Carbon Footprint of Malaysian Palm Oil and Future Areas of Research

Transcription

1 Carbon Footprint of Malaysian Palm Oil and Future Areas of Research Dr Chan Kook Weng Malaysian Palm Oil Board No 6 Persiaran Institut, Bandar Bangi Baru, 43000, Kajang, Selangor Abstract The world has gone green. The palm oil industry to make itself heard, credible and authentic has to minimize the risks of being accused of greenwashing. The increase demand for solid data from the industry based on LCA approach to demonstrate carbon balance, the green commitment and achievements require the industry to walk the talk. Things are changing where singing the song like sustainability of a hundred years without supporting data on Greenhouse Gases (GHG) emissions is tantamount to failing to match the fine words without positive actions in implementing green policies throughout the business. Following the release of the UNFCCC IPCC Fourth Assessment Report, the Stern Report, and the Bali Roadmap in 2007, governments across the globe are developing regulations and incentives to reduce GHGs emissions. Aligning the walk-talk requires companies to articulate and communicate how their employees, investors, NGOs, stakeholders and customers are driving the industry to give equal emphasis of a well-balanced three-pillared sustainable development of economic growth, environmental protection and social development. Companies become energy efficient and offset their emissions, measured in t of CO 2 equivalence (tco 2 e), by purchasing credits (of tco 2 e that have yet to be emitted) voluntarily or from a regulated scheme to balance their exceeded allowances (in tco 2 e emitted) so as to be carbon neutral. In the market, such transactions must require creditable data and information on carbon to support environmental claims. Hence the industry in assembling a carbon balance budget over a 25 year cycle will require urgent conformity to internationally accepted methodologies to quantify the carbon footprint of their products, services and events. This becomes critical to support claim, encourage carbon market growth and protect consumers. Increasingly the code of good practice establishes a basic framework for application of large number of ISO standards used by companies to measure and communicate their carbon footprint. The interest, centred on the GHG emissions reduction, requires inventories associated with the carbon footprint of the products, services and events in the industry be examined from LCA and eco-labelling approach. This is done to meet demand, firstly, of customers who want reduction in carbon footprint; secondly, for companies that want less carbon intensive or neutral products; and thirdly, for governments that want innovative ways to address climate change. To avoid conflicting approaches to measure GHG emissions, ISO s harmonised set of common ISO series standards comprising of i) ISO life cycle assessment of emissions from sourcing to end-of-life, ii) ISO and ISO to ensure apples-to-apples comparison of emissions, iii) ISO to communicate carbon neutral claim based on environmental product declaration for eco-labelling; and iv) ISO to manage and reduce the environmental burden of carbon footprint, are used. Currently ISO/TC 207 Sub Committee (SC 7) on greenhouse gas management and related activities has began developing newer standards specifically for measuring and reducing the carbon footprint of products, services and events worldwide. R&D focus on new practices aimed to reducing GHG emissions, keeping yields and nutritional quality high, and maintaining 1

2 resource input as low as possible before attempting sustainability branding is well on the way to reduce climate change. Introduction In today s globalized world, climate change will influence future development in any industry. The overarching requirement is to look into ways to reduce the greenhouse gases (GHG) emissions by applying ISO and ISO standards. The palm oil industry is not excluded. Companies within the palm oil industry in order to have a wider global reach must inspire trust and confidence in their products, services and events by demonstrating conformity assessment to international standards, like ISO for those food products which present high risk to health, ISO for safety and environment; and corporate social responsibility standard ISO to drive big industries as well as small and medium enterprises (SMEs) to embrace these standards to meet environmental and societal needs as well as global market requirements. In so doing, the challenge is to ensure that the activities in conformity assessment are seen to have been performed adequately so that such products are firstly, not barred for sale in specific markets and secondly, not led to establishment of trade barriers between exporting and importing countries. As the reputation of a palm oil producing company is constantly under scrutiny, it can easily be damaged when not careful. For instance, individuals can act through internet to report or do blogging on information obtained on products that have not been conducted according to the approved international standards that have been developed based on international consensus. Such reputation, which can easily be destroyed, may take years to rebuild. It is important therefore that Malaysian Palm Oil Board (MPOB) takes on the responsibility to oversee that the integrity of conformity assessment over the whole supply chain of the palm oil industry is above any type of criticism. Thus adopting international standards effectively is likely to create a level playing field that allows producing countries to operate from the same base. Most critically, the correct use of international standards should assure all that GHG emission reductions are real and human can make real progress towards climate change. For this, five initiatives have commenced by the industry to explore global solution. They are: 1. Building Confidence in Harmonising Global Approaches in Computing Carbon Balance: Currently, the oil palm industry has started working on carbon balance but rather than rushing into it, the search is for some standardised methodologies that is agreed multilaterally to allow for comparison of carbon use between competing oils. Even before harmonising could be done, some companies have started to use some ad hoc methods to calculate carbon balance with the hope of getting a share of the carbon market with their carbon credit calculation. Such companies are aiming to trade in the carbon market to gain some green currency from their sale of carbon credits by offering them firstly, to the regulated market that is well developed, implemented and enforced through regulations such as the European Union (EU) Emission Trading Scheme (ETS); and secondly, to the voluntary market which is outside the formal government regulation. Irrespective of these two types of markets, it is important that credibility of the carbon unit is maintained in that one tonne of CO 2 or CO 2 equivalent (CO 2e ) is indeed 2

