Nur Ansar and Agus Sutomo
(Coalition of #Cleanbiofuelforall and Earthqualizer)
Monday, December 23, 2019, President Joko Widodo inaugurated the launch of 30 percent Biodiesel (B-30) at the Pertamina MT Haryono Gas Station (SPBU), South Jakarta. The program is mixing 30% Biodiesel with 70% diesel fuel. Quoted from Kompas, Jokowi said that the program was implemented on the grounds of finding renewable fuel sources as a substitute for fossil energy, as well as a manifestation of the nation's commitment to use clean energy to reduce carbon emissions. The program is also used to release imports of fuel oil (BBM), especially diesel fuel which is quite high. And will create the use of palm oil - Crude Palm Oil (CPO) - a very large domestic.
The use of domestic CPO will also be the answer to Indonesia's current trade war with Europe related to CPO. "You don't buy anything, I use it myself. You don't buy anything, I consume it domestically. Our bargaining power is stronger," Jokowi said at the MT Haryono gas station (December 23, 2019), quoted from CNBC.
The use of domestic CPO, as Jokowi said when inaugurating the launch of the B-30, that would save the country's foreign exchange is indeed correct. For the B-30 program, if it runs optimally, it will save foreign exchange reserves up to 63 trillion rupiah from the reduction in diesel imports.
The commitment of the Government of Indonesia to use biofuels, starting with the adoption of a legal umbrella for the development of biodiesel in Indonesia for 25 years — starting from 2004. The legal umbrella is Presidential Regulation No. 5 of 2006 concerning National Energy Policy. Then also issued Presidential Instruction No. 1 of 2006 concerning Procurement and Use of Biofuels as Alternative Energy, and Presidential Decree No. 10 of 2006 concerning the Establishment of a National Team for Biofuel Development. And the Minister of Energy and Mineral Resources Regulation No. 32 of 2008 concerning Provision, Utilization and Commercial Administration of BBN as Other Fuels as amended the last time by Minister of Energy and Mineral Resources Regulation No. 12 of 2015.
The main raw material for Indonesian biofuels at present is crude palm oil (CPO). However, there are still other sources of raw materials such as Jatropha curcas (Jathropa Curcas). For other countries, like America using soybean oil. Some use corn.
From Databox Katadata - taken from the Ministry of Energy and Mineral Resources and APROBI - Indonesia's biodiesel production increased rapidly from 2009 to 20182. Biodiesel production in 2009 was 190,000 Kilo Liters (KL), while in 2018, it increased to 6.2 million KL. Of the total 2018 production, only 1.7 million KL was exported and domestic consumption was 3.8 million KL.
In 2019, the Indonesian Biofuel Producers Association (APROBI) noted that biodiesel production was 8,399,184 KL3. While the domestic distribution of 6,392,645 KL. In 2019, biodiesel exports would actually drop to 1,319,428 KL. It seems that the decline in exports was affected by the trade war between Indonesia and Europe related to CPO.
For 2020 production, Indonesia is targeting to procure biodiesel for diesel fuel as much as 9,590,131 kilo liters. The procurement allocation was given to 18 companies operating in Indonesia, such as Pertamina, Shell, and Exxonmobil. However, Pertamina is the company that received the largest allocation of biodiesel in 2020, totaling 8,382,300 kilo liters (see table 1 for details).
Biodiesel which will be used by Pertamina in 2020, will be supplied by 18 companies operating in Indonesia. For example, Wilmar, Sinar Mas, Musim Mas and Tunas Baru Lampung (see table 2) for example. That is, Pertamina, received biodiesel from several companies that violated labor rights, and also companies that violated the RSPO's NDPE and P&C standards.
Tabel 1
The allocation of biodiesel procurement 2020 is based on Minister of Energy and Mineral Resources Decree number 199 K / 20 / MEM / 2019
Tabel 2
Perusahaan pemasok biodiesel Pertamina 2020
The government's commitment to use biodiesel is good, but it needs to pay attention to other aspects. Forest fires, deforestation, fulfillment of the rights of plantation workers, to agrarian conflicts that occur in oil palm plantations clearly need to be overcome by the Government. If not, the Government merely produces new renewable energy, but fails to reduce emissions and fulfill the rights of the people who should be able to benefit from the program.
