Palm Oil Industries Can Benefit From Climate Change Program

JAKARTA – Indonesian palm oil industries have a chance to get additional financial benefit up to US$9 billion or around Rp130 trillion if they manage to realize efforts of mitigating global climate change.

It can be realized if the banking sector, investors, central and regional governments, companies and mass organizations can quickly take the opportunity. Efforts to realize it should be based on the strategy to capitalize on the steady increase of palm oil demand, while trying to reduce greenhouse gas emissions, and protect forests and peat lands.

An important finding was derived from the research of Orbitas, an institution based in Washington, D.C, the USA, which focuses on researching the risks of climate transition for investors who finance the tropical commodities. In its new report titled “Climate Transition Risk Analyst Brief, Indonesia Palm Oil”,  Orbitas says that Indonesia’s palm oil players will get benefits from the climate transition if they apply the sustainable production model.

According to the new report, the climate transition will bring big impact to the business of palm oil, which is the main commodity export of Indonesia. Its impacts, negative and positive, will depend on the quick response of all palm oil stakeholders in Indonesia.

CEO of Climate Advisers UK and the Managing Director of Orbitas, Mark Kenber pointed out that there are a number of risks facing the palm oil industries due to the climate transition.

“Policies and laws, innovations and technologies, and markets will change as a response to the climate transition. All sectors connected into the global trade will be impacted, including the palm oil,” Mark said in a ceremony to launch the report as part of Katadata’s annual forum of Sustainability Action for The Future Economy (SAFE) on Monday, 30 August 2021.

Despite big business opportunity, the palm oil industries are facing even bigger risks if they failed to implement the principles of sustainability. The report shows that 76% of unplanted concession land and 15% of planted concession land risk becoming stranded assets.

The capability of palm oil producers to manage the risks is determined by the following factors: the ability to harvest, ability to adapt to change, access to capital, and operational efficiency.

But despite the fact, Mark said that there are opportunities that can be utilized by Indonesian palm oil industry players. It can be realized by implementing massive conservation and restoration of forests, intensification system, and applying bio-methane capture system in producing the crude palm oil (CPO) as a substitute to the use of fossil fuels in the industrial sectors and transportation. (*)