3 ascertained as one tonne as the green currency traded. The CO 2e is a measure used to compare the emissions from various greenhouse gases (GHG) based on their global warming potential (GWP). In the agricultural field, the GWP of emission of one tonne of GHG like methane (CH 4 ) means that over 100 years, one tonne of CH 4 is equivalent to 21 tonnes of CO 2. Likewise one tonne of nitrous oxide (N 2 O) emitted is equivalent to 296 tonnes of CO 2. In the carbon markets, two types of carbon units: viz., allowances representing one tonne of CO 2e emitted into the air and credits representing one tonne of CO 2e that has yet to be emitted, are traded. Any individual or organisation emitting CO 2e can purchase credits either voluntarily or from a regulated scheme, to offset their own emissions so as to claim to be carbon neutral. Carbon trading therefore has become a potentially lucrative business and the aim is to build confidence in the carbon market. Currently, the global carbon market stands at USD 30 billion of which the EU ETS represents a very significant component at USD 25 Billion. On our part, the industry must ensure that the carbon credit offered in the market is real in achieving the reduction in GHG emissions in the world. 2. Ensure that the Palm Oil Industry is Green: As the world has gone green, the palm oil industry must make itself heard, credible and authentic. It has to champion against the accusations levelled at palm oil firstly, as a bioenergy or biofuel source generates more GHG emissions that it seeks to reduce and secondly, diversion of palm oil to fuel production may cause further shortage in supply. Are these accusations real or wrong and short-sighted? An examination of the facts shows that as much as 90% of palm oil is used for food, the rest of the solid biomass is being actively pursued through research into the second generation biofuels to make the biomass-to-liquids (BTL) a commercial reality. Efforts in improving the energy independency and at the same time boosting local agricultural economies is done without threatening the food situation since the biomass is a non-food item. Further, the palm oil industry is also looking at producing sustainable biomass in order to minimise the risks of being charged with greenwash. This means that the industry in walking the talk has to ensure more implementation of environmentally sound practices than what companies disclose in their annual reports. The green commitments must be demonstrated and the process over the whole supply chain towards such achievements be communicated to the customers. The irony is that when companies stick out their necks in calling for attention to what the industry has been doing right, very often the corporate risks they faced is unwittingly what they expose to the customers as benefits are focused by the environmental NGOs to be environmental issues. Thus many companies chose to remain silent on certain issues. However, being quiet is no longer an asset as the industry is pushed to communicate about what it is doing right and not doing, by consumers as well as other drivers such as the employees, investors, activists and NGOs, players along the supply chain, stakeholders and communities. In other words, the industry now has now to match word with action. 3. Gaining Global Credibility for the Green Palm Oil Companies: Progressive companies within the palm oil industry in adopting green policies do demonstrate a n strong accompanying commitment to sustainability. The latter requirement has 3

4 become the new impetus to put into practice, many positive environmental initiatives such as SIRIM Malaysian Standards on Oil Palm Good Agricultural Practice (MSOPGAP), Malaysian Palm Oil Association (MPOA) multi stakeholders initiative in the Roundtable Sustainable Palm Oil (RSPO), and Malaysian Palm Oil Board (MPOB) five Codes of Practice (CoPs) over the whole supply chain. International ISO standards on GHG accounting and verification such as the ISO issued in 2006 and ISO published in 2007 are also applied to provide the users with much needed credibility of standardised methodologies (based on consensus-building process), broad applicability (being regime-neutral it is applied over all schemes without bias), consistency, reproducibility, transparency (based on consistent, reproducible and transparent processes for market confidence) and assurance (that claims and declarations are fairly stated). In general, these initiatives are aimed at reducing GHG emissions associated with resource use and energy efficiency, conservation, recycling, smart energy and reduction of fossil fuel use. Customers, at the end of the supply chain, are eagerly looking to the industry for leadership in GHG emissions reduction so as to be assured that they indeed receive good quality and safe oil for consumption. On its own part, the industry has begun to collect and also to generate more data based on the complete formal LCA studies on the actual GHG emission reduction over the whole supply chain. Such data will be needed to silence the false accusations made on palm oil sustainability by environmental and social NGOs who are also petitioning their governments particularly those in European Union (EU) into dropping their subsidy for palm oil use in biofuel production. 4. Boldness in Defining Sustainability for the Industry: This must be done as part of the solution. By defining what sustainability meant in the context of the palm oil industry will provide a valid basis for the whole argument on sustainability. Of course, the common definition of sustainability as adopted by the World Commission on Environment and Development (the Brundtland Commission) in 1987 of satisfying our present need without compromising the future generations ability to meet their own needs gives us the important clues of what is required. The definition implies that the palm oil industry, at the highest level, must be able to go for the balanced development of the three pillars, as stated in the Rio Declaration on Environment and Development in 1992, of Environmental protection, Economic growth and Social development. Sustainability therefore demands that the balanced approach be given emphasis to the three pillars of preserving the environment, satisfying human needs in a social fairness way and stimulating development progress. In the context of the Malaysian palm oil industry, RSPO has a definition of sustainability in its preamble while MPOB s view is that sustainability is about the long-term security of our supply chain if palm oil business is to continue with brand values and consumer trust. Defining sustainability indeed becomes increasingly strategic and integrated for the industry. As a result, the palm oil business is now beginning to link its competitive advantage and value creation to the wider societal expectations in sustainability. How well the palm oil industry in integrating these wider societal issues will depend on the shift in the systems approach thinking to root out the underlying causes of non- 4