Problems in oil palm plantations, such as deforestation, are the reason the European Union refuses to buy biodiesel from Indonesia. In addition, the European Federation for Transport and Environment (T&E), states that the emissions produced by palm oil during production are greater than fossil energy, one of which is due to land conversion; Europe revises energy policy and revokes support for palm biodiesel; certification of oil palm plantations does not guarantee environmental sustainability because it does not take into account the transfer of functions of forest land; and the palm oil industry is the biggest driver of deforestation in producing countries such as Indonesia and Malaysia.
The reasons from the European Union, are actually already listed in the No Deforestation, No Peatland, and No Exploitation (NDPE) policies made by the company as a commitment to environmental sustainability. Roundtable on Sustainable Palm Oil (RSPO), an organization consisting of various companies in all sectors of the palm oil industry. In revising the CPO certification standard, the RSPO strengthens its No Deforestation, No Peatland, and No Exploitation (NDPE) policies that must be met by its members, including in Indonesia.
Indonesia's biodiesel supplier company 2020, also many who adopted the NDPE policy. However, in the company's production process, there are still various problems, including violations of NDPE policies (we discuss this issue in the section on implementing NDPE policies). Earthqualizer found, until now there is still conflict, at least in 100 groups of oil palm plantation companies. But Earthqualizer also states that companies that have an NDPE policy show a change in behavior and are committed to carrying out that policy.
The problem is, can the NDPE policy be used to encourage companies to produce sustainable biofuels in Indonesia? Before discussing further, sustainable biofuels in this paper means biofuel produced without violating the environmental sustainability principles set out in the NDPE, as well as RSPO policy. Biofuel is indeed a renewable energy that can be used as a substitute for fossils. However, if the production process causes forest destruction, seizes land, and violates human rights, it is the same as exacerbating the climate crisis.
No Deforestation, No Peat and No Exploitation (NDPE) Policy
No Deforestation, No Peatland, and No Exploitation (NDPE) is a policy made by the company and must be obeyed by every company that agrees. The policy was made in response to environmental damage that led to the climate crisis. NDPE has been adopted by manufacturers, suppliers and final managers.
This policy was also adopted by investors. At least 56 investment institutions that adopt NDPE standards under the UN Principles for Responsible Investments. The investment principle requires palm oil companies to adopt NDPE policies.
As the name implies, NDPE policy, there are three principles. Each of these principles has their respective indicators. When adopted into the RSPO P&C, these principles also interrelate with policies made by the RSPO. For details see table 3.
Tabel 3
Indikator kebijakan NDPE
Companies such as Unilever, Pepsico, Johnson and Johnson (J&J), Cargill, Sime Darby, Socfin, IOI Group, Indofood Agri Resources, Wilmar, Musim Mas, Golden Agri-Resources and many more, have adopted NDPE policies. According to Chain Reaction Research (CRR), NDPE's policy covers 74 percent of refiners in Indonesia and Malaysia. In addition, CRR also identified 207 refineries that adopted NDPE. Some of these companies are located in the USA, South Africa, UK, Brazil, and so on, even though their production capacity - if combined - is lower than Indonesia and Malaysia.
More and more companies are adopting NDPE policies, making them wary of not violating them and trying to comply with the standards set by the RSPO in the P&C. According to the CRR, investors and companies face high investment risks if their buyers adopt NDPE. This is related to market access related to investment capital. Did not rule out the possibility of their CPO not selling in the international market because it was proven to violate NDPE policy.
Implementation of NDPE Policy
To find out about the company's implementation of the NDPE policy, we collect information through online news media, the findings of NGOs focused on advocating for the oil palm problem, and visit the company's website to check whether they adopted NDPE or not.
Information presented by Katadata in 2016 states that oil palm is the highest cause of deforestation. From 2001 to 2016, oil palm plantations contributed to deforestation of up to 23%. This figure is greater than that of the small-scale timber and agricultural industries, which account for 14% and 15%, respectively.
On November 28, 2018, The Gecko Project, in collaboration with Mongabay, Tempo, and Malaysiakini, published an investigation report on Papua's large “Tanah Merah,” palm oil plantation project. Based on the investigation, the Tanah Merah project holder company pocketed a plantation permit in a 4,000 square kilometer forest. In these forests, there may be a variety of invertebrate species and other micro-organisms that are useful for the future. Even the process of issuing permits is very strange, and makes the indigenous people who live there feel intimidated.
Of course there are still other problems related to oil palm plantations. Based on the end of year records of the Agrarian Reform Consortium (KPA) 2018, the highest agrarian conflict was in the plantation sector, namely 144 cases. Conflict over oil palm plantations is the highest, 83 out of 144 cases. After plantations, agrarian conflicts took second place in the property sector, 137 cases.
