers. It first planted rubber and, later, oil palm as anchor crops to provide a steady income for settlers. Today, Felda enjoys a new image as one of the world s largest plantation conglomerates (Ahmad Tarmizi, 2008). Set up under the auspices of the World Bank, Felda has successfully developed 853,313 ha of land and resettled 112,635 families. Oil palm is the core business with 84% of the land under this crop (Table 10). As the smallest user, bio-fuel is not in a position to dictate demand or cause large price movements for related vegetable oils. The bio-fuel hype has, however, caused vegetable oils to be associated with fossil fuel price. In fact, CPO futures were highly correlated with NYMEX crude oil futures (Figure 7). So, for a while, palm oil price tracked NYMEX crude oil movements. However, since the end of October 2008, palm oil price has been disassociated from developments in crude mineral oil prices (Ng, 2009). Palm oil production in Malaysia is based on the concepts and principles of the Bruntland Report (1987) which focuses on the three pillars of sustainability people, planet and profit (Yusof et al, 2008). Fulfilling these pillars has also enabled eradication of poverty. In fact, the oil palm farmer in Felda gets a monthly income which is well above the national poverty line (Ahmad Tarmizi, 2008). The oil palm is a suitable crop for developing countries. As an example, the palm oil industry is a major revenue earner for Malaysia. In 2008, the export of palm oil and derived products raked in RM64,808 million, or 9.8% of total national revenue (Figure 8).

7 7 Land-use comparison A comparison is made here of the land-use pattern in developed countries and tropical developing countries that produce palm oil. Both the palm oil producers (30%) and the developed countries (27%) have devoted a similar proportion of land to agriculture. A comparison of findings in Tables 11 and 12 shows that palm oil producers have retained much higher forest cover, averaging 54% compared to developed countries with only 34%. It is clear, therefore, that the major palm oil producing countries do not wantonly destroy forests. Developing countries also have more efficient landuse habits as only 7% of the land is not associated with a specific activity. If the 78.2 million ha of currently idle or under-utilised land is planted with oil palm, the potential yield would be 288 million tonnes of oil. Conclusions The escalating need for food and fuel is a global concern. Of late, the need to replace fossil fuel with bio-fuel has also gained prominence among strategies to tackle climate change. The versatile oil palm can be used for food, fibre and bio-fuel. It requires 6-10 times less land than the other oilseed crops to produce vegetable oil or bio-fuel. Cultivating oil palm relieves pressure on clearing and developing large tracts of scarce arable land. 1. If the area equivalent to that now occupied by soybean, rapeseed, sunflower and oil palm were planted solely with oil palm, the vegetable oil produced would be almost five times the current world needs. The surplus of 514 million tonnes of CPO, obtained without opening up any new arable land, could then be used as for bio-fuel or other needs. In such a scenario, the palm oil produced could still meet global requirements for food and bio-fuel in 2030 and leave 388 million tonnes for other purposes.

8 8 2. As a bio-fuel source, palm oil is superior to soybean and rapeseed in that it delivers the lowest LCA GHG emission. The reduction savings exceed 35%, thus making it suitable for use as a bio-fuel source in the EU. 3. Developing countries in the tropics depend heavily on agriculture to create employment opportunities and generate revenue through exports. Oil palm is a proven crop for these purposes. 4. The main palm-oil producing countries have 78 million ha of idle land which could add to production capacity by 288 million tonnes. Oil palm cultivation must therefore be encouraged in these countries. References 1) Ahmad Tarmizi A (2008). FELDA A success story, Global Oils & Fats, Malaysian Palm Oil Council, Vol 5(1), Kelana Jaya; pp ) Bourne JK (2007). Biofuels: Boon or boondoggle? National Geographic, Vol 212(4); pp ) Chen, S.S. (2008). The LCA Approach to Illustrate Palm Oil s Sustainability Advantage. Proceedings of Int l Palm Oil Sustainability Conference, Kota Kinabalu, Sabah. pp 11 4) Choo YM, Ma AN, Chan KW and Yusof B (2005). Palm diesel: An option for greenhouse gas mitigation in the energy sector, Journal of Oil Palm Research, Vol 17; pp ) Corley RHV and Tinker B (2003). The oil palm, Blackwell Science Ltd, pp 562 6) Dumanski J and AJ Smyth (1993). The issues and challenges of sustainable land management, Proceedings of International Workshop on Sustainable Land Management, Lethbridge, Canada, pp ) FAO. (2004). Global Forest Resources Assessment Update 2005, Food and Agriculture Organisation of the United Nations, Rome, pp ) Biofuels from rapeseed 9) Global Trends The world in ) food: Human appropriation of the world's food supply 11) Population and arable land 12) External Trade ) Round Table on Responsible Soy Association 14) Global food crisis 15) IPCC (2007). Climate change 2007, Synthesis report available on ch/ipccreport/ar4-syr.htm 16) Jan-Kees V (2008). RSPO - Delivering on a promise, Proceedings of Palm and Lauric Oils Conference 2008/09. Bursa Malaysia. Kuala Lumpur, pp 3 17) Lee PC and WP Panton. (1971). First Malaysia Plan Land Capability Classification Report. Economic Planning Unit, Prime Minister s Dept, Malaysia. 18) Lee KT, Mohamed AR and Bhatia S (2007). Palm oil: addressing issues and towards sustainable development, Science Direct, Renewable & Sustainable Energy Reviews,13, pp ) Legge T (2008). The potential contribution of biofuels to sustainable development and a low-carbon future, Chatham House, pp ) Ng, J. (2009). Plantations: still early to go overweight, The Edge Malaysia, pp ) OECD (2008). Economic assessment for trade and agriculture, pp ) Oil World (2008). ISTA Mielke GmbH, Hamburg. Vol 51, pp ) Preusser S (2008). Status of biofuels sustainability certification and wildlife conservation, JRC/MPO Industry Expert Consultation, Kuala Lumpur. 24) Sauthoff H (2008). Is the tiger dead? When the vegetable oil market loses its pride, what remains lauric specific?, Proceedings of Palm and Lauric Oils Conference 2008/09. Bursa Malaysia. Kuala Lumpur; pp 6. 25) Unnithan UR (2008). Palm biodiesel - the cost effective environment friendly fuel, Proceedings of Palm and Lauric Oils Conference 2008/09. Bursa Malaysia. Kuala Lumpur; pp ) van Zutphen H. (2008). The CO2 and energy balance of biodiesel derived from vegetable oils, Zwolle, The Netherlands, pp 4. 27) van Zutphen H (2007). The CO2 and energy balance of Malaysian palm oil, Zwolle, Netherlands, pp ) Yapp HH (2008). Clean Development Mechanism (CDM) - Market based solution in greening the palm oil industry, Proceedings of Int l Palm Oil Sustainability Conference, Kota Kinabalu, Sabah, pp ) Yusof B, M Basri and Chan KW (2008). Why doubt Malaysian oil palm sustainability?, Proceedings of the 6 th Eurolipids Conf., Athens, Greece, pp ) Yusof B. (2007). Palm oil production through sustainable plantations, Eur.J.Lipid Sci.Tech; 109, pp ) Yusof B (2005). Biofuel: an alternative fuel in the Malaysian scenario ; Palm Oil Developments, 42, pp 1-4.