Tag Archives: development
Rubber Study Group Looks for Sustainability Plan
By Huileng Tan SINGAPORE — The Singapore-based International Rubber Study Group is embarking on an ambitious initiative to draw up a plan for the industry, much like what the Roundtable on Sustainable Palm Oil did in the tropical oil seed industry. Courtesy of Lekshmi Nair Senior economist and statistician Lekshmi Nair, of the International Rubber Study Group, says what is needed “is commitment from all players in the supply chain” to end up with a sustainability plan. An overwhelming 85% of rubber production comes from small growers. That has meant that the fragmented industry has never come together to agree on a common set of sustainability standards. Natural rubber is a major tropical cash crop valued at more than US$30 billion annually. It has a long history of being cultivated for commercial uses. A boom in the last decade sent prices to record highs and spurred rapid new plantings outside of the traditional producing countries of Thailand, Indonesia and Malaysia, which account for over two-thirds of the world’s natural rubber supply. With burgeoning demand from China fueling rapid planting in these new areas – such as Cambodia and Laos — environmentalists and scientists are increasingly voicing concern about the environmental impact of rubber plantations. While rubber trees are deemed to be green, because they absorb carbon, large tracts of planting will lead to habitat loss for birds, elephants, tigers and other wildlife in the region, and also disrupt water movement, they argue. Set up in 1944, the International Rubber Study Group is made up of more than 30-member governments, as well as producer groups and consumers such as tire companies. Now its members are trying to give it a new, important mission of trying to balance its commercial success while not being overly destructive of the environment. The Roundtable on Sustainable Palm Oil was formed in 2004 in response to pressure from social and environmental groups to develop global standards for the entire palm oil supply chain. Plantation firms, such as Sime Darby Bhd and IOI Corporation Bhd, with estates larger than the city-state of Singapore, were first to adopt the standards and now account for the bulk of 8.2 million tons of eco-friendly palm oil produced annually. A key figure at the rubber study group’s sustainable project is senior economist and statistician Lekshmi Nair. She spoke to The Wall Street Journal about what the organization envisions for the industry. Excerpts follow: The Wall Street Journal : You are setting up a sustainable natural rubber action plan. Define sustainability. Lekshmi Nair: The definition of sustainability varies from different stakeholders, but, in general, sustainability means ensuring continuity of raw material so that it’s not disturbed. The mission of the sustainability initiative in rubber is to promote the economic, environmental and social sustainability in the production and use through dialogue and cooperation with all stakeholders along the supply chain. Now, there is an imbalance in that 85% of natural rubber production is coming straight from small growers while 70% of the consumers are from the tire sector. So we need commitment from both sides [in the form of a memorandum]. For the producers, natural rubber has the potential to generate a number of positive environmental benefits. Sustainability initiatives in rubber have positive impacts on the development policies of the producer economies. Promotion of sustainable production can enhance producers’ market entry and competitiveness in the growing new markets for sustainable products. For the consumers, the tire industry is by far the largest end-use market for natural rubber, with tire producers purchasing around 70% of total natural rubber placed on the global market. About 85% of natural rubber is produced by smallholders, whose decision to plant new trees and tap depends on opportunity cost. [Corporate Social Responsibility] is scaling up to include social as well as environment standards, with application of sustainability principles with regard to resource efficiency or purchase of raw materials [rubber]. So what we needed is commitment from all players in the supply chain to achieve objectives in this initiative in natural rubber. From the producer end, we have to take care of resource efficiency and the purchase of raw materials. This productivity in turn will ensure income for the small growers. For all major consumers, CSR is an issue. From the CSR point of view, the raw material that they are procuring must be shown to be sustainable, and one aspect of this is in its production. What are some of the sustainability criteria you are looking at? Other than improving productivity, we want to ensure natural rubber quality. Improving quality ensures enhancing productivity that certainly will increase income of predominantly small growers. If we looking at the emerging producing countries or African countries, you can see that the rubber they produce is filled with a lot of with impurities. In fact, you can say 50% is filled with sand or wood particles. Latex is collected in a cup attached to trees. So what small growers do is to collect the lumps and throw them to the ground, So contaminants will stick them. However, if small growers take some initiative to avoid these practices, they can avoid impurities at an early stage, which will save a lot of energy during processing. So it’s also beneficial from an environmental point of view. Bad quality rubber will require more energy for cleaning and will also produce more waste. Waste reduction can at start at the production stage. Natural