Folks,

This recent WSJ article expressed something that has long bothered me about the way that the press usually handles energy and climate change–as if they were separate issues. They are as intimately connected as my left hand and my right, but hardly anybody writes about that. Either the article is about the benefits of biofuels, or it’s about the climate effects of burning away forests to plant croplands. It’s about economic improvement programs in remote and impoverished parts of the world, or it’s about the effects of those programs on the native ecosystems. But almost never both, at once.

Well, just as there is no free lunch, there is no way to increase production of alternative fuels without also incurring some “externalized” costs somewhere else. And it’s about time that we understand that. Maybe we need to start telling newspaper editors that we can handle the truth, that we do have an attention span longer than your average TV commercial, and we want more well-rounded coverage of this stuff.

This article presented a balanced view of some new “sustainable” programs to grow biofuel feedstocks in Indonesia. Good stuff. Kudos to the WSJ.

–C
Crude Awakening
As Alternative Energy
Heats Up,
Environmental Concerns Grow

PONTIANAK, Indonesia — Investors are pouring billions of
dollars into “renewable” energy sources such as ethanol, biodiesel and
solar power that promise to reduce the world’s reliance on petroleum. But
exploiting these alternatives may produce unintended environmental and
economic consequences that offset the expected benefits.

Here on the island of Borneo, a thick haze often encloses
this city of 500,000 people. The cause: forest fires that have blazed
across the island. Many of them were set to clear land to produce palm oil
— a key ingredient in biodiesel, a clean-burning diesel fuel
alternative.

1

Patrick Barta

At a new oil-palm plantation, the hillsides have been cleared and terraced.

The bluish smoke is at times so dense that it leaves the
city dark and gloomy even at midday. The haze has sometimes closed
Pontianak’s airport and prompted local volunteers to distribute face-masks
on city streets. From July through mid-October, Indonesian health
officials reported 28,762 smog-related cases of respiratory illness across
the country.

“I feel it in my breath when I breathe,” said Imanuel
Patasik, a 26-year-old delivery man, as he sat in one of Pontianak’s many
open-air coffee shops on a recent evening. When the smoke is really bad,
he wears a mask to work, but still wakes up the next morning feeling sick.
“It’s part of life here,” he sighed.

Seasonal rains have helped quell the fires over the past
few weeks. But the miasma of smoke from Borneo and the island of Sumatra
— an annual phenomenon that blankets large parts of Southeast Asia in
smog — underscores a troubling dark side of the world’s
alternative-energy boom. Among other problems, the fires in Indonesia spew
millions of tons of carbon dioxide and other greenhouse gases into the
atmosphere, experts say. In doing so, they exacerbate the very
global-warming concerns biofuels are meant to
alleviate.

Such side effects are not an isolated problem. In
Indonesia, Malaysia, Canada and elsewhere, forests are being slashed for
new energy-yielding crops or other unconventional fuels. In India,
environmental activists say, water tables are dropping as farmers try to
boost production of ethanol-yielding sugar.

“Let’s be brutally frank: [The push for alternative fuels]
is going to cause significant changes for the environment,” says Sean
Darby, an equities analyst and expert on alternative energy companies at
Nomura International in Hong Kong. He is most worried about the strain on
water resources caused by accelerated crop production. Water, he says, is
“just as precious” as oil.

Some experts are also concerned that crops for biofuels
will compete with other farmland, possibly driving up global costs of
basic food production.

It’s not clear how serious these problems will become — or
whether they eventually will be resolved through new technologies and
stricter environmental measures. Proponents of alternative energy,
including some palm oil industry executives, say the dangers are
exaggerated and are outweighed by the benefits new fuels promise.

“We’re unfairly targeted,” says M.R. Chandran, former chief
executive of the Malaysian Palm Oil Association. He contends that the
timber industry and local farmers are much to blame for destroying
Indonesia’s forests.

The alternative energy field “is almost like the Internet
in terms of the pace of how fast all this is changing,” says Chris Flavin,
president of Worldwatch Institute, an environmental organization. He
believes that new technologies could help resolve some concerns over
collateral damage. One of the hottest, for example, is called cellulosic
ethanol, which uses different kinds of waste — including municipal
garbage — to create fuel.

