The Indonesian government has recently earmarked 6.5 million hectares of idle land for biofuel-related crops, including 3 million hectares for oil palm, 1.5 million each for jatropha and cassava, and 500,000 for sugarcane. Currently more than 25% of all palm oil produced in Malaysia and Indonesia is cultivated on peatlands.
Wetlands International, a non-profit group supported by Western governments and conservation groups, and the Dutch water-research institute Delft Hydraulics warned in a recent joint study that about 20 tonnes of carbon dioxide is released from each tonne of oil palm grown on peat.
Last month, Jakarta rolled out the red carpet for global biofuel investors and pulled in 58 new production agreements worth $12.4 billion. One major $5.2 billion deal will see China National Offshore Oil Corp, Indonesia’s Sinar Mas Group and Hong Kong Energy (Holdings) Ltd team up to develop bio-diesel from crude palm oil and bio-ethanol.
The report by Wetlands International and other scientific studies have prompted the EU to put its 2003 biofuel directive under review, and many in the industry believe some sort of sanctions or tax could soon be imposed on palm-oil-derived biofuels from Malaysia and Indonesia. If so, it would scupper what was rapidly emerging as one of Southeast Asia’s fastest-growing rural-based industries. Indonesia and Malaysia, which currently account for 85% of the world’s supply of crude palm oil, combined earn more than US$6 billion a year from the crop.