5 sustainability. The industry must proceed to have more leaders who are steeped in these disciplines to move the industry quickly in this direction to thrive and adapt in the coming years. Sustainability has begun to have one clear meaning in that the relevant criteria to achieve it must have locally-specific elements and broad agreement with stakeholders and communities in arriving at the consensual definition to assure sustainable production in a specific area. 5. Readiness of the Palm Oil Industry to Tackle Climate Change: With the definition of sustainability settled as far as MPOB is concerned, the industry must go about developing principles, criteria and indicators to quantify sustainability in actual terms so as to be able to tackle climate change. To assess sustainability in the oil palm industry, certain risks to economic growth, preservation of the environment and social development have to be identified, refined and given equal emphases at local settings. All three dimensions of sustainability must be tackled simultaneously and the industry must resist any pressure exerted by developed countries to emphasise only at one dimension only. For example, if economic performance of sustainable palm oil is emphasised, then dependency on fossil oil price and the fluctuation of the oil markets upwards with prices breaching the USD 100/barrel will curtail the economic growth of palm oil production because high input costs like fertilisers and transport fuel especially in the marginal, fragile and deep peat soils, where returns are not always guaranteed. Problematic soils touch on the environmental aspect where life cycle emissions of GHGs must take into consideration of the problem of deforestation for feedstock production, degradation of soils, the consumption of water and loss of biodiversity when factoring their risks impact on both the environment and economic growth. These two dimensions in turn affect the social part, the third dimension. As palm oil is a food item first and then an oleo-chemical next, there must be an assurance of food availability from the oil given as a priority while the non-food biomass be seed as offering new opportunities for the second generation biofuels production by exploiting, for example, the biomass to liquids (BTL) technology. By providing improved working conditions of employees and distributing improved benefits to them, the environmental and economic components in concert will pave the way to reduce the risks of imbalances in the social development. As the consistent framework and a robust methodology with equal emphases on all three dimensions with strong application of the MPOB s CoPs, MSOPGAP, RSPO and the ISO series of international standards becoming the basic building blocks for standardised methodologies, the industry is now ready to embark ob a proper contribution to assist in tackling climate change by reducing real GHG emissions. Developing a Sustainability Framework to Assess Palm Oil Production and Carbon Balance: In the hierarchical sustainability framework, five requirements are involved. They are: 5

6 Have an Objective: The sustainability of the industry, assessed by an objective, has a set of principles defined and verified by the fulfilment of a set of criteria that are supported by measurements to obtain clear data set of the performance of the indicators. Provide Guiding Principles: Principles are actions based on social values, tradition and scientific knowledge (FAO, 2002). Therefore a set of principles defines the framework of sustainability of which the basis of criteria, indicators and compliance by auditors or verifiers go about achieving the fulfilment of the objective of sustainable palm oil. To satisfy a principle, a set of criteria is used. Develop Criteria: Criteria are a set of conditions by which an objective is assessed and given dimensions. Criteria define the rules to be satisfied in order to accomplish the sustainability principle. Operationally, criteria provide the meaning to the principle. The measurements for verifying the criteria are called indicators. Assess with Indicators: Indicators provide a consistent and clear measure of the attributes of the system under study. An indicator therefore is a quantitative or qualitative variable that can be measured. Hence when a set of indicators satisfy the rules of the criteria, then the indicators have contributed to the accomplishment of a sustainability principle. Audit with Verifiers: When testing the indicators fulfilment of the criteria a verifier is introduced. A verifier is a set of data that provides meaning, precision and sitespecificity to an indicator. Very often when testing of indicators fulfilment of criteria over time, the sustainability trend can be determined. Urgency to Become Clean and Green: With the basic elements of the framework set, the industry will focus on the call to increasingly narrow the gap in the compliance between the industry s stated intentions in the principles and their actual behaviour or performance of indicators on the ground. The industry is doing its best to fulfil these principles, criteria and indicators outlined in the sustainability framework but certainly not fast enough. There is now an urgency to do it quickly in terms of speed to market yet possessing the scientific rigour to meet international scrutiny. The state of the data collection on the business and the environment aspects remains fragmented. The industry has yet to obtain complete figures on the impact of reducing the GHG emissions associated with the use of energy, water and materials on site-specific basis in order to make a difference in moving the needle of sustainability scale to slow down climate change. The quantity and quality of available data while found to be wanting, the industry must do some things quickly through multilateral agreement with players along the supply chain on the action plan set out to measure properly the life cycle GHG emissions associated with the products, services and events in oil palm plantations. There must be firm milestones indicated. There must also be clear timelines, target and deliverables. What are the indicators to show progress? Serious budget and resource allocations with periodic reviews for assessment are suggested. Finally, ownership and participation by companies are only the beginning of the tangible contribution of oil palm sustainability towards solving what climate change is all about. 6