rubber is known as a green product as the trees absorb carbon dioxide. What impact does large-scale cultivation of rubber as a cash crop have? Because of the demand for natural rubber, there is a lot of large-scale investment in emerging countries. One issue involves the use of forested versus degraded land. We encourage using degraded forest, and this initiative encourages this type of cultivation versus cutting down forested land. A comprehensive range of social issues, like land use shift, tenure rights, food security, are also within the? broader impact on large-scale investments. Also, when land is given for rubber cultivation, investors have to ensure food security for residents in the area first before they can cultivate a non-food crop like rubber. We need to ensure a balance between the two crops. First, we need to get commitment from all supply chain stakeholders so that the sustainability efforts become voluntary standards. Natural rubber is a commodity with a long history of being cultivated for profit. What took the industry so long to come up with these standards, which you are drawing up? Many of the established rubber growing countries do have initiatives and framework for enhancing small grower productivity through some form of sustainability efforts. But our project will involve multiple stakeholders, including governments and private individuals. At this stage, no civil society organizations [non-governmental organizations] are involved. We know there are some issues surrounding rubber, such as land rights and environmental issues. What is the state of the rubber industry now? Historically you’re looking at rubber as a colonial crop. It started as an organized plantation crop before government land ownership restrictions [to prevent individuals from accumulating too much land] saw it shift to being a small-holder crop. So that’s where the rubber is coming from now, and we need to reach out to these small growers. Other than CSR standards and image, what’s in it for consumers, like major tire makers and small holders? For commodities, there’s a boom and bust cycle. During the bust cycle, growers are withdrawing from this crop. But at the same time for consumers, they want need to keep the production line going, so they need to have an ensured quantity of rubber. Here, we need the consumers’ commitment to encourage small growers to stay with the cultivation of this crop. Sustainable prices are a concern for both producers and consumers. If the price is not sustainable, consumers may find it difficult to get their assured quantity from the producers because nobody can force the small growers to produce. They can do something else. Why not? There’s an opportunity for everybody and they are businessmen. What’s the next stage in the project? We hope to get all stakeholders commitment to this initiative [to sign a memorandum] by the next World Rubber Summit [likely in May of 2014 and held in Singapore] to get their commitment to certain standards. We hope to eventually get into a voluntary certification for sustainable natural rubber. Continue reading
Powering Ahead With Biomass
Biomass is often overlooked within the renewable energy sector, but is now emerging as a key player for many countries seeking cleaner ways to power their economy, Gosia Klimowicz reports. One emerging technology that could boost the biomass sector is a new, 40MW straw-fired localized biomass model by DP CleanTech and the Polish Energy Partners. Image:biomassenergy.gr With urbanisation accelerating across the world, the global demand for energy is set to double by 2035. Given the dwindling supply of fossil fuels, those countries which are abundant in renewable energy sources are finding themselves in a privileged position – particularly those rich with wind, hydro, or solar energy. However, from being an often overlooked energy resource, biomass may just become the game changer for some countries. In countries such as Poland, for example, biomass co-firing has emerged as one of the largest sources of renewable power. As part of their green energy initiatives, several local utilities – including PGE, Tauron and Enea – have upgraded their coal-fired installations to allow for burning biomass as well as coal. Under its new three-pack energy law, Poland has just concluded works on a new law on renewable energy sources, which covers electricity, gas and renewables. Legislators debated whether to increase the share of renewable energy in the power generation mix, which will drive reforms to the green certificates system, whilst at the same time limiting subsidies for biomass co-firing generators, as well as other renewables such as wind or photovoltaics. Green certificates – tradeable documents proving that certain electricity is generated using renewable energy sources – are part of Poland’s scheme to support the renewable energy market. Green certificate trading enables the industry players to generate additional profit from the production of renewable energy. Changes to this system would help to avoid last year’s market crash where prices plunged almost 70 per cent, caused by the oversupply of green certificates. This reform could also help lift the share of the energy mix using renewable sources to 15 per cent in 2020 to meet the European Union (EU) targets. This target has been scaled back from the initial target of 20 per cent, which was an ambitious target for a country heavily dependent on coal. “The new law seeks to adjust Poland’s renewables support mechanism to the changing conditions of the renewable energy market,” Piotr Czopek, renewable energy specialist at the Polish Ministry of Economy told Eco-Business. Poland presented