Questioning World Bank Palm Oil Funding and Forest Carbon Finance in Indonesia
Ombudsman report on 20 years of corrupt IFC, World Bank Group lending to the Indonesian oil palm industry casts doubt on Bank’s