7 Aim of Paper From the urgency for both government and policy makers to take action to reduce their carbon footprint of GHG emissions associated with the products, services and events, the palm oil industry is dictated by deadline set for December 2009 at Copenhagen, Denmark (two years down the Bali Roadmap) to commence reduction of GHG emissions targets of the developed countries. The meeting at Bangkok in April 2008 has allowed manageable chunks of commitment to GHG emissions reduction to be fulfilled. Some details of these three events underlined the importance of taking action on GHG emissions reduction to prevent climate change from bringing about abrupt and irreversible global impacts and they are: Firstly, the release of the Fourth Assessment Report (FAR) which summarized the last six years of solid research since the release of Third Assessment Report by the Intergovernmental Panel on Climate Change (IPCC). Incidentally IPCC is also the cowinner of the 2007 Nobel Peace Prize. With FAR, everyone seems to have finally accepted the critical importance of reducing GHG emissions to slow down global warming and climate change. Further, FAR represents the most comprehensive and authoritative assessment of climate change to-date by providing an integrated scientific, technical and socio-economic perspective on relevant issues concerning climate change. The global warming of the climate change is equivocal on the increases in global average air and ocean temperatures, wide-spread melting of snow and ice and rising global average sea level. There will be serious concerns on the anticipated extinction of numerous species around the world. The IPCC report besides pointing to issues also proceeded to offer options for mitigating (e.g. zero-burn policy, EFB composting and biogas capture) and adapting (e.g. breeding for drought resistance and water use efficiency) to climate change. There will be a new ethic by which every human being realizes the importance of the challenge faced by the world and starts to take action through changes in individual lifestyle and attitude. Secondly, the Stern Report in 2007 which noted that the cost of extreme weather disruption alone could reach 1% of the world GDP by middle of the 21 st century, and such economic disruption could approach the scale of those associated with the great wars and the great economic depression of the first half of the 20 th century. Many companies therefore have to ensure effectiveness of their policies. They will have to see climate change to have both a threat and an opportunity for new products, services and trading, particularly in carbon emissions. Companies in seeking to remain competitive will therefore need to view the world through a broader and more realistic lens. Clearly they need to do better in their GHG emissions reduction. Currently their annual reports invariably had too little quantitative information, provided insufficient explanation of their business impacts and trends, and had inadequate management goals for reducing GHG emissions. Most of them are not revealing their public policy positions either of lobbying against climate change regulations or making pronouncements about their climate change leadership. 7

8 Hence the need to quantify and report GHG emissions, for all purposes and intent, represents inefficiencies yet opportunities to improve operations, reduce risks, save money, become leaders in the eyes of the employees, stakeholders, customers and others; and finally to embark on the commencement of a continuous improvement cycle to discover other ways to become better corporate citizens and doing better business. Only then will there be equity. Thirdly, the Bali Roadmap in December 2007 is asking for enhanced national and international actions on mitigation of climate change to obtain measurable, reportable and verifiable commitments and actions which require quantified emission limitation and reduction targets by all developed countries. This is to ensure that there is comparability of efforts among these developed countries by taking into account differences in their national circumstances as per Article 4.2a of the UNFCCC. As for the developing countries, Parties in the context of sustainable development, be supported and enabled by technology, financing and capacity building so as to be able to take appropriate mitigation actions nationally in a measurable, reportable and verifiable manner. Overall the Bali process has achieved its own roadmap of action. Business is ready to move into low-emissions era and the Bali Roadmap provides the framework for governments to launch formal negotiations by setting 2009 as the deadline for negotiation. Developed countries are to continue to take the lead on curbing GHG emissions and also on the emphasis in providing incentives to act globally together with developing countries, businesses and individuals on climate change. Hence from the above three events, many Parties in COP/MOP of UNFCCC have recognized that the debate is over and it is time for action. The responses are seen on three fronts: Firstly, governments and countries across the globe have therefore developed a complex array of regulations, taxes and incentives to help reduce GHG emissions as spelt out in the KP. Many countries have also set up monitoring systems for measuring climate change through technical basic equipment and geometric and meteorology standards. Secondly, businesses are increasing the awareness of their customers desires to buy greener products, services and events. This is done by promoting good practice in environmental management, quantifying GHG emissions and communicating on environmental impacts Thirdly, individuals, operational units, offices and homes are improving their energy efficiencies and offsetting their GHG emissions. This is done by developing standards for energy-efficient technologies and renewable sources, for solid-to-liquid (BTL) biofuels to defuse the food versus fuel controversy, and for improving energy management. 8

