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Transcript in English

MOT: Palm oil under pressure
YLE TV1 8:00 PM

Director: Kati Juurus

Transcript in English


Kristianto Hidajatur Rochman: “Who are you?”

Reporter Kati Juurus: “We are from Finnish TV, we are making a film about palm oil.”

Sampo Soimakallio: ”Now that Neste Oil is rapidly expanding their production, a question arises about where they have planned to get the raw material for their plants.”

Juurus: “I don’t know if you know a company called Neste Oil?”

Wilmar: “Nes…, Oooh, excuse me! Neste to become here next month.”

Episode title: Palm oil under pressure

Voiceover (VO), Juurus: The atmosphere is warming. Earth’s oil resources are being burned to greenhouse gases in car engines.

In December a new EU directive on renewable energy enters into force, seeking to curb greenhouse gases.

It stipulates that 10 per cent of transport fuels in the Union must come from renewables. The Finnish Government has decided on an even more stringent target: 20 per cent.

The directive means that in ten years time Europe will consume 20 million metric tons of biodiesel annually.

And someone has to produce it.

Honkamaa: ”The reason this is being done, as you know, is the will of the society. At the moment, oil companies can’t really sell any fuel in Europe if it doesn’t include any bio content…”

VO: The directive requires fuel distributors to sell biofuels alongside regular fuels. This applies also to the Finnish Neste Oil in its’ home market, which means Finland and the Baltic region. Domestic demand can be satisfied with fuel from the Porvoo refinery’s bio plant on Finland’s south coast. - But the Finnish oil company has much more ambitious plans. It wants to become a global player.

Honkamaa: ”Neste aims to be the world leader in renewable diesel.”

The state-owned Neste Oil has invested more than one billion (thousand million) euros in two new biodiesel plants, that are supposed to increase the company’s biodiesel production fivefold. This renewable diesel is meant for export, to Europe and the US.

The new plants in Singapore and Rotterdam are mainly targeted at the commercial market.

Neste Oil’s goal is to produce up to 10 per cent of the biodiesel used in Europe. Its’ main raw material is palm oil.

Question to Honkamaa: Why did you decide to stake so much in palm oil?

Honkamaa: "Palm oil is an excellent raw material for this purpose, because the emission reductions are so much better than with other raw materials."

VO: Reading the directive one might draw a different conclusion. The EU commission has commissioned studies that show greenhouse gas emissions associated with palm oil production to be worse than with most other biofuels. Palm oil based biofuel causes more greenhouse gas emissions than other biofuels, unless the strong greenhouse gas methane is captured in the process.

We’ll get back to methane later.

VO: Most of the world’s palm oil comes from Indonesia and Malaysia. That’s why Neste Oil has calculated that the best place for a new refinery is in Singapore, close to the plantations.

Question to Honkamaa: Did you anticipate when doing this investment decision that, palm oil might become a slightly controversial product?

Honkamaa: “Well, it may be that, historically there have been problems associated with palm oil.”

Kristell Hergoualc’h: “How many trees, for instance you have one, two three four, five, six, and then the sixth tree would be…”

VO: EU-funded research is going on in Sumatran swamp rainforest, with the goal of gaining knowledge about greenhouse gas emissions from palm oil plantations and of helping the EU commission to refine its biofuel directive.

Hergoualc’h: “We focus our research on carbon stock changes and changes in greenhouse gas fluxing after land use change. We take the forest as a reference, and we look around the forest what kind of land use we have.”

VO: The island of Sumatra, one and a half the size of Finland, is the most important area for oil palm cultivation in Indonesia. There is not much virgin forest left. This rainforest is also surrounded by large areas cut down and burned for planting oil palms.

Kristell: “All this area was cleared and burned three years ago. And here in this burnt area we have small oil palms of one year old.”

VO: The staff are from the CIFOR research institute, whose forest research program is led by Markku Kanninen from Finland.

Kanninen: ”It’s good business for those who produce it. But there are these environmental effects, actually, that if you cut down a forest and replace it with oil palm – and especially if you do it on marshland, it may lead to huge greenhouse gas emissions. The total emissions from Indonesia’s dried marshlands correspond approximately to those of Germany.”

