Sustainability |

The Continuing Battle of the Economy Versus the Environment

SUSTAINABILITY | 12 August 2021

“I would hate to be a minister in today’s governments –not only in Indonesia- which, I think more than ever are faced with conflicting priorities at every turn”, says Now! Publisher Alistair Speirs.  “Not only do they face the Economy vs Health debate, they also face the Economy vs the Environment battle, which many say will fuel the former problem if major changes are not made right now. I have selected three recent news stories to illustrate the problem , but cannot tell who will win. If history is anything to go by , the power of money will be the major factor, which may not be the right one. 

INDONESIA’S COAL RESERVES  CAN LAST FOR A VERY TEMPTING 65 YEARS 

The Energy and Mineral Resources (ESDM) Ministry’s Mineral and Coal Director-General Ridwan Djamaluddin said Indonesia still has large coal reserves of 38.84 billion tons.

“We still have about 60 to 65 years to go of our [coal] reserves,” said Ridwan in the ministry’s virtual discussion in July. The period was calculated based on a production rate of 600 million tons per year.

Kalimantan holds most of the total reserves at 24.84 billion tons or 62.11 percent, followed by Sumatra at 12.96 billion tons or 37.70 percent.“This is a huge potential that inevitably remains Indonesia’s mainstay in providing affordable energy,” Ridwan said. One of the government’s current efforts, he added, is to encourage the use of coal in a cleaner fashion. 

“The intentions are good. But there are at least two challenges as we already know.”The first challenge is technology exploitation. The second challenge is the economics of implementing it.“These are huge challenges that the value-added coal project downstream that we have pushed until now is still running at a speed that has not met our expectations,” said Ridwan.

This is the opening gambit in the quest for a sustainable future for Indonesia. The coal reserves are huge and “ affordable “ from an economic point of view , but there are serious arguments which blame coal fired power stations for a lot of the climate change  problems and many countries ( like UK ) are closing down their coal powered stations entirely. But Indonesia with huge reserves and a powerful pro-coal lobby may balk at drastic and swift changes. 

THE  SEDUCTIVE LURE OF BIODIESEL 

The achievement of the B30 biodiesel development program demonstrates Indonesia's success as a B30 pioneer, DadanKusdiana, Director General of New, Renewable Energy, and Energy Conservation (EBTKE) at the Energy and Mineral Resources Ministry (ESDM), said.“Our provision and utilization of biodiesel have made us the world’s leader in B30 implementation,” he affirmed.The  program has also reduced 11.4 million tons of carbon dioxide emissions, Kusdiana pointed out.

During the first semester of 2021, the government had distributed 4.3 million kiloliters of biodiesel, with economic value of Rp29.9 trillion comprising foreign exchange savings of Rp24.6 trillion and Rp5.3 trillion added value from processing crude palm oil to biodiesel, he stated.Indonesia uses palm oil to produce biodiesel on account of its position as the world's second largest  producer of the commodity, Kusidiana explained.

Biodiesel production has continued to grow annually. A total of three million kiloliters was produced in 2016 and jumped 300 percent to reach 8.5 million kiloliters in 2020, he informed.This year, the government has targeted the disbursal of 9.2 million kiloliters of biodiesel to maintain stability in the price of crude palm oil by absorbing the palm oil production for domestic demand, he remarked.

During the period from January to June 2021, the average monthly purchase order fulfilment had reached 93.03 percent, with the lowest recorded in January while the highest was in June, he noted.“This program has been used by customers, who have diesel engines in transportation as well as other industry sectors,” the director general stated.

Implementation of the vegetable fuel utilization mandatory policy has succeeded in creating a domestic biodiesel market that has clocked significant growth since 2008. "This achievement also makes Indonesia a top biodiesel producer, surpassing the United States, Brazil, and Germany", he informed.This program has been supported by 20 vegetable fuel enterprises (BU BBN) producing fatty acid methyl ester (FAME) as well as another 20 BU BBNs mixing biodiesel with diesel fuel, with an average absorption of 766 thousand kiloliters each month, he noted.