9 All these are done with the aim of reducing carbon footprints and becoming carbon neutral. Going forward, it is apparent that, given the stakes of the climate change challenge, there are demanding needs for standardization for better global reach, effectiveness and actions. This paper therefore tells about the effort of the Malaysian palm oil industry in reducing its carbon footprint and becoming carbon neutral in the process. Understanding Carbon Footprint, Carbon Offset and Carbon Neutral The emerging consensus is that transformative changes need to take place in almost every sector of the industry be it upstream-, mid- and down-stream, in order to successfully address climate change. The objective is that the early adopters of green technologies must move forward to acquire high quality GHG emissions credit to offset their unavoidable emissions so as to become carbon neutral. The equation requires the carbon footprint to be offset in order to achieve carbon neutral position. Thus the carbon footprint equation is as follows: Where, (Carbon footprint + Carbon offset = Carbon neutral) Carbon footprint: (refers to the calculation of the amount of GHG emissions associated with the company, activity, operation and event or the life cycle of a product or service) and to this has to be added:- Carbon offsets: (which are carbon credits from emissions reductions or removal enhancements associated with projects such as energy efficiency, reforestation, etc that can be purchased by individuals or companies to compensate for their impacts of their company s activities, operations, events, products and services) where these credits are sold by a variety of providers, including project developers, aggregators, wholesalers and retailers in order to assist companies to claim for:- Carbon neutral: (which is a type of an environmental claim applied to a company, activity, operation, events, product and service that obtains carbon offsets equal to its carbon footprint) which then can be put into the eco-labels of their products. A number of international standards related to climate change ranging from measurement of specific greenhouse gas emissions to generic accounting standards leading to who should pay the emission price for the footprint of goods produced and manufactured in Asia and sold in the developed countries, are available. As palm oil is sold as a food, it is important to highlight the food miles in crossing national boundaries to reach the consumers involves burning of fossil fuels and has to be accounted for. Avoid Conflicting Approaches A Proper Detailed LCA Study is Ongoing in the Industry: In MPOB, being aware of the requirements globally has commenced a detailed LCA study that conforms to international standards. The work in progress involves distinct boundary settings as outlined by ISO standards are on: 9

10 Upstream from planting from previous vegetation including land use change effects to production and delivery of FFB to mill Processing of FFB to palm oil including capture of methane Kernel crushing with emphasis on reduction of energy requirement by integrating the refinery close to the mill Sending the palm oil for refining with better integration of refinery close to mill to reduce energy Manufacturing of refined palm oil into products like cooking oil, margarine and shortening Into soap Into α methyl ester for cosmetic products Into biodiesel. The work is necessary as MPOB wants to be identified with the consumers who are the drivers of change and MPOB as the custodian of the palm oil industry is responsive to them. Therefore by combining the emissions over the supply chain for which include the various production, processes, refinery, manufacturing and transport processes, clear boundaries identified under the LCA approach will mark out new research areas where carbon footprint of GHG emissions of the industry is ready for quantification of carbon used a unit of product. Both direct and indirect sources of emissions and sequestration or removal will be examined. Further, the LCA technique also requires responsible influence through their purchasing decisions to go for low carbon economy. In this way the industry hopes to provide in the near future newer information and opportunity for consumers to make low carbon choices in their purchase. In the Interim: While pressure mounts globally for businesses, companies, governments and civil society to manage their carbon impact, an interim effort has to be communicated to tell the customers that the industry indeed is giving attention to its carbon footprint. A review is made on the published work on the carbon budgets involving oil palm that have assessed exchanges of CO 2 and other greenhouse gases. It was found that different approaches had been used as reported by Henson, 2004; 2005, Reijnders and Huijbregts, 2006; Melling et al., 2007; Germer and Sauerborn, 2007; Reinhardt et al., 2007; Henson, 2008 and Henson and Chang, 2008, Van Zutphen, 2008; Chen, 2008 and Yapp, Most of the researchers used the non- or partial- LCA approaches based on historical studies some done over the last years of planting and some even excluded the land use change effects over the various previous crops prior to the planting oil palm. The aim of the interim communication is to look at gaps in the methodologies and to improve on them. Research into Oil Palm Carbon Footprint at Local, Landscape and National Levels This has to be done at three levels. i) At Local Level: Using the figures projected by Henson and Chang (2008) as an example, the aim is to look for shortfall from the full LCA requirement and to caution researchers from attempting to rush to rub away carbon footprint to meet market demand without applying the acceptable international standard or methodology. From this simple exercise it is hoped that the methods suggested will be used to reduce methodological differences by governments, companies, consultants and NGOs in measuring and communicating carbon footprints, offsets and balance to be neutral. 10