VO: Most of global palm oil production goes to cooking oil. But now the demand for biofuels just accelerates the increase in production.

Kanninen: During the past years Indonesia has planted additional palm oil production on 400 to 500,000 hectares, half of which is on wetlands.

VO: Wait a minute. The purpose of using biofuels was to cut greenhouse gas emissions, but producing them increases the emissions.

Question to Kanninen: “Does it make any sense to produce bioenergy from palm oil?”

Kanninen: “It depends a lot on what was the original land use on the palm plantation. - - If it is on former agricultural lands with low yields, the negative side is not too great. - - But if it requires the cutting of a fully grown terminal rainforest, it is quite clear that it will take 400-500 years before the balance in carbon emission and reduction is restored.”

Hergoualc’h: “We use this palm oil as renewable energy, but yeah, the problem is that when you assess, in terms of climate change you have to start from the starting point, which is the forest. And this is the problem. So you have to do a full cycle assessment in order to see if it’s, the impact of all palm cultivation on the climate, so…” (laughs).

Question: “Are we still on the plus side or are we on the minus side?”

Hergoualc ‘h: “No, I think we’re on the minus.”

VO: The purpose of the EU’s renewable energy directive was to curb greenhouse gases. But when drafting the legislation, even the commission noticed that from the standpoint of climate policy, some biofuels are more problematic than others.

Soimakallio: ”It is likely that, on an average, the production palm oil causes higher emissions than fossil fuels.”

Marlene Holzner(EU Commission): ”We only want to promote biofuels which really meet high environmental standards. And that is why we have described in very detail, which biofuels we want to see and which are allowed and those that are not allowed. For example, we have said very clearly, that it is not allowed to chop down forests ---to produce biofuels. It’s not allowed to dry wetlands and to produce biofuels on that and also other protected areas, because we want to make sure that our nature is protected.”

VO: There are set criteria in the directive about what kind of biofuels can be considered as sustainably produced. Now it is the job of member countries to interpret these criteria and draft national legislation based on them. But there is still a lot of room for interpretation.

Soimakallio: ”How to handle emissions from soils may be the most important, and the biggest question mark.”

VO: In the ministry of labor and industry, the task has landed on Jukka Saarinen’s desk.

Saarinen: ”Now I have to, not quite alone, but together with colleagues and ministries, I have to consider how to implement these demands – in a somewhat reasonable and realizable way.”

Juurus: ”How hard is that?”

Saarinen: ”Well, it’s quite enough for one man. – In practice it means that, the production cycle of all imported biofuel raw material must be traceable. And there must be some trick to prove that the cultivation area is not among the forbidden areas.”

Juurus: Who can verify that?

Saarinen: Well, that is a good question.

Honkamaa: ”We know exactly which plantations they (the palm oil shipments) are coming from. – And all the palm oil that Neste has procured has been produced sustainably and the suppliers are responsible people.”

Juurus: If they are so good, could we have a list of them?

Honkamaa: For commercial reasons we have decided that we don’t give it out.

- - -

VO: The EU directive stipulates that, greenhouse gas emissions from biofuels should be at least 35 per cent smaller than those of a corresponding fossil fuel. Honkamaa says that Neste Oil’s biodiesel exceeds this target with flying colors.

Honkamaa: When we make a real calculation from our suppliers we get to about 60 per cent reduction (compared to fossil fuel).

Juurus: Could I have a copy of that calculation?

Honkamaa: I think so. Actually there are some on our website even, some examples of them that have been studied.

VO: At the end of the interview, the company’s communications manager promises to look for Neste Oil’s biodiesel’s life cycle analysis, which would show the amount of emissions at different stages of the production process.

Neste Oil person: ”I have to dig into this myself to see what the calculations look like exactly. It is clear that the work is being done all the time because this is a critically important area for us.”

VO: The companys environmental director Simo Honkanen returns later and tells us that, a proper lifecycle calculation is not available because an outside audit is just about to commence.

Soimakallio: As there are no exact rules about how these calculations should be done and what accuracy is needed, it is impossible to say what fraction of current production could fill the criteria.

VO: This already difficult assignment is becoming even more difficult in the near future. It may not be enough that, the palm oil was produced sustainably on certain plantations. Researchers and commission officials have started to talk about so-called indirect land use effects.

