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Cablegate: "Cooking the Climate" or Cooking the Books? Greenpeace's

VZCZCXRO9725
PP RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #3278/01 3340250
ZNR UUUUU ZZH
P 300250Z NOV 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC PRIORITY 7213
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBY/AMEMBASSY CANBERRA 1664
RUEHWL/AMEMBASSY WELLINGTON 2088
RHEHNSC/NSC WASHDC
RHHJJPI/USPACOM HONOLULU HI
RUEHRC/USDA FAS WASHDC

UNCLAS SECTION 01 OF 02 JAKARTA 003278

SIPDIS

SENSITIVE

SIPDIS

USDA/FAS FOR OGA/CRUTCHFIELD, MCKEIVER

E.O. 12958: N/A
TAGS: CASC EAGR PGOV PREL SENV SOCI ID
SUBJECT: "Cooking the Climate" or Cooking the Books? Greenpeace's
Report on Indonesian Palm Oil


1. (U) Summary: In a recently released report, "How the Palm Oil
Industry is Cooking the Climate," Greenpeace blames American and
European companies for the destruction of Indonesia's forests and
peat swamps. If this destruction continues unabated, Greenpeace
writes, vast amounts of carbon will be released, detonating a
devastating "climate bomb." In making its case, Greenpeace ignores
the real culprits of forest destruction - unethical local firms,
government corruption resulting in weak oversight and enforcement,
and a gold rush mentality leading local firms to expand at all
costs. Greenpeace's report also ignores key industry-led
initiatives that undermine the report's credibility. Greenpeace
concludes by advocating an immediate moratorium on forest clearing
and that funds be transferred "from rich to poor countries for
forest protection." End summary.

The Greenpeace Report
-----------------------------
2. (U) In early November Greenpeace International published a report
entitled "How the Palm Oil Industry is Cooking the Climate." The
report blames "the world's largest food, cosmetic and biofuel
industries" - including U.S. firms such as Cargill,
Archer-Daniels-Midland, and Procter & Gamble - for "driving the
wholesale destruction of peatlands and rainforests." Unless forest
and peat land destruction is stopped, the report concludes, the
"peatlands will release massive amounts of carbon triggering a
devastating climate bomb." Greenpeace blames two other culprits as
well: shortcomings in the Kyoto protocol and the growing demand for
biofuels.

3. (U) Greenpeace's report outlines four actions it describes as
necessary to diffuse the "climate bomb". They include:

-- A moratorium on forest clearance and peat land degradation;
-- Prioritizing protection of remaining peat swamp forests and other
high conservation value forests;
-- The inclusion of a global funding mechanism to reduce emissions
from deforestation in the next phase of the Kyoto protocol (post
2012); and
-- The transfer of funds from rich countries to poor countries to
enable them to take immediate action to reduce their emissions from
deforestation.

Cooking the Books?
------------------
4. (SBU) While the Greenpeace report correctly identifies the
destruction of Indonesia's forests and the resulting carbon
emissions as a massive international problem, it is wrong about the
principal causes, misidentifies the culprits, and fails to
acknowledge the positive impact Western-led self-regulation programs
are having on the industry. In particular, the report wrongfully
blames Western companies for destroying Indonesia's forests and the
resulting release of carbon (rhetorically transferring
responsibility for Indonesia's high greenhouse gas emissions back to
the United States).

5. (SBU) The report also fails to acknowledge the impact of
corruption, weak government oversight and regulatory systems, and
the greater impact that domestic pulp, paper and logging industries
have on the country's forest resources. Problems with corruption
are present at all levels - local, provincial, and national. One
example of the scale of corruption related to the domestic
exploitation of land for palm oil cultivation is the March 2007
conviction of former East Kalimantan governor Suwarna Abdul Fatah in
a case which has also implicated at least two former Ministers of
Forestry. Fatah was convicted on corruption charges for unlawfully
opening up one million hectares of land in East Kalimantan to local
companies for palm oil development beginning in 1998. The main
Indonesian company involved, PT Surya Dumai, sold the timber after
clearing the land and failed to develop large tracts of the area
slated for palm oil plantations. Fatah was sentenced to 18 months
in prison and 22,000 USD fine by the Corruption Court in Jakarta in
a case that is currently on appeal.