11 In Henson and Chang (2008), the approach was to assemble annual carbon gains and losses including the initial loss of biomass caused by land use change of clearing the land of previous vegetation to plant oil palm. The biomass residue left to decompose on site is similarly offset against the remaining biomass loss amortised annually based on decomposition rates as described by Henson (2004, 2008). Compiled over a period of 25 years, the carbon sequestrated by the oil palm crop was assessed annually from the yearly carbon increment in dry biomass of the standing crop. The changes in total C storage based on on-site and off-site include both oil palm and non-oil palm components. Biogas from palm oil mill effluent needs to be accounted for. It is not uncommon to see how the differences of positive to negative estimates of the carbon balance calculations by tracing the footprints based on different background of the history of cropping. Table 1. Comparison of carbon budgets in tc e /ha/yr over major soil groupings Carbon Peat 1 Average 2 Coastal 3 Inland 4 Notes Oil palm Includes roots Ground cover Includes cover litter OP litter Frond, base, inflorescence Total On-site gain Off-site gain Mill & by-products Po, Ko, Kc, Efb, F, S, Pome Sub-total On &Off Losses Peat C oxidation Mean rate over 25 years Plantation inputs Based on fossil fuel use N 2 O emission From N fertilizer From peat Initial biomass o forest, Discounted 25 yrs Sub-total On-site Off-site CH 4 from POME Sub-total Balance (-) denotes Net C emission (Source: Adapted from MPOB and Henson and Chang, 2008; tc e /ha/yr= t carbon equivalent/ha/yr; Peat 1 = Based on 16 year extrapolated over 25 years with initial vegetation as felled secondary forest; Average 2 =Based on average yield over 25 years with the previous vegetation as rubber; Coastal 3 =Based on coastal soils over 25 years with higher yields at 25t/ha/yr and the previous vegetation as oil palm; Inland 4 =Based on low to medium productive inland site with the previous vegetation as grassland; Po=Palm oil; Ko= Kernel oil; Kc=Kernel cake; Efb=Empty fruit bunches; F=Fibre; S=Shell; Pome=Palm oil mill effluent; 2 o = Secondary forest.) Looking at the calculations, the estimates over 25 years cropping from , as summarized in Table 1, can differ between being an emitter of tC e /ha/yr for peat with previous secondary forest and a net sequester of 0.970tC e /ha/yr for oil palm grown on exgrassland. How reliable can the consumers trust be on the information on the carbon balance 11

12 data will depend on how complete the life cycle inventory (LCI) coming from the companies in the palm oil industry? Do they have the historical records to discount the relatively larger initial biomass such as in second, third or even fourth logged-over forest or secondary- forest as compared from rubber, cocoa, coconut, grassland and from oil palm itself? The oil palm plantations currently are at different stages ranging from being first planting on degraded logged-over or secondary- forests to replants, some reaching up to the 4 th replant, continuously replanted on the same land, with each cycle being 25 years. Have the calculation taken into account the on- and off-site sequestration and emission as shown in Table 2? Have the innovations to take into account the continuous improvements in best practices for incorporation through the formulation of new policies by the companies and government so as to reduce the carbon footprint? Table 2. Potential Carbon Balance based on Improvement in Good Agricultural Practice Carbon Peat 1 Average 2 Coastal 3 Inland 4 Notes On-site gain Off-site gain Mill & by-products Po, Ko, Kc, Efb, F, S, Pome CH 4 from POME Assumed captured and used Sub-total On & Off Losses Total On-site Balance (-) denotes Net C emission (Source: See footnotes of Table 1) It can be seen that when on- and off- site sequestration and emissions are considered, the carbon balance calculations are improved, underscoring the importance of getting the life cycle inventory (LCI) to be as complete as possible. ii) At Landscape Level: As pointed out by Basri and Chan (2007) over the last 25 years, there have been significant changes made to the good agricultural practices and they are likely to affect the carbon build-up when they are highlighted and incorporated into the new policies. They include: 1. Since 1989 there has been zero burn policy in place (Teoh, 2003). 2. There is no cross ploughing of the soil whereby retaining much of the soil organic carbon (Goh, 2004) in the underground roots accumulated (Khalid, et. al., 1996) at 14.9, 29.7 and 41.0tC/ha at 5, 10 and 20 years respectively and this has been reviewed recently by Yew (2008) who found that the soil contain higher amount of carbon. 3. There is an increase emphasis to grow more legume ground cover mixtures to take advantage of the nitrogen fixation through the root nodules of the legumes and to reduce the N 2 O emissions from mineral fertiliser application. 4. Already many companies are improving their boiler efficiency in the mill with the resulting less fibre, shell and even empty fruit bunches being combusted and more available for mulching in the field and as an inorganic fertiliser substitute. 5. And many companies are intensifying their efforts to trap the methane (biogas) thereby reducing a major source of GHG emissions 12