In other words: As demand for palm oil grows, production spreads to new areas. And if a plantation encroaches on agricultural land, a rice field for example, the rice production may in turn move on, possibly to a swamp rainforest.

Soimakallio: “The big problem here is actually the indirect effects, and the runaway growth in demand. That is a problem.”

VO: The indirect land use effects have been noticed also in the EU commission, including energy commissar Günther Öttinger.

Holzner: “He has said very, very clearly that he takes this issue of indirect land use very seriously. If we promote biofuels, it has to be ruled out that if they have any negative impact on the environment and if we have the evidence that really there’s a huge impact, he will act on that.”

VO: The indirect land use changes may end up in the new directive.

Linnanen: It would be good to include them, because it would bring additional viewpoints to decision-making, despite the difficulties in the calculation procedure. It is all about the availability of the Earth’s finite resources, including biomass. – All kinds of problems come up: Aha, there is an indirect link between this and that, and what do we do now, where and how to produce our food – and then we may notice the Earth is not big enough.

Juurus: What are the implications for palm oil, if these indirect land use changes are included?

Linnanen: It is not going to make palm oil’s carbon footprint any smaller.

VO: And that goes for Neste Oil’s carbon footprint as well.

Honkamaa: “From a scientific viewpoint it is a difficult thing – there is no exact definition about how the emissions should be calculated and which variables should be included. – But we have anticipated this for a long time now and we’ve taken it into account in our business, and we will adapt to it, whatever it means.”

Juurus: Do you know what biofuels are?

(Interpreter translates)

(Yusuf shakes his head)

Interpreter: “he say no.”

Juurus: "what do you think the palm oil is used for?"

Yusuf: "They make oil as far as I know. They say you can make soap from it. That’s what they say, I haven’t seen it myself."

VO: The village of Bungku in central Sumatra has had to adapt to the sprawling palm oil plantations.

Yusuf: This was originally a forest, where we used to eat. We used to hunt wild boar and deer here.

The Kubu-people used to get their livelihood from the forest. Now they steal palm fruit from the plantation that replaced their forest about ten years ago.

Yusuf: "I have waited a long time for some people to come here and give us some support and advice. "
"Nobody’s coming. When do you think they might come?"

"Only people coming here are the the army, police and brimob (special forces)

“Arrest them”, they shout.

Yusuf: "I still don’t know who is right and who is wrong. I can’t make up my mind. Are we wrong or is it the company. I don’t understand."

The Bungku village leader Mohammed Zen sides with the villagers against the large plantations. Zen says that, the plantations established on state land do not have a valid operating license.

VO: The Kubu-tribe has traditionally viewed the state lands as their own. Now the villagers are stealing palm fruits on lands they consider their own.

The plantation company MPS belongs to the Asiatic Persada group, which is in turn controlled by the world’s largest palm oil merchant, the multinational Wilmar Corporation.

Zen: "If we citizens are able to obey the law, why can’t Wilmar?"

"At the same time they are telling us that people have taken the land and when they collect the fruits they say it is stealing."

"Let’s ask who stole first, the people or Wilmar?

VO: The Wilmar-controlled Asiatic Persada has also other land disputes with local people. Last year Wilmar had bad press as the International Finance Corporation of the World Bank stopped all funding to Wilmar’s palm oil projects because of irregularities in finances.

VO: Indonesian palm oil companies are usually not very eager to appear in front of TV cameras. Journalists interested in the business have been kicked out of the country. In spite of all that, we decided to go and have a look at Wilmar’s one 20,000 hectare plantation.

Kati Juurus: "Hello"

Rochman:" Who are you?"

Juurus: "We are From Finnish tv, we are making a film about palm oil"

Rochman: "Who gave you access?"

Juurus: "it’s just a road, public road…"

Rochman: "What are you going to do with it?"

Juurus: "We are making a program for Finland"

Rochman: "oh…

VO: For some reason the man responsible for Wilmar’s local quality certification decides to show us the estate.

Juurus: I don’t know if you know a company called Neste Oil?

Rochman: Nes, Ohh, excuse me, Neste they are becoming here next month!

Juurus: They are coming next month?

Juurus: Have you been talking about prices with Neste?