its draft bill on renewable energy support in mid-August. The main legislation is expected to come into force by the end of the year, or at the latest by June next year. According to the Ministry, the current green certificates framework – which provides the same level of support for all technologies using alternative energy sources – has been one of the causes of excessive development of technologies which offer very little innovation. Specifically, this equal treatment of different technologies has led to a rapid growth of biomass co-firing in coal power plants. Whilst, 50 per cent of current Polish electricity from renewable energies is produced from biomass, almost a third comes from co-firing biomass in coal-fired power plants. However, this method of generating power has come under criticism by environmentalists who say that most co-firing coal power plants do not use the emerging waste heat – about 75 per cent of the electricity from biomass is produced without using it. Waste heat is a by-product of energy conversion processes, mostly discarded in cooling towers, ponds, the atmosphere, or discharged into the sewer. Recovering value from waste heat can be another major opportunity to lower energy costs, increase the productivity, as well as reduce greenhouse gas emissions. Furthermore, Polish bioenergy experts have noted that Poland has been importing a huge amount of biomass in the past five years, when there is a vast amount of idle land, and waste agricultural streams which could be used for growing country’s own feedstock. They also state that the activities of large energy companies, which use biomass in order to receive compensation in the form of green certificates, have contributed to a considerable wastage of this resource. Nearly 30 per cent of the available biomass from agricultural waste weighing millions of tonnes is used for co firing, which is a highly inefficient use of the fuel. With more efficient technology and feedstock distribution, it is estimated that around 170,000 households could be heated with the same amount of biomass. Benefits and challenges of biomass co-firing Co-firing can be a cost-effective and relatively swift means of adding a renewable energy component, converting biomass to electricity by adding biomass as a partial substitute fuel in high-efficiency coal boilers. “ Provided the biomass is sourced sustainably, co-firing reduces emissions of carbon dioxide. Biomass also contains significantly less sulfur than most coal. This means that co-firing will reduce emissions of sulfurous gases such as sulfur dioxide that will then reduce acid rain.” Krzysztof Dragon, DP CleanTech “It incorporates environmental, socio-economic and strategy advantages”, says Krzysztof Dragon, vice president of clean energy solutions provider DP CleanTech. “For example, provided the biomass is sourced sustainably, co-firing reduces emissions of carbon dioxide, a greenhouse gas that can contribute to the global warming effect. Biomass also contains significantly less sulfur than most coal. This means that co-firing will reduce emissions of sulfurous gases such as sulfur dioxide that will then reduce acid rain.” Co-firing facilities are also less sensitive to seasonality in biomass fuel production as well as biomass availability and price. Power stations allows for greater flexibility in terms of the origin of the fuels, (for example from forestry, agriculture or municipal waste), as well as the ratio of each biomass fuel in the power mix. This is because it does not affect the fossil fuel load, which can still operate at 100 per cent. For many European countries, the promotion of co-firing is a key initial step for the development of sustainable biomass markets as well as for the creation of expertise on biomass handling and combustion. In Poland, biomass projects will continue to be supported through 2017, but the increasing number of projects has led to a large price hike for popular biomass feedstocks. Acting on such environmental and economic concerns, the government is cutting subsidies for biomass co-firing and the issuance of green certificates for co-incinerators. In response, the industry has come up with innovations that could boost the country’s biomass sector – without subsidies. One such solution is a new, localized biomass model conceptualized by DP CleanTech and the Polish Energy Partners. Currently under development, this optimized 30MW and 40MW straw-fired model will be more sustainable and energy-efficient. It will process most types of organic, carbon-containing feedstock without causing air pollution, greenhouse gases (GHG) and environmental harm. “It allows the co-firing of agricultural and forestry biomass, where agricultural waste can make up to 100 per cent of the power mix; and wood chips can constitute up to 80 per cent”, explained Piotr Maciołek, Industrial Energy Outsourcing Director, Polish Energy Partners. “This gives us a lot of flexibility in terms of location and availability of resources. In the future, we would like to build more power plants based on this model.” “ The new technology will significantly reduce the fuel consumption of biomass power plants, which leads to increased energy savings, improved cash flow and better return on investment. The project also features a special boiler design that will also minimize nitrogen oxide emissions, and an innovative feeding system that will handle both square and round bales. The new technology will significantly reduce the fuel consumption of biomass power plants, which leads to increased energy savings, improved cash flow and better return on investment. During the next two years, DP CleanTech will exclusively