In the U.S., questions about corn-based ethanol are
swirling in academic and agricultural circles, in part because of the work
of a Cornell University professor. David Pimentel, who teaches
environmental policy, has long held doubts about the fuel’s value. He
argues that expanding corn production for biofuels would deplete water
resources and pollute soils with added fertilizer and chemicals. It would
also require huge volumes of traditional energy for farming equipment and
ethanol-conversion facilities — a toll that could nullify gains from the
less-polluting fuel produced.

Other studies, including reports by researchers at the U.S.
Department of Agriculture, have reached much more optimistic conclusions
and have criticized Mr. Pimentel’s methodology.

Big Implications for Business

Critiques of alternative energy — even if they prove to be
exaggerated — could have big implications for business. Last year,
investors globally poured a record $49 billion into energies such as solar
power, ethanol and biodiesel, according to New Energy Finance, a
London-based firm that specializes in analyzing renewable energies. That
was a 60% increase from the previous year.

But commercializing many alternative fuels relies on
political support in the form of government subsidies or tax incentives.
So the rise of local resistance could jeopardize the new fuels’ economic
viability.

This is particularly true for palm oil, a once-mundane
commodity whose price has climbed about 31% so far this year. The spike is
partly attributable to demand for biofuels.

In October, a European Parliament committee recommended a
ban on all biofuel made from palm oil, citing fears that the crop
encourages deforestation in tropical countries. In Indonesia, activists
helped block an $8 billion Chinese-backed project that would have created
one of the world’s largest palm-oil plantations.

And last month, one of Britain’s largest power companies,
RWE npower, a subsidiary of the German power giant RWE AG, said it
would abandon a project that was to use several hundred thousand tons of
palm oil a year to generate power. An environmental group, Friends of the
Earth, had complained that the project would contribute to unsustainable
global demand for palm oil, contributing to rain-forest destruction in
South East Asia. RWE npower said it dropped the project because it
couldn’t secure an adequate supply of sustainably grown palm oil.

Most consumers still think of palm oil mainly as a source
of cooking oil. The oil is squeezed from bunches of red fruit that grow on
oil palms, primarily in Malaysia and Indonesia. But the oil can also be
processed to make fuel. Then it’s mixed with conventional diesel to form a
hybrid energy source — for instance, 80% regular diesel and 20% biofuel
— that can be pumped directly into fuel tanks.

Biodiesel offers lots of upsides. Renewable crops such as
palm oil reduce the need for fossil fuels such as petroleum whose supplies
are finite. It also burns more cleanly than carbon-based liquid fuel,
releasing fewer of the gases thought to cause global warming.

As oil prices have surged, a number of companies, including
Chevron Corp., have announced plans to build or invest in biodiesel
plants. In a recent report, Credit Suisse analysts said there’s enough
refining capacity under development to produce as much as 20 million
metric tons of fuel annually by late 2008. That capacity, more than twice
that of today’s levels, would “easily soak up” all the world’s available
palm oil — creating even more demand for plantations.

Indonesian authorities hope to capitalize on such demand to
bring economic growth to impoverished regions. The government is offering
low-interest loans for plantation companies, with a goal of adding 3.7
million acres of new plantations over the next five years, an area more
than half the size of New Hampshire. Officials maintain this can be done
on designated land areas without causing widespread environmental
damage.

Different Outcome

But what’s happening on the ground in Borneo suggests a
different outcome. Among the world’s most fabled islands, Borneo — which
is divided between Indonesia and Malaysia — is considered by
environmentalists to be one of the last great tropical wildernesses. It’s
home to rare and unusual species, including the wild orangutan, the
clouded leopard and the Sumatran rhinoceros.

It’s also home to some of the world’s last headhunters. The
indigenous Dayaks resurrected the grisly practice as recently as the late
1990s in interethnic clashes. Some Dayaks still live in villages that can
only be reached by river, and sleep in wooden “longhouse” buildings on
stilts.

A fire at this oil-palm plantation near Pontianak, Indonesia, made some local villagers sick.

In the 1800s, Dutch and British traders began carving up
parts of the island to produce rubber and other commodities. Later,
Malaysian and Indonesian timber barons devastated millions of acres of
forest logging tropical hardwoods. Today, only a little more than half of
Borneo’s once-ubiquitous forest cover remains, according to WWF, the
global conservation organization.

