Why Palm Oil Is Cheap?

Why Palm Oil Is Cheap?

Palm oil is cheap and ubiquitous. It’s used in thousands of everyday products and is the most widely consumed vegetable oil on the planet.

You can get a kilo of palm oil for just $2, but its usage has become unsurprisingly controversial, as huge areas of rainforest have been cut down or burned to make way for palm plantations. So why is this oil still so cheaply and readily available?

Palm oil is in everything, from chocolate to bread, instant noodles to shampoo. And without even really thinking about it, globally, we each consume, on average, about 8 kilos of palm oil every year. But even if you look through the ingredients of your product, you may not be able to spot it, because written on the back label, you could see any of these.

These days, Indonesia and Malaysia make up 85% of all palm oil production, but the oil palm species used actually originated in West Africa. The trees were introduced to Malaysia in 1875, but for 100 years, something was missing.

For years, the flowers were pollinated by hand, requiring hundreds of workers and limiting efficiency. Until in 1981, African palm weevils were introduced to the country. These little beetles pollinated the plants with no extra work from humans.

And suddenly, palm oil yields boomed. Since this, palm oil’s popularity has done nothing but rise. Demand spiked again in the 90s, as companies suddenly realized the negative health implications of the trans fats found in many processed products and replaced them with palm oil. And as ultra-processed foods increased, so did the use of the oil.

But this incredible rise came at a cost. The rapid expansion of palm oil plantations has led to the destruction of huge areas of tropical rainforest, creating dangerous CO2 emissions and destroying the remaining habitats of already endangered species. It’s extremely cheap.

It’s shelf-stable. It has natural preservative qualities. It is a really good vegetable oil. But the fact is, it has been grown in a way that’s caused a lot of environmental damage and has also impacted communities and the workers that have been employed to harvest the material. Seeing the devastation caused, one instinct might be to cut out palm oil completely. But searching for an alternative might actually make things worse.

Palm oil is so efficient that using an alternative oil would require up to 10 times the land to grow. This efficiency is the main reason the oil is so cheap. Oil palm trees are evergreen and perennial. They produce oil all year round and can happily grow in soils that many other plants can’t.

NGOs and companies from around the world came together to set up the Roundtable on Sustainable Palm Oil in 2004 to create a set of criteria to grow this crop sustainably. But it’s only since 2018 that the Roundtable has embraced the high-carbon stock approach, a system that helps identify valuable areas of forest and keeps the palm oil they certify completely deforestation-free.

The fact is, it’s just a plant. It’s how and where we’ve done it and how we’ve grown it that causes the problem. But that means that it’s a human problem. We created the issue. That means that we also have the ability to solve that issue, to fix that issue.

Fixing this problem isn’t going to be easy, though. There are numerous barriers that exist for companies trying to implement zero-deforestation commitments. So one of those is the fact that you have highly complex supply chains and it’s difficult to know exactly where your palm oil is coming from.

Another one is that you have varying levels of government support in different regions that produce palm oil. And the extent of government support, it plays an important role in whether a company can produce without deforestation for complex reasons. So are we doing enough?

The Roundtable now certifies about 19% of palm oil worldwide. But getting to this point has been a long, slow process, and we’re running out of time. Critically, global consumption for palm oil will invariably increase until 2050, as we approach 9.6 billion people.

You also have the persistence of large markets, such as China and India, where there is much more of an emphasis on price rather than the sustainability profile of the product. And this means that if you’re a manufacturer, say, and you’re trying to buy palm oil and encourage your suppliers to make sure that their production is deforestation-free, you have limited leverage because they always have an alternative market they can sell into.

So there are these challenges with implementing a commitment to zero deforestation, which make it very difficult to achieve. India, China and Indonesia now account for nearly 40% of all palm oil consumed. And it looks like palm oil is going to remain cheap for a while longer.

But the cost to the planet could be devastating. But it’s not just palm oil that’s the problem. Palm oil still pales in comparison in terms of its contribution to deforestation. It pales in comparison with cattle and beef products, which some estimates indicate may be responsible for as much as a quarter of all tropical deforestation.

Global Canopy published a list of 500 companies and financial institutions linked to tropical deforestation from soy, palm, cattle and timber. Only half of these companies have made zero deforestation a commitment by 2020. And not a single one of these companies is on track to make this target.

Global Canopy also says that despite the commitments that have been made, evidence shows that rates of commodity-driven deforestation have not decreased since 2001. Whether it’s palm, soy, beef, leather, all ingredients, companies have a responsibility not to wait for the consumer to make the demand.

They have a responsibility to do it before the consumer demands. Any forest that’s being cleared as we face what many would call a climate crisis is too much. So what we know we have to do is we have to take a very hard look at how we consume things, why we’re consuming and how we go about sourcing and growing our materials like palm oil or soy, beef or cotton.

 

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