Sounds good doesn’t it, a renewable energy source that once again, Indonesia has vast reserves of. But the anti-palm oil lobby will have it otherwise, claiming that to get the “renewable” palm oil , primary forests have been cut down, reducing Indonesia’s capacity as a ”carbon sink”  and destroying the natural habitat of many unique and some endangered species. Maening that those palm plantations can never qualify as renewable sources in some countries’ measurements. Tricky. 

THE CONTINUED SUCCESS OF PALM OIL

The palm oil industry is still one of the driving forces of the national economy. Even during the Covid-19 pandemic, the palm oil industry, both upstream and downstream, was able to show solid performance.Senior Economist at the Institute for Development of Economics and Finance (INDEF) Fadhil Hasan said the palm oil industry has become a pillar of the economy through export contributions when the Indonesian economy is under pressure due to the Covid-19 pandemic."In the downstream sector, palm oil also drives the food industry, oleochemicals, to biofuels for the transportation sector," he said in a recent discussion on the National Palm Oil Downstream Industry and Sustainability Challenges conducted online.

The large contribution and potential of the development of the palm oil industry in Indonesia is also accompanied by big challenges. Fadhil said that the issue of sustainability is the main challenge for the palm oil industry today.“In the last decade, the palm oil industry in Indonesia has undergone a significant transformation. With a commitment to sustainability, the palm oil industry will continue to grow,” he said.
RGE Indonesia Palm Business and Sustainability Director Bernard A. Riedo said a commitment to sustainability in the operations of the palm oil industry is a must."Therefore, the sustainability aspect is at the core of a positive transformation in the supply chain of the Indonesian RGE palm industry," he said.Through Asian Agri in the upstream sector and Apical in the downstream sector, RGE Indonesia is one of the largest producer and exporter groups of palm oil in Indonesia. Its export market reaches more than 30 countries on five continents.

Its commitment and sustainability practices have made the RGE Group a trusted supplier of raw materials by global giants such as Unilever, Nestle, P&G, Kao, and dozens of others.
According to Bernard, the challenge in the palm oil business today is to be able to answer the issue of sustainability, not only to meet the demands of the global market, but also to carry out the company's commitments. "We adhere to the 5C principles, namely Climate, Country, Community, Customer, and Company," he said.

Sustainability Director of Apical Group Bremen Young added, the competitiveness of palm oil which is much higher than other vegetable oils makes the demands for sustainability aspects are also very high, both from the global market, government, and environmentalists.Therefore, continued Bremen, Apical Group applies a sustainability approach methodology to ensure transparency and traceability of palm oil supply sources.
"We want to ensure that the supply comes from plantations that carry out the principles of sustainability, including through the protection of conservation areas, protection of peatlands, as well as having a positive impact on the communities around the operational areas," he said.

Bremen said that the implementation of this commitment makes Apical's products acceptable in the international market and supplies to Europe, America, Asia, Australia and Africa. Innovation to ensure that the company continues to run. "One of them is through the use of satellite technology for monitoring and platforms for leveraging supply sources," he said.

So the palm oil industry fights back and says it is adhering to sustainable practices, and its spokesmen noted above have certainly got their homework done, but without mentioning the origins of the plantations which will remain the centre of the argument and for many will always preclude the adoption of bio-fuels as renewable energy sources. But are they better than coal, normal diesel and petrol which are the clear enemies of the renewable supporters? The answer is yes, but to get the whole picture we have to include forest destruction in the equation not just the simple combustion of the fuels. As I said, it is a debate that most people, me included , are not well enough informed to make the final conclusion. But the argument above shows that we are now very dependent on palm oil to keep the wheels of indUstry turning, which means they hold the upperhand.   Let’s hope our ministers are smart enough to find the perfect compromise!