Now, the palm-oil boom threatens what’s left. In West
Kalimantan, a province along the western coast, the palms cover about
988,000 acres or more, up from less than 37,000 acres in 1984. Fleets of
orange and mustard-colored trucks ply the province’s few paved roads,
ferrying the oil to river ports.

The plantations have meant jobs and opportunities for many
Dayak families. Some have even taken ownership stakes in the
operations.

As residents are discovering, though, the spreading
plantations have deleterious effects. They can alter water-catchment
areas, destroy animal habitats and contribute to the months-long bouts of
haze that spreads hundreds of kilometers across Southeast Asia.

As fires burn deep into the dry peat soil beneath
Indonesia’s forests, centuries of carbon trapped in the biomass are
released into the atmosphere. A study presented last month at a U.N.
Climate Change Conference in Nairobi showed that Indonesia is the world’s
third-biggest carbon emitter behind the U.S. and China, when emissions
from fires and other factors are considered.

“Stopping these fires could be one way of getting rid of
some significant carbon emissions to the atmosphere,” says Susan Page, a
senior lecturer at Britain’s University of Leicester who studies carbon
emissions in Southeast Asia.

A ship on the Kapuas River, in the Indonesian section of the island of Borneo, is shrouded by smoke from forest fires.

To be sure, palm-oil plantations aren’t the only cause of
deforestation and smoke on Borneo. Loggers have degraded huge swathes of
forest. And indigenous residents have long practiced their own form of
slash-and-burn agriculture that involves setting fires to clear fields for
planting.

But Indonesian environmental officials say plantation
companies are exacerbating the problem, and some palm-oil executives
concede their industry is partly to blame. Often, companies hack down the
trees, leaving behind a mass of debris that must be removed before they
can plant oil palms. The cheapest and easiest way is simply to torch
it.

One new oil-palm plantation, four hours by dirt road from
Pontianak, offers a glimpse of the fallout from the flames.

The plantation stretches across some 2,740 acres and
features a series of blackened and largely bare hills. Charred stumps
stick up from the soil and blistered tree trunks litter the ground. In the
distance, a wall of misty jungle marks the border of the property.

Villagers nearby say smoke and flames from fires at the
site destroyed fruit and rubber trees on which they relied. They also made
many people in the area sick. One villager began acting like he was
possessed and was placed in a cage where he remained for weeks, the
village chief says.

Nearby, on a ridge overlooking the property, a man in a
floppy sun hat who identifies himself as the plantation manager says he
didn’t know who started the fires. “We are one of the victims,” says the
man, Kong Tamcheng.

Mr. Kong says his employer, an Indonesian company called
Incasi Raya Group, has a strict no-burning policy. He suggests the fire
might have been started by a careless worker flicking cigarette butts, or
by “interested parties” out to “smear” the company’s reputation.

But Untad Dharmawan, director of environmental impact
assessment for West Kalimantan, says Indonesian authorities are
investigating nine palm-oil companies for illegal burning, including
Incasi Raya Group and its manager, Mr. Kong. He displays a dossier of
photos of the Incasi Raya site, adding that his department has witnesses
with evidence the company started the fires.

Phone calls to Incasi Raya’s office in Padang, Indonesia
went unanswered.

Indonesian officials say they’re doing the best they can to
fight the fires and prevent illegal forest-clearing. Among other tactics,
they hired two giant Russian planes to drop “water bombs” and launched
projects to hand out water pumps to local villagers.

But they’re hamstrung by tight budgets and the logistical
difficulties of policing such a vast area with few roads. At best, “we can
just minimize the spread” of fires, laments Mr. Dharmawan, the provincial
environmental official.

Palm-oil companies, meanwhile, have joined with environment
organizations, energy companies and others to set up a group known as the
Roundtable on Sustainable Palm Oil that plans to certify plantation
companies that follow guidelines to minimize ecological damage.

Back in Borneo, Tony Hartono, head of a local plantation
association in West Kalimantan, says he still believes biodiesel derived
from palm oil will play a big role in solving the world’s energy problems.
After all, “it’s a renewable energy,” he says. “It’s our future.”

Write to Patrick Barta at patrick.barta@wsj.com2
and Jane Spencer at jane.spencer@wsj.com3

URL for this article: http://online.wsj.com/article/SB116501541088338547.html

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