13 From Table 2, the whole impact of various plantings has to take into account of the oil palm planting over the whole oil palm landscape in Malaysia as shown in Table 3. Table 3. Application of the Potential Carbon Balance in tc e /ha/yr over the Whole Oil Palm Landscape of 2,448,470ha average Peninsular Sabah Sarawak Malaysia Sequestration Emission Balance (Source: Basri and Chan, 2007) In 2007, there were million ha of oil palm in Malaysia with a proportion of 2.36 million ha (60%), 1.28 million ha (30%) and 0.66 million ha (10%) of oil palms in Peninsular, Sabah and Sarawak respectively. It can be seen that from Table 3 that when the carbon balance is projected to the regional oil palm area, the carbon balance in Peninsular being of the largest oil palm area has positive carbon balance at while that of Sabah and Sarawak with smaller areas are negative. This is due to the rapid planting of oil palm from previous crops or different land use. More improvements can be made if in the future the planting and replanting involve less logged-over and secondary-forest and peat and fields are replanted from oil palm areas in terms of the land-use change and perhaps deep peat reverted to regeneration to forest. iii) At National Level: Further, at the Bali meeting, the Minister of Natural Resource and Environment (NRE) confirmed that Malaysia has been able to maintain about 60% of the land is under forest cover which is 10% higher than its 50% pledge made at Rio Summit in It was reported by that Minister that nearly all of the production forests in Peninsular have been certified as being managed under the criteria and indicators that are based on International Tropical Timber Organisation (ITTO) guidelines. On a national level on the subjects of carbon balance, the Minister informed that Malaysia is a net sink where we absorb more CO 2 than producing it (Azmi Khalid, 2007) The results in Table 3 also highlighted the need to integrate the oil palm figures into the national inventory as required under the second national communication to the UNFCCC international agreed guidance for land use, land-use change and forestry as spelt out in Article 3, paragraphs 3 and 4 of the Kyoto Protocol. At the Bali COP/MOP meetings in December 2007 have agreed that the final module format will be released in April The sample of the calculation of accounting for GHG emissions monitoring activities is shown in Table 4. As seen from Tables 1-4, the call is for accurate and consistent GHG emissions data collection to understand the land-use change effect. It is important to know what is meant by claims of being carbon neutral and when can they be made? If green products, services and events are to go main stream, then creditable data and information must be produced to support environmental claims are to support market growth and protect customers. Therefore there is an urgent need to use internationally acceptable practices to ensure a consistent and creditable approach to quantify carbon footprint, offset and neutral claims. Fortunately, ISO has developed a number of standards to support companies that want to measure and 13

14 communicate the carbon footprint of their operations, products, services and events. This will allow for fungibility of carbon credits. Table 4. Accounting for Activities under Articles 3.3 and 3.4 of Kyoto Protocol GHG Source and Sink Activities Net Emissions/Removals BY Total Parameter Quantity Cg CO 2e A. Article 3.3 activities A.1 Afforestation & Reforestation x A1.1 Unit land not harvested X x x x x x A.1.2 Unit land harvested x Unit A X x x x x x Unit B X x x x x x Unit C X x x x x x Unit D X x x x x x Unit E X x x x x x A.2 Deforestation X x x x x x B. Article 3.4 activities B.1. Forest Management X x x x x x 3.3. Offset x x FM cap x x B.2.Cropland Management x X x x x x x x x B.3.Grazing Land Management x X x x x x x x x B.4. Revegetation x X x x x x x x x (Source: Adapted from FCCC/SBSTA/@))/L.21; BY= Base year; x=data required to be filled in; 08-12= years of commitment; Cg CO 2e = Giga gram CO 2 equivalent; FM cap= Value inscribed for Party in Annex for forest management) Climate Change, Carbon Markets and Standards Why Use ISO and ISO 14065? Shortly after the publication of ISO standard for GHG accounting and verification in March 2006 and the ISO in April 2007, the uptake of these two standards by the leading GHG programmes and organisations dealing with regulated and voluntary market worldwide has been widespread. The first standard ISO in three parts provided rigorous and credible accounting to maintain integrity in the market while the second standard ISO allows the emissions reduction or inventories to be verified or validated under ISO Part 3 by a validation or verification body accredited to ISO ISO :2006, Greenhouse gases- Part 1: Specification with guidance at the organisation level for quantification and reporting of greenhouse gas emissions and removal, specifies verifiable requirements for organisations to design, develop, maintain and report on emissions throughout the inventories, and deals with quantifying GHG emissions through monitoring and reporting programmes. ISO :2006, Greenhouse gases- Part 2: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements, specifies verifiable requirements for GHG project programmes to 14

15 plan, monitor, quantify and report projects, including resultant GHG emission reductions or removal enhancement units. This is useful for proponents of voluntary projects, regulatory credit-based schemes and government administrators designing programmes and schemes. ISO :2006: Greenhouse gases- Part 3: Specification with guidance for the validation and verification of greenhouse gas assertions, specifies verifiable requirements for validation/verification bodies and validators/verifiers in providing assurance of GHG claims from organisations using Parts 1 and 2 of the standard. The part 3 standard aims to be applicable to any GHG scheme and will be of interest to validation/verification bodies, validators/verifiers and GHG scheme administrators. The ISO 14065:2007, Greenhouse gases- Requirements for greenhouse gas validation and verification bodies for use in accreditation or other forms of recognition establishes the requirements that allow accreditation bodies and others to assess the processes used, and the creditability of GHG verifiers and validators. A summary of the demand and uptake of GHG standards is shown in Table 5. It can be seen that there is widespread market demand and uptake of the two standards. Table 5. Widespread Market Demand and Uptake of ISO and ISO No. Application of ISO and ISO Date and Activity 1 ISO , 1SO & ISO March ISO April World Resource Institute (WRI) and World Business December 2007 signed Council for Sustainable Development (WBCSD) MOU with ISO 4 International Emission Trading Association (IETA) and November 2007 WBCSD launched Voluntary Carbon Standard (VCS) 5 WRI/WBCSD GHG Protocol linked to UNFCCC Kyoto Protocol CDM November Greenhouse Gas Management Institute launched October 2007 (GHGMI) 7 WRI/WBCSD Partnership with GHG Management December 2007 Institute (GHGMI) 8 Canada Technology Early Action Measures Training courses 2005/06 9 Australia Greenhouse Challenge Plus WRI/WBCSD Protocol 10 USA DOE GHG Registry ISO International Petroleum Industry Environmental Adopts ISO in Conservation Association (IPIECA) accounting guidelines 12 New York Mercantile Exchange (NYMEX) Included VCS 13 GE Energy Financial Services and AES launched 2007, Sell GHG credits Greenhouse Gas Services (GGS) 14 Det Norske Veritas (DNV) ISO Lloyd s Register Quality Assurance (LRQA) ISO British Standards Institution (BSI) ISO Societe Generale de Surveillance (SES) ISO Canada Standards Association (CSA) ISO (Source: Baumann, 2008) 15

