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Achieving SDGs through the Palm Oil Industry in Indonesia: Potential Irony in Bioenergy Development?

Updated: Jul 5



Correlation Between Bioenergy, The Palm Oil Industry, and SDGs

The sustainable development goals (SDGs) are the blueprint to achieve better and sustainable future for all. Each goal is designed to target particular sector, such as food security, energy, education, et cetera. Furthermore, the SDGs are now converging to address complex questions that emerged from the economic, social, and environmental dimensions. In the energy sector, bioenergy is one of the sources that pioneer sustainability. At least 10% of global energy supply comes from bioenergy. Moreover, the use of bioenergy is expected to increase driven by several SDGs (goal: 2,7,8,9,11,12,13,15).


Indonesia also utilizes the SDGs as a framework for its development. In the country, bioenergy plays a significant role of providing about 18% of the renewable energy capacity by 2020. The government have set the production in the form of electricity, liquid biofuels (biodiesel and ethanol), biomass and biogas. The feedstock is generated from industrial processes (e.g., palm oil and paper mills) and from rural farming. Especially on biodiesel, 100% of the feedstock comes from palm oil, therefore the palm oil industry becomes an integral of energy development and other associated SDGs.


The palm oil industry is a major economic sector in Indonesia. The ecosystem in the country highly supports the development of palm oil plantation. In addition, the country population provides substantial workforce. The combination of the two brings about the ample profit for companies and benefits to local farmers and community. Initially the government encouraged the development through policies, such as giving incentive for companies who were committed to share 80% of the revenue to the local community. This share is obtained from a part of the developed land dedicated for the community, which is called the plasma. Since 2007, it became a legal requirement for companies to share a fifth of any new plantation with the communities

A System to Benefit the Community

The term "plasma" is derived from the Nucleus Estate and Smallholders (NES) concept. The NES is a farming system for commodity crops inspired by biological cell model: a nucleus and the plasma. In a partnership scheme, the companies act as the nucleus while plasma refers to the local surrounding farmers. Here, companies are expected to help and foster the plasma in nurturing and organizing their farms while also accommodating the produce. The revenue generated is to be split with portions based on agreement. Usually, the agreement is established by the government, and companies are subjected to the regulation to provide parts of their profit to the locals.

Company-Farmers Partnership Scheme in the Palm Industry in Indonesia (source: BBC News Indonesia, 2022)

In 1977, The NES concept for oil palm was implemented in Indonesia. Following the needs of migration, the PIR-Trans (Perusahaan-Inti-Rakyat-Transmigrasi or literally translated as Company-Nucleus-Citizen-Transmigration) scheme was developed in 1986 to help transmigrants who were moving out of Java to start anew. Starting a farm in new lands proved to be arduous and many people resigned back to their home. Nonetheless, plasma has the potential to change the lives of the people if they are well implemented. During harvest, the farmers may profit up to three times the regional minimum wage. With this in mind, the industry could potentially and directly contribute to not only energy development, but also strengthen the economic of the local community.


If the scheme was well implemented in the past, plasma can help eradicate poverty,” said Idsert Jelsma, an environment consultant who focuses on research of oil palm plantation and small farmers.



Issues in Relation to Legal Obligations

For decades, various reports have stated that companies in the industry have been seizing lands of the indigenous people. They were also responsible for numerous land clearing that damaged the rainforest. Publication of such cases has encouraged the regulations to avoid deforestation and exploitation of local community. However, problems relating to profit sharing still prevail, causing smallholders to lose millions and forcing some into debt. The industry generally denies the existence of problems related to plasma.


One of the main problem lies on the regulation (Law No.11 of 2020 Article 58) which can be defined ambiguously. Some companies believe that community is entitled to get a fifth of anything planted by the company. The others may define the policy as follow: they have to facilitate the development of plasma plantation outside of the land they have gotten permit on, with a total area of 20% of their permitted land. However, the obligation is avoided by stating insufficient land as an excuse, and that clearing more land would be deforestation. Hence, they impose local community to search for other land on their own.


Other problems are the lack of transparency in the administration of plasma and unawareness of the local people. The government has been criticized for being lenient towards companies which resulted in arbitrary practice of the policy regarding plasma. Several disputes between community and company have also happened where the companies have been accused of failing to provide plasma. Government intervention in the disputes has been limited and mostly ineffective, causing the conflicts to fester for years. Besides, the lack of transparency has also inhibited audits as there is not much comprehensive information available.


The palm oil industry is a powerful sector that brings forward economic growth and boost bioenergy production. The implementation of the development should progress through considerations of sustainable development goals. Enforcement of policy to provide aid for the community in the form of plasma further accelerate the accomplishment of the goals. However, such deed can only be attained if the system is done right. Therefore, as long as issues disregarding the welfare of the community still persist, the industry cannot truly be declared as a form of support to the SDGs.


References

Harahap, F., 2021, May. Bioenergy Sustainable development in Indonesia and its relation with SDGs goal. In IOP Conference Series: Earth and Environmental Science (Vol. 753, No. 1, p. 012036). IOP Publishing.


International Renewable Energy Agency, 2021. Energy Profile: Indonesia. [online] Masdar City: IRENA, p.2. Available at: <https://www.irena.org/IRENADocuments/Statistical_Profiles/Asia/Indonesia_Asia_RE_SP.pdf> [Accessed 27 June 2022].


Irham, M. and Ajengrastri, A., 2022. Apa itu ‘plasma’ dan mengapa perusahaan-perusahaan sawit di Indonesia dituduh tak menyediakan kewajiban hukumnya? - BBC News Indonesia. [online] BBC News Indonesia. Available at: <https://www.bbc.com/indonesia/dunia-61519343> [Accessed 25 June 2022].


Jacobson, P., 2022. A hidden crisis in Indonesia’s palm oil sector: 6 takeaways from our investigation. [online] Mongabay Environmental News. Available at: <https://news.mongabay.com/2022/05/a-hidden-crisis-in-indonesias-palm-oil-sector-6-takeaways-from-our-investigation/> [Accessed 22 June 2022].


United Nations Sustainable Development. n.d. Take Action for the Sustainable Development Goals - United Nations Sustainable Development. [online] Available at: <https://www.un.org/sustainabledevelopment/sustainable-development-goals/> [Accessed 27 June 2022].

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