engineer, manufacture and commission the combustion boiler, fuel feeding and air system. The complete straw-fired power plant will be delivered to PEP in Winsko, in South West Poland. “The design is done, the location confirmed and we have all the approvals for construction. We are now waiting for the government’s decision regarding the new renewables bill. Without it, we won’t know all the economic parameters that we need in order proceed with works on the power plant,” said Mr Maciołek. Asia’s growing potential There is also significant potential for this biomass model in Asia, say private sector experts and academics. “ There is a lot of interest in biomass around the region but the main challenge is to make the business model work properly Dr Tong Yen Wah, National University of Singapore South East Asia has a huge need for distributed power generation and is also home to one third of the world’s usable biomass supply. However many countries still generate power through coal and expensive diesel fuel. Despite having vast waste streams such as rice husk, palm oil waste and wood chips, as well as strong government incentives for dedicated biomass plants around the 10MW range, they lack the infrastructure and resources to efficiently collect and transport biomass fuel. Perhaps by encouraging biomass co-firing as a cost effective first step for governments and utilities to meet renewables targets, the biomass industry will begin to better utilize waste streams and build a reliable fuel collection framework. With a more efficient fuel collection framework, the risk of disruption of fuel availability for small localized biomass power plants around the 10MW range is significantly reduced. Sales Manager at DP CleanTech, Jerome Le-Borgne said: “The incentives for dedicated 10MW plants in countries like Thailand and Philippines are very attractive and allow for fantastic profitability, because it is seen as a great solution for managing waste and providing distributed base load power to rural communities. However the number one challenge we are faced with is ‘bankability’ resulting from unpredictable fuel supplies”. According to Dr Tong Yen Wah, Assistant Professior at the Department of Chemical and Biomolecular Engineering, National University of Singapore (NUS), while biomass co-firing is the dominating technology in countries such as Korea and Japan, it is less developed in other Asian countries such as Indonesia and Malaysia, which are rich in biomass feedstock. Dr Tong heads a few teams of researchers at NUS who are looking at different models to convert and transport biomass. “The models that we are currently exploring are also strongly focused on the logistics: either collecting the biomass or implementing a transportable technology to convert biomass into energy. We need to find a cost-efficient solution to the many logistical issues.” “There is a lot of interest in biomass around the region but the main challenge is to make the business model work properly,” he said. Clearly, the opportunities are there for biomass to become a much bigger contributor to the renewable energy sector in many countries, but its development will depend on several factors. Building certainty into fuel pricing and fuel supplies can be realised through a combination of government support, market reform, and innovation in logistics processes. However, the efficiency and flexibility of the technology to move along the development curve from co firing to stand alone biomass power plants is an equally critical factor in the development of the industry as a whole. Continue reading
Foreign Investment In Agriculture? How About A Plan For Profitability
Perhaps talking about investment could lead Australia to a brighter farming future. Michael Lloyd Large parts of Australian agriculture are economically and financially unsustainable . Returns are inadequate and unbalanced; assets are depleted; risks are needlessly high. To date, governments have largely relied on the market to address problems, but problems have worsened. Mainstream political thinking has essentially ignored issues of foreign investment in farming and food processing (where no significant wholly Australian processor remains). Popular opinion has been turning against such investments, but it was only on Wednesday evening, at the Rooty Hill leaders debate, that prime minister Kevin Rudd finally stated his anxiety about our “ open slather approach ” and expressed the need for change. Responding, opposition leader Tony Abbot was reassuring. He would lower the threshold for review of foreign investment from A$220 million to A$15 million – a meaningless gesture when approvals are automatic and asset overpricing pressures remain unchecked. Understandably he did not wish to open up an issue that still divides those in the Coalition and, now openly, Labor . Headline reactions were splendid: Rudd “retreats on foreign investment” (AFR), “risks foreign investment” ( The Australian ), “takes hard line on foreign investment” ( The Land , The Conversation ), “cautious on foreign investment” and makes “reckless flub on foreign investment” (both Business Spectator). Tidying up after this explosive “thought bubble” preoccupied most. All in all, it was a marvellous media moment for reporting, little analysis and much opinioneering. How important is foreign investment to our farming future, and indeed our nation? Briefly, the historical record is mixed. There are no clear connections between GDP growth and foreign investment, and indeed some contrary examples (relatively slow GDP growth with high foreign investment). The really important issue is how investors use production assets (such as farmland) and who