Agrarian conflicts in many oil palm plantations occur because of the ongoing expansion of plantations. Based on Katadata's publication, the area of Indonesian oil palm plantations in 2019 will reach 16.3 million hectares. This area has increased many times from the initial area of 295 thousand hectares in 1980. However, there are only 14.31 million hectares of permits for oil palm plantations in the Ministry of Agriculture. While the land area data collection in 2018, there were around 20 million hectares of plantation location permits - in the same year Indonesia issued a moratorium on oil palm plantation permit. The extent of these oil palm plantations, while making Indonesia the largest producer of palm oil in the world.
In 2014, Wilmar, Golden Agri-Resources, and Musim Mas affected Astra Agro Lestari's revenue by 47%. The three companies are members of the RSPO while adopting the NDPE policy. However, receiving palm oil from Astra Agro Lestari which from 2006 to 2014 has deforested more than 14,000 hectares and in 2015 was still deforesting in West Kalimantan and Central Sulawesi.
Not to mention the conflict with the community around the plantation owned by its subsidiary - PT Mamuang - in West Sulawesi. A report on Mongabay revealed that in June 2019, residents around the plantation entered the company's HGU area to reclaim the land. PT Mamuang started entering in 1992 to clear land. However, when the company was established, it turned out that conflict with the community continued to occur until 2019. At least 10 people had been imprisoned while fighting the company.
Astra Agro Lestari is not a member of the RSPO. However it is certified through the Indonesian sustainable palm oil certification system (ISPO). Astra also adopted the NDPE policy in its company activities. This can be seen in the company's sustainability policy, as well as Astra Agro's three-year action plan 2018-2020.
PT Sawit Mas Sejahtera, a subsidiary of the Sinar Mas Group, laid off the chairman of the union from GSBI, January 8, 2019. Previously, the worker signed a petition for the President to address the impact of oil palm plantations on forest destruction, land grabbing and human rights violations. According to the GSBI, the layoffs were carried out for no apparent reason. Sinar Mas Group operates under Golden Agri-Resources (GAR) which is registered with the RSPO and adopts NDPE.
In 2019, the Indonesian Palm Oil Labor Coalition issued a press release that contained various problems experienced by oil palm plantation workers. Unpaid worker wages up to the arrears of health and labor BPJS payments by the company. In addition, there are no regulations that regulate labor rights fairly. This results in heavy workload because it uses a tonnage target system, land area, and working hours. Another problem is discrimination against women workers. For example in PT Agro Kati Lama (a subsidiary of SIPEF Group-Belgium), 1200 casual daily laborers are women. Even though SIPEF is registered as a member of the RSPO, has adopted NDPE policies, and has had a plantation responsive policy since 2014.
However, companies that violate NDPE, their production may be refused to enter the supply chain. The CRR analyzed the financial impact of 15 holds for palm oil companies that violated NDPE - the first suspension of 2015 - for Sawit Sumbermas Sarana (SSMS), Austindo Nusantara Jaya (ANJ), Tunas Baru Lampung (TBLA), and Indofood Agri Resources. The company's deferred net profit in 2015 decreased by USD 122 million. While the more recent deferment has led to a larger share price decline. Perhaps, more and more palm oil refiners are adopting NDPE, causing the non-NDPE CPO market to shrink. As a result, companies that are not compliant with NDPE, lose the market.
Procter & Gamble (P&G), a goods company based in Cincinnati, Ohio, is at risk of losing revenues of USD 14 billion because of the risk of its reputation. P&G is a multinational company committed to NDPE, however, most of its palm oil is obtained from uncertified CPO. The risk exists because, 15 of its supplier companies are actively involved in logging and actively operating on peatlands. However, according to the CRR, P&G believes that non-compliant suppliers enter through the Wilmar and Musim Mas supply chains. CRR's findings show that non-compliant companies remain in the P&G supply chain.
Can the NDPE Policy be Used to Encourage Sustainable Biofuel Production?
The application of NDPE that we described earlier shows adverse effects for companies that are not compliant with the policy. First, the company lost the market because its supply chain was blocked. Second, companies that use palm oil as raw material are also threatened if they use CPO that is not certified. Companies will lose reputation which can lead to loss of market access. In short, companies that are not compliant with NDPE will suffer losses.