American Firms in Indonesian Palm
---------------------------------
6. (SBU) Only two U.S. firms have a meaningful presence in
Indonesian palm oil: Cargill and Archer Daniels Midland (ADM). ADM
entered the market earlier this year when it formally merged some of
its Asian operations with Wilmar International Ltd. Wilmar itself is
the largest global processor and merchandiser of palm oil, one of
the larger plantation companies in Indonesia and Malaysia (though
not in the top ten), and the largest palm biodiesel manufacturer in

JAKARTA 00003278 002 OF 002


the world. Cargill International, by contrast, remains a relatively
minor player in the Indonesian palm oil market. In its report,
Greenpeace singled out both firms for criticism.

Western Firms are not the problem
--------------------------------------
7. (SBU) Environmental activists point out that while all palm oil
plantations claim to implement responsible land management policies,
in practice, few are willing to commit the funds needed to live up
to the rhetoric. Despite this, industry insiders and environmental
NGOs generally agree that a handful of firms are genuinely
attempting to operate responsibly. These firms include, among
others, Cargill, London Sumatra, Socfindo, and Wilmar International
(ADM's partner in palm). Ironically, American firms Wilmar
International and Cargill are also primary targets of Greenpeace's
faultfinding.

According to various observers, several things set these firms apart
from less responsible firms:

-- These companies are among the few believed to be sincerely trying
to comply with the Roundtable on Sustainable Palm Oil (RSPO)
industry guidelines. Many other firms try to use RSPO for
"greenwash".
-- These companies have received or are seeking ISO 14001
Environmental Management certification which requires them to adhere
to all environmental laws and regulations, treat effluents before
discharging them, protect riverbanks, etc., practices eschewed as
too costly by many local firms.
-- These companies are also among the most conservative in expanding
their operations. In general, it is the firms that are expanding too
rapidly and in unsuitable areas that cause a disproportionate amount
of environmental degradation.
-- These companies are very technically competent and well- financed
so there is less pressure to cut corners in land preparation or
engage in burning.
-- These companies have also developed a culture of ethical and
professional management and corporate responsibility.

8. (SBU) Not all firms have such responsible management. Indonesia's
second and third largest palm oil firms and their subsidiaries,
Asian Agri (Raja Garuda Mas or RGM) and Sinar Mas (SMART), are
relevant examples. The head of Asian Agri, Sukanto Tanoto, has fled
to Singapore to avoid prosecution on charges of money laundering,
corruption, and tax fraud. Last year, after the respected head of
Mt. Leueser national park brought in heavy equipment in order to
clear several thousand hectares of oil palm planted illegally by RGM
inside the park, Tanoto reportedly complained to the Ministry of
Forestry and had him removed. Several years ago the founder of
Sinar Mas, Eka Cipta Widjaya, was accused of embezzling hundreds of
millions of dollars in the Asia Pulp and Paper debacle. More
recently, environmental NGO WWF felt compelled to break off its
relationship with Sinar Mas' pulp and paper division because of its
failure to adhere to environmental norms. These two companies
regularly boast of their rapid expansion in recent years.

Industry Self-Regulation
------------------------
9. (SBU) A final major flaw in the Greenpeace report is its
treatment of industry self-regulation efforts such as the Roundtable
on Sustainable Palm Oil (RSPO). In the report, Greenpeace accuses
the body of being complicit in environmental destruction without
describing what the organization does. The roundtable's primary goal
is the establishment of credible and verifiable global standards for
the production and distribution of palm oil products - a goal
Greenpeace purports to share. In fact, RSPO has developed detailed
principles and criteria for sustainable production. Once the pilot
programs are complete, RPSO members will be required to undergo an
intense certification process to verify their compliance with the
principles and standards.

10. (SBU) Other important industry initiatives include the ISO 14001
Environmental Management certification and partnerships with
environmental NGOs. Cargill, for example, has partnered with Fauna
Flora International (FFI). Under the arrangement, FFI assists
Cargill in identifying high-conservation-value-forest areas for
protection and monitors Cargill's compliance with environmental
standards. If more palm oil plantations followed the lead of
American and European companies involved in the industry,
Indonesia's forests and wildlife would face far fewer threats.

HUME

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