profits where and when. Serious problems arise in markets when: income streams and profit are inadequate for needs distorting opportunistic strategies are not curbed or countered assets from stressed enterprises are dumped on markets investments are made with mixed motivations funding availability and power are asymmetric financing is unevenly based and biased and perceptions are distorted by misinformation. Any one of these conditions can corrupt asset markets. As all seven are evident in the Australian farmland and product markets, outcomes are likely to be perverse. Relying on a market solution in such circumstances would be foolish, something that the current prime minister seems to be realising, finally. Not business as usual While our politicians and, particularly, their advisers might prefer “Plan A: business as usual”, prudence dictates planning for realities. Here the Australian people are ahead, with now clearly expressed preferences for controls on farm land purchases, supply chain reform, robust national interest evaluations and the like. This year has witnessed many collapses in rural businesses across all manner of size and form, with many more likely. Governments need to agree on an adequate “Plan B: Stabilisation” as a debt-deflation spiral builds in rural land assets. In our open economy, the build-up in foreign investment necessitates “Plan C: asset return enhancement”. Foreign investment, be it direct or portfolio, can add significantly to the progress of regions and a nation when it adds something “new” or “better” that realises decent returns for both its domestic hosts and external investors. Foreign capture of assets, however, is different. There, not only do the bulk of returns accrue preferentially to external parties. Control of assets also enables wider strategies, be these corporate or national. For example, a grain handler (headquartered in the USA, China, Middle East or elsewhere) may acquire assets in Australia not so much for the earnings from a well-run business based on them but as a means of global supply chain consolidation and targeted preferencing of some suppliers (and discrimination against others). Plan C should then minimally include a robust national benefit demonstration and measures to preclude opportunistic actions. Under some circumstances (such as current high domestic finance costs and limited rural liquidity) the only real national solution appears to be to ban foreign investment until local investors can obtain comparable finance. Currently cheap foreign money is maintaining unserviceably high asset values and privileged asset access, pushing prices above those local investors can sensibly afford. The critical strategic question is how to manage foreign investments so that excessive domestic production earnings do not leave the country (as already happens in some Australian sectors and many parts of the world). This is central to plan “D: Restoring national incomes”. Ownership transfer, income losses Further ownership transfers of farm, processing, product handling and marketing assets to external parties would see increasingly serious national income losses and Balance of Payment deterioration. Australia is an increasingly indebted nation. It needs to earn its way in the world, not sell off the assets which could support such earnings. External crises can be expected soon enough if our annual net outflows of around A$50 billion continue to go unaddressed. The usefulness of current financing arrangements could be the focus of “Plan E: sustainable finance”. Currently banks are providing what are essentially home loans to businesses with the high income volatility of agriculture. Others have structured finance in unsustainable ways. All have been asking for trouble, and it has now arrived. High interest rates (especially the growing margin claimed by financiers for rural funds and the use of unilaterally-imposed penalty rates) need attention, as do the situations of larger debt holders. A well-constituted Rural Reconstruction and Development Bank is part of a viable solution. Next come “F: supply chain operation”. This does not just mean the problems laid at the door of Woolworths and Coles. The real issue is one of supply chain closures, globally and nationally, as countries and corporations set up their own exclusive supply chains. Markets are increasingly bypassed as corporations tie up chains for a variety of reasons. Such chains are tailored to preferentially serve certain parties at select parts of the chain. As this runs from farmers through transport and processing to end users anywhere in the world, there are many options for predatory, security or other actions. Recall that high prices only five years ago saw more than 30 nations enact food export controls to ensure their domestic populations were fed. Insightful action needed Ultimately, solutions combine in “Plan P: restoring enterprise profitability”. Suitably profitable enterprises have futures. Opportunities to develop can then be sensibly taken up. Much distress and needless destruction of wealth can be avoided if we act insightfully, now. In all, new policy directions that canvas a range of possibilities for these uncertain times are needed. Solving serious problems in rural Australia requires focused, informed and creative responses by involved stakeholders. Unfortunately, current policy proposals are out by an order of magnitude – and many are not even on the right track . Prompt, effective interventions can halt the deteriorating situation of Australian farm assets, and the national slide. Complementary actions can restore profitability. Such is the challenge to those who would lead us. Continue reading
