MALAY BIG BUSINESS MOVES INTO PALM OIL

The United Nations’ Clean Development Mechanism (UN CDM) allows companies in developing countries to sell Certified Emission Reductions (CERs) in emissions trading markets. The CDM certifies the number of tonnes of carbon dioxide equivalent (CO2e) a company’s project prevents. A CER equals one tonne CO2e prevented.

Palm oil, an agro commodity with nutritional and industrial value, is also in high demand as an agrofuel that replaces petroleum fuel. In this latter form, it earns CERs. Offering these multiple revenue streams of financial potential makes palm oil a highly valued commodity. Skyrocketing world agrofuels prices have led to skyrocketing palm oil prices that in Malaysia are driving the conversion of marginal land into palm oil plantations.

The marginal land, unfortunately, is often precious rainforest.

There is money to be made in palm oil. There is no money to be made in protecting the rainforest. YTL Corp, a Malaysian power and telecom conglomerate, just got into the palm oil business and is looking to make money from the commodity and the CERs. Aware of the bad rap it will get for allowing its business interests to supercede the protection of the rainforests, YTL wants to add waste biomass-to-biogas-to-electricity facilities at its palm oil mills to clean up the business’s image.

YTL Francis Yeoh, Chief Executive, YTL: "Biomass and biogas are very high in emissions that cause the greenhouse effect, so if we could recycle them and give it a commercially viable story, that would help keep our palm oil industry from being attacked so much…"

“Give it a commercially viable story…” That’s what he said. He’s going to proceed to aggressively destroy his nation’s rainforests and he wants to “…give it a commercially viable story…”

The CDM is working on a project to save the rainforests by selling CERs for preserving them. It’s called Reduce Emissions from Deforestation and forest Degradation (REDD). Unfortunately, it will not be implemented before the next phase of the Kyoto Protocols in 2013 and only then if the world community can work out the many kinks in the concept that would prevent the program from being gamed by hucksters like Mr. Yeoh.

The World Wildlife Foundation (WWF) has been working on a Roundtable for Sustainable Palm Oil (RSPO) that would bring environmentalists to the table with folks like Mr. Yeoh and work out compromises between environmental values and market values.

Somebody better do something before the only rainforests left are the ones in the Jurassic Park movies.

Palm oil is a growth industry - but not growth of rainforests. (click to enlarge)

Malaysia’s YTL targets palm oil carbon credits
May 2, 2008 (Reuters via Yahoo News)

WHO
YTL Corp; SV Carbon; YTL-SV Carbon (Soeren Varming, Managing Director)

Under a smart system, saving the rainforests could be more profitable. (click to enlarge)

WHAT
Power and telecom conglomerate YTL Corp bought a controlling majority stake in SV Carbon to form YTL-SV Carbon in order to capitalize on emissions credits trading in the palm oil sector.

WHEN
- 2007: Malaysian crude palm oil output was 15.8 million tonnes
- 2008: Malaysian crude palm oil output expected to be 16.5 million tonnes
- YTL-SV Carbon has 30 emissions credits projects now and expects to be handling 1,000 in 3 years.

REDD is an effort to create a system of emissions allowances to save the forests. (click to enlarge)

WHERE
YTL-SV Carbon sees palm oil project opportunities in Indonesia, Cambodia, Vietnam, the Philippines and Thailand.

WHY
- SV Carbon is Malaysia’s biggest emissions credit trader.
- Malaysia is the world's second largest palm oil producer.
- YTL-SV Carbon is working on improving the emissions and environmental profiles of the palm oil mills by using waste to generate biomass for their power as well as composting.
- No financial details of the purchase were released.

The Roundtable for Sustainable Palm Oil has a noble goal but few results to date. (click to enlarge)

QUOTES
- Soeren Varming, Managing Director, YTL-SV Carbon: "Palm oil is where the big opportunity is in Malaysia…The paradigm is changing, from a waste producer to a sector that will actually utilise the waste."
- Varming, YTL-SV Carbon, on the value of turning a palm oil plant into a CDM-certified project: "CDM allows, in some cases, an incremental project income that will go straight to the bottom line, in other cases it allows projects you would never have thought of before, and in yet others, you'll see new business models become possible, because the income stream of the carbon credits allows this…"