Wilmar: No, not yet. This is Singapore(´s duty). I just received the schedule to be with Neste team.

VO: Mr. Rochman tells us that, the plantation is soon going to get the RSPO certificate which is issued by the business itself. Neste Oil and the plantation’s main owner Wilmar are committed to the RSPO certification system.

Juurus: "Are there still things you have to change to become RSPO compatible?"

Rochman: "Not a lot. The change is I think about finalizing indige..tribu…indigenous people…some declaration

Juurus: “And the problems you said you have to solve with the local people, what kind of disagreement is it?

Rochman: “We gave already to them about 1000 hectares.”

Juurus: “But they are not happy with it?”

Rochman: “(We are) progressing. Some of them, outside organizations, the ngos still complaining, complaining, I have headache. Because local government already took the problem, then solved the problem together with Asiatic.”

VO: The Bungku village leader told us about the same thing, but he sees the situation differently. He thiks the government is on Wilmar’s side, not on the villagers’ side.

Zen: "You can see from this example what is the connection between Wilmar and the local administration. One example is the agreement. Why were the people given only 1,000 hectares? We want to know what is behind this. This is state-owned land, and all we get to use is that. I can’t tell you much, but this is what I think."

Rochman: ”We do like this wrong. we do like this, wrong….. we have been disturbing by this local people, there is thief issue. Thiefs thiefs thiefs"

Juurus: Thieves?

Rochman: thiefs…

VO: Wilmar sees the locals as thieves, whereas they view themselves as victims of land grabbing by Wilmar.

Fruits of this 20,000 hectare plantation are pressed into crude oil at Wilmar’s own mill. Up to one fifth of the raw material comes from diverse outside distributors.

Juurus: Where do you put the waste?

Rochman: “The waste? Behind. We have a pond. Effluent pond.”

VO: The ponds smell strongly of sewage: methane.

Juurus: You have a method to capture methane?

Rochman: “No, not yet. We have, Wilmar has, only one, I think, at Sumatra xxx to capture gas.”

Juurus: It’s not very common is it?

Rochman: “Not yet not yet. This is only to - -

Juurus: To study?

Rochman: “Yes, to study only.”

VO: As a greenhouse gas, methane is 20 times more potent than carbon dioxide. It is released in great quantities into the atmosphere from the wastes of palm oil mills. The gas could be used to produce energy, but that’s not done in the branch, some experimental projects notwithstanding. Capturing the methane is not profitable.

But for the EU, methane is more or less the deciding factor in determining whether the palm oil fuel fills the directive’s criteria. The directive gives out default values, according to which palm oil diesel is acceptable only if methane has been captured in the process.

Question to Honkamaa: How much methane have your suppliers been able to remove in their processes?

Honkamaa: "I know that almost all of them have some plans, but at the moment not much is captured. Some of our suppliers have very elaborate plans, but it varies from company to company of course."

VO. The European Commission seems to take the matter very seriously.

Holzer: ”If you want to produce biodiesel from palm oil, then you have to also install oil mill which captures the methane. So if you have a regular production of diesel from palm oil where methane is not captured at oil mill, this will not meet our standards.”

Question to Saarinen: “What if it turned out that a shipment of palm oil in the Finnish market turns out not to be in compliance with the directive. What happens?”

Saarinen: “Well, then we would have to recover the allocated tax breaks (from the importer), and an even stronger sanction would be that it wouldn’t be counted as part of the EU’s biofuel quota, and then if Finland didn’t meet the target we’d have to pay fines for every missing liter of biofuel or unit of energy. And that would be costly.”

Juurus: ”And the fine would be paid by the company?”

Saarinen: “Yes”.

Question to Honkamaa: “What would it mean for you if your product was found to be not in compliance with the directive?”

Honkamaa: Well I don’t want to speculate much, but of course we can use all plant oils as raw material: soy, rapeseed and animal fats. It must be noted that as the EU drafts this legislation, it has to be remembered that the raw material must come from somewhere if there is binding legislation – otherwise the situation will be impossible.

Juurus: What kinds of plans do you have with a company called Wilmar?

Honkamaa: As I said earlier, we do not comment specific suppliers. Wilmar is known to be one raw material supplier, and among the responsible ones.