Palm oil is the second most traded vegetable oil crop in the world, after soy, and over 90% of the world’s palm oil exports are produced in Malaysia and Indonesia. Palm oil is still mostly used in the manufacture of food products and is found in most of the products sold at supermarkets.

However, palm oil is now starting to be used as an ingredient in bio-diesel and as a fuel to be burnt in power stations to produce electricity. This is a new market for palm oil which has the potential to dramatically increase global demand for this commodity.

The development of the oil palm industry in Indonesia and Malaysia has brought economic benefits to both these countries. However it has also generated considerable environmental and social costs. Oil palm plantations are one of the biggest causes of rainforest clearance. The palm oil industry has already set up 6.5 million hectares of oil palm plantations across Sumatra and Borneo but it is estimated that it is probably responsible for the destruction of 10 million hectares of rainforest.

By clearing the forest first, plantation companies can offset the start up costs of their plantations. The profits are so large that some oil palm companies clear the land and don’t even bother to set up the plantation. There is therefore a strong incentive for oil palm companies to seek concessions and access to land that is heavily forested.

Oil palm plantation development also poses the greatest threat to the survival of many species, including the orang-utan. Oil palm plantations could be responsible for at least half of the observed reduction in orang-utan habitat in the decade between 1992 and 2003.
Tropical deforestation due to agricultural expansion, logging and infrastructure development already contributes between 10 and 30 per cent of greenhouse global emissions.

The use of palm oil for biofuel and as biomass for energy clearance of rainforest to make way for oil palm plantations is exacerbating this problem.
In addition, oil palm plantation companies in Indonesia have been identified as one of the chief culprits in setting forest fires over the last 10 years. These occur every year in Indonesia and release huge quantities of carbon into the atmosphere. In one of the worst fire incidents between 1997 and 1998 it is estimated that the emissions from the forest fires in Indonesia were equivalent to 40% of all global emissions from burning fossil fuels that year.
The development of oil palm plantations has also often benefited large companies at the expense of local communities who can lose their land and access to important forest resources and ecosystem services.

In Indonesia over 100 million people depend upon access to rainforest resources for their survival. The rapid expansion of the oil palm industry in Indonesia has all too often been associated with community exploitation and corporate greed rather than sustainable development.

However, since the potential demand for palm oil as a biofuel or for biomass energy is so large and given the weak governance in Indonesia and its destructive policies regarding plantation development, Friends of the Earth does not support the use of palm oil as a biofuel.