The big haze

The region’s annual shroud of hazardous smog will continue to thicken until consumers start shopping smart

Sun Xi
September 3, 2013

The region’s annual shroud of hazardous smog will continue to thicken until consumers start shopping smart

By Sun Xi
For the past two decades, Southeast Asia has been plagued by an annual haze, a result of forest fires caused by slash-and-burn tactics employed by palm oil plantations in Indonesia. This year the severity of the haze reached a record high in Indonesia, Malaysia and Singapore, prompting a region-wide outcry.
History has shown that the cost of haze pollution can be massive. The 1997 haze disaster cost the region $4.5 billion, with Indonesia footing 85% of the bill.
While it is clear the region must bear the financial responsibilities of such an environmental hazard in the short term, in the longer term global consumers of palm oil must share the burden of creating a haze-free Southeast Asia by promoting greener ways to clear land for palm oil trees.
With the world’s appetite for palm oil growing at unprecedented rates, the US Department of Agriculture forecasts that palm oil will supply roughly 36% – the largest share – of the total global edible oil consumption. With the World Bank expecting demand to double by 2020, the establishment of haze-free practices will become vital to the health of the region.
About 60% of forest fires in Indonesia are caused by the traditional slash-and-burn farming activities of impoverished farmers, as it remains the cheapest way of clearing land. Using bulldozers and excavators to clear land is 40 times more expensive than slash-and-burn techniques, meaning the industry must encourage companies to adopt such practices by offering to help shoulder the costs.
About 90% of the 49.9 million metric tonnes of palm oil produced in 2010 and 2011 was sourced from Indonesia (51%), Malaysia (36%) and Thailand (3%). However, the majority of palm oil consumption occurs beyond Southeast Asia’s borders: India, China and the EU are the largest gobblers of the gold stuff.
Palm oil consumers must place pressure on producers to abandon environmentally damaging practices employed by palm oil companies, many of which are Malaysian and Singaporean. Moreover, several leading producers are publicly listed companies, meaning that investors – including government-linked investment arms – sovereign wealth funds, resources funds and consumer-related funds are supporting the destructive practices of these palm oil companies.
While sustainable palm oil issues have become more prevalent in recent years, only a few investors are supporting environmentally conscious companies.
In the future, both investor and consumer awareness for haze-free palm oil productions will need to be fostered. In 2011, 12% of palm oil produced was certified sustainable, but only half of that was purchased. Government agencies and civil society must do more to help consumers identify the good guys from the bad, which will in turn put pressure on investors to start acting for a greener tomorrow.
Environmental pollution knows no borders and local environmental protection efforts should be supported globally. We can all contribute to a haze-free Southeast Asia simply through our responsible palm oil consumption and investment decisions.
Sun Xi is a socially responsible investment analyst and independent commentary writer based in Singapore. He graduated from the Lee Kuan Yew School of Public Policy at the National University of Singapore.
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