The implementation of NDPE also shows that the policy has a bargaining value to encourage companies to produce clean biofuels. However, not all oil palm companies adopt the policy. Likewise with the half-hearted application of companies that adopt NDPE. As a result, the sale and purchase of CPO that does not meet NDPE standards is still ongoing in Indonesia and other countries.
In early 2020, non-NDPE palm oil from Indonesia, had found a new market in India. The non-NDPE palm oil market in India is getting bigger after boycotting CPO from Malaysia - according to the Government of India, the boycott is unofficial. India is the biggest importer of palm oil from Indonesia and Malaysia, where most refineries do not comply with NDPE. The CRR study shows that 58 percent of Indian CPO imports belong to non-NDPE refiners. Indonesian companies including Sumbermas Sawit Sarana and Austindo Nusantara Jaya, which were boycotted by the NDPE market, again found a market for non-NDPE palm oil in India.
Besides in India, Tunas Baru Lampung, now still has a market in Indonesia. As we mentioned before, Tunas Baru Lampung became Pertamina 2020 biodiesel supplier. Other companies that are not committed to NDPE but are Pertamina suppliers are Duta Palma / Darmex Agro and Best Group. According to Earthqualizer, there are 25% of Pertamina 2020 biodiesel suppliers, which do not have an NDPE policy.
This shows that the Indonesian government is not serious about using renewable energy and reducing emissions. In order for the biofuel program to run well, the government should use biodiesel produced according to NDPE standards. Instead of accepting biodiesel that does not meet NDPE standards and the market has been blocked from the international market.
Although there are still various problems in its application, the NDPE and RSPO P&C policies are progress. This problem is a manifestation of the weak enforcement of policies within the company for environmental sustainability. In order for the NDPE policy to be used to encourage sustainable biofuel production, it is important to mobilize a broader campaign. This is necessary so that the general public knows about issues related to biofuels. Of course the pressure from the wider community will affect the enforcement of these environmental sustainability policies.
The government must also be actively involved in encouraging clean biofuel production in Indonesia. Although NDPE is a company policy that is not a state-made regulation, the principle in NDPE actually exists in various Indonesian Laws. For example, Law Number 39 Year 1999 concerning Human Rights, Law Number 32 Year 2009 concerning Environmental Protection and Management (PPLH), and sustainable development policies in Indonesia - with the principle of Leave No One Behind.
The government must also encourage all companies that are suppliers of Indonesian biodiesel to adopt and implement NDPE policies. This encouragement can be done by not using biodiesel from non-NDPE companies, until they do it. In addition, the government must tighten the supervision of plantation companies so that it runs in accordance with state policies and international standards that have been set to realize sustainable biofuels.
Finally, it is also important to say that enforcement of NDPE policies is only one problem. It does not extend to other issues, for example biofuels and food security. We will not discuss this matter here, but it will be the next discussion.
Referrences :
[1] Nur Ansar dapat dihubungi di nuransar243@gmail.com; Agus Sutomo (Earthqualizer). Tulisan ini disusun pada 19 Februari 2020.
[2] Stanly Ravel, “Jokowi Resmikan Solar B30, Tahun Depan Berlanjut ke B40,” Kompas.com, 23 Desember 2019, diakses 12 Februari 2020, https://otomotif.kompas.com/read/2019/12/23/163314815/jokowi-resmikan-solar-b30-tahun-depan-berlanjut-ke-b40
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[13] Albert ten Kate dan Adriani Zakaria, "Penilaian kesinambungan Astra Agro Lestari," Aidenvironment (Mei 2015), https://d5i6is0eze552.cloudfront.net/documents/Publikasjoner/Andre-rapporter/Astra-Agro-Lestari-report-IND-Final-ID-14680-2.pdf?mtime=20150905184339
[14] Albert ten Kate dan Adriani Zakaria, id.
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[21] "Procter & Gamble’s Deforestation Exposure May Affect Reputation," Chain Reaction Research, 15 November 2019, diakses 17 Februari 2020, https://chainreactionresearch.com/report/procter-gamble-deforestation-exposure-may-affect-reputation/
[22] "The Chain: India’s Boycott of Malaysian Palm Oil May Lead to Higher Imports from non-NDPE Sellers in Indonesia," Chain Reaction Research, 24 Januari 2020, diakses 17 Februari 2020, https://chainreactionresearch.com/the-chain-indias-boycott-of-malaysian-palm-oil-may-lead-to-higher-imports-from-non-ndpe-sellers-in-indonesia/
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