16 Being regime neutral, these standards are readily applied in a number of situations within the major national and industry initiatives as indicated in Table 6. Table 6. Industries using the ISO and ISO GHG standards No. Industries Project Protocol Using ISO and ISO Bioenergy Biofuel, Biogas, Biomass, Energy efficiency 2 Energy and electricity Wind power, Small hydro power, Electricity grid baseline 3 Oil and gas Enhanced oil recovery, Oil and gas sector 4 Mining Coal mine methane, Abandoned mine methane 5 Waste recovery Waste heat recovery, Waste water treatment, Landfill gas 6 Forestry Afforestry 7 Meat Beef feeding, Beef life cycle, Diary operations, Pork operation 8 Soil Composting, Tillage, Soil carbon sequestration 9 Industrial N 2 O destruction, Municipal operations on energy systems 10 Transportation Fuel switching (Source: Baumann, 2008) The growing widespread use of ISO and ISO in both regulated and voluntary trading schemes is a testament to the versatility in linking GHG markets of the world. The broad appeal has created consistent requirements irrespective of the country in which the project or industry is located. It further implies that regular users and multi stakeholders have effectively promoted the use of these ISO standards as a means to introduce innovations into the industry. This is because standardisation provides a floor but cautions against using it as a ceiling since the ultimate objective ensure that agreed measurable and verifiable targets for significant reduction of GHG and improvement in climate change are met. This will facilitate greater performance of the industry and better free trade in the global economy. Towards the use of ISO Standards for Carbon Footprint, Offset and Neutral Claim Due to the great demand for measuring carbon footprint, there are a number of existing protocols and emerging efforts underway around the world to develop carbon footprint methodologies but these are often inconsistent. Thus ISO standards could play an important role in bringing together a common set of rules outlined in ISO and ISO as the basic building blocks in these emerging protocols and this has broad agreement multilaterally with ISO. The benefits of using ISO standards base for the quantification of carbon footprint, offset and carbon neutral claims are seen in several areas. In countries that did not signed the Kyoto Protocol: Where the regulatory market has yet to be firmly established, voluntary market is thriving as in USA which has not signed the Kyoto Protocol. Here in USA about 68% of the customers understandably use the voluntary carbon standard (VCS). The popularity is due the founders of the VCS having included the ISO and ISO into VCS to ensure rigorous and creditable accounting of carbon to maintain integrity in the market. In the VCS, the emission reductions and inventories are verified and validated in accordance with ISO Part 3 to use a validation or verification body accredited to ISO

17 Use in CDM Projects: Interestingly, the use of ISO is growing in Asia and Africa especially in the former where CDM projects are more than rest of the world. Through the WRI/WBCSD cooperation, ISO and ISO together with the WRI/WBCSD GHG Protocol are being used in the quantification of GHG emission reductions in CDM projects. In UNEP Programme: The United Nation Environment Programme (UNEP) at the end of February 2008 had launched a new Carbon Neutral Network to provide on line support for sharing experience and good practices. It involves a network of countries, cities, companies and others who are bold enough to commit to climate neutrality. UNEP has always encouraged voluntary action by business to complement regulation and deal with environmental issues in a more proactive manner. This includes use of voluntary standards and Codes of Practice. Much progress has been achieved through regular and multi stakeholder discussion and revision to ensure effective promotion of new technologies and innovations in matters such as eco-labelling and life cycle management of carbon footprint. Use of other ISO Standards: Besides ISO and ISO 14065, tracking carbon emissions would need to use ISO LCA standard. It provides the confidence of meeting the robust and practice-proven requirements for performing transparent and acceptable carbon footprint calculations over the life cycle of a products, service and events. The standard provides guidance on how to measure the potential environmental impacts of resource use, wastes and emissions from both the product system as well as climate change impacts. Communication of carbon neutral claims: The ISO series of standards on environmental labelling provides specific environmental communication tool and guidance related to product labels and declarations. In particular, ISO provides guidance on producing environmental product declaration which can be used to document the environmental performance of a product across its life cycle. This standard is intended to support informed choices of environmentally preferable products for the customers. Integrating environmental aspects into product design and development process: The ISO standard provides guidance on how to manage and reduce environmental burden including carbon footprint of both organisation and products. Further ISO Guide 64 also helps writers to take environmental impacts into consideration in the development of products standards. The Way Forward While it is clear that ISO standards and guidance documents can help companies measure and reduce their carbon footprint, there are other areas where use of international ISO standards can help to harmonise the best practices to measure the carbon footprint of a product, services and events. This is to ensure apples-to- apples comparisons between products. Consumers 17