Green Capitalism Implementation: The Sector of Palm Oil Between Indonesia and Japan

Green capitalism is a term that appears as a capitalist response to an ecological crisis where the capitalist system can continue to develop by establishing sustainability and pertaining market efficiency to natural commodities (Chotimah & Winanti, 2018). As a country with the largest palm oil industry in the world,  palm oil became the largest agricultural export commodity in Indonesia, making palm oil play an important role as a major source of foreign exchange and tax. In the process of industrial production and processing, oil palm plantations are also able to build employment opportunities, particularly for rural communities, as well as improve community welfare.

The prospect of formulating the palm oil industry is currently very fast where there is an increase in both the area and production of oil palm in line with the increasing needs of the community. Opening a large plantation requires a large area of land so that investors develop their business. The amount of production that is produced causes emissions as a result of the side effect of the production process and will have an indirect effect on the environment. The fact that the palm oil business is a key driver of deforestation and the intensity of forest fires is increasing every year. The expansion of palm oil plantation capitalism in Indonesia raises various dilemmas, especially land problems, such as low compensation and land grabbing. The rulers and businessmen also ignore local values regarding land ownership, such as customary land, customary forest, and forbidden forest.

These situations have become the focus of the Japanese government as one of the strategic partners in Indonesia’s foreign relations for trade, investment, and research. In the trade sector, Japan is the third-largest non-oil and gas export destination country from Indonesia after China and the United States (Ngadi, 2019).  Japan is currently aggressively looking for vegetable products that can be utilized as an alternative for nuclear power for its power plants. The revolution of energy generation projects in Japan to the renewable energy sector, which is currently happening, requires meeting the supply of biomass raw materials. This opens up opportunities for Indonesia, especially to export Palm Kernel Shells (PKS) and wood pellets. This opportunity prevails open in line with the Japanese Government’s launch of an environmentally friendly energy policy (green energy) in the 2030 Basic Energy Plan which targets electricity production of 1,065 TWh. In the policy, 3.7-4.6% of the energy source comes from biomass raw materials (“Pasar Cangkang Sawit Ke Jepang Terus Melonjak”, 2020). 

The export of Indonesian palm oil products to Japan is constrained by the existence of certification requirements requested by the Japanese Government. In this case, the certificate they pertain to is Roundtable Sustainable Palm Oil (RSPO), which is an international standard. This Japanese regulation becomes an obstacle because the majority of Indonesian palm oil producers currently use Indonesian Sustainable Palm Oil (ISPO) certificates (Ngadi, 2019).

However, Indonesia conveyed its commitment to implementing sustainable practices in the palm oil sector and its derivative products. The Indonesian government emphasizes that the issuance of the New Indonesian Sustainable Palm Oil (ISPO) as outlined in Presidential Regulation No. 44 of 2020 is proof of the seriousness of the Government of Indonesia in ensuring aspects of legality, aspects of sustainability, and aspects of transparency of Indonesian oil palm biomass. In the New ISPO, there are 7 principles, 37 criteria, and 173 indicators that will be able to answer the concerns of the Japanese Government so far, including related to land legality and environmental preservation, empowerment of the local economy, and eliminating the use of underage labor and children.

Japan is conducting a study on ISPO as a requirement for certificates for the palm kernel shell products they import. The determination of sustainable palm oil certification will be adopted by the Japanese government in the feed-in tariff scheme in April 2021. Based on data from the ISPO Commission, of the 746 business entities in Indonesia that have participated in ISPO certification, 502 of them have earned this certificate. If Japan accepts ISPO as a condition for importing Palm Kernel Shells, it will be an opportunity for Indonesia to promote palm oil as a sustainable vegetable commodity globally.

The presence of Green Capitalism helps to solve environmental issues and economic balance in a country by enforcing carbon market mechanisms through bilateral and regional mechanisms to promote low carbon development. Indonesia’s position plays a significant role in Japanese exports and imports in the sector of palm oil. The cooperation between Indonesia and Japan is based on trade and investment interests in implementing low-carbon projects. The idea of green capitalism leads us to the conclusion that capitalism and the environment can coexist so that we can still comfortably save the planet and also economic growth at the same time. Ensuring that humanity has a future by restoring capitalism with social order, not only maximizing the private profit but also must prioritize human needs and also not to be forgotten is to restore a healthier and more sustainable environment.

References

Chotimah, H. C., & Winanti P. S.  (2018, May 23). The Politics of Green Capitalism: Formulating the Low Carbon Growth Partnership Between Japan and Indonesia [Paper Presentation]. The 1st International  Conference on South East Asia Studies, Yogyakarta, Indonesia. http://doi.org/10.18502/kss.v3i5.2339

Ngadi, T. (2019, September). The Cooperation of Japan-Indonesia in the Oil Palm Sector [Paper Presentation]. Proceedings of 3rd International Conference on Trade. http://doi.org/10.2991/icot-19.2019.16

Pasar Cangkang Sawit Ke Jepang Terus Melonjak. (2020, 16 July). InfoSAWIT. https://www.infosawit.com/news/10064/pasar-cangkang-sawit-ke-jepang-terus-melonjak

Author: Mia Melinda

38 thoughts on “Green Capitalism Implementation: The Sector of Palm Oil Between Indonesia and Japan

  1. nice article mia!! With this article we know in this era i think we should do that systems, because many country like industrial country didnt notice about impact to the environment. That systems reducing all of negativity things about everything which can damage the environment and world. Good job mia!

  2. Green capitalism’s proponents argue that because fossil fuels and most other natural resources are limited and dwindling, the economy will inevitably run up against shortages. Nice article!

  3. Green Capitalism is one of the effort to tackle the global warming issue, we can use the levers of the market to fix the broken environment—that’s its fundamental reasoning.

  4. This is a concrete step that entrepreneur can take to be more aware of environmental problems. the cooperation between the two countries will make it easier for this to be realized. Nice article

  5. what a terrific article also very informative. this article can broaden my point of view about how we should act to stop the climate crisis by a single tiny effort like spreading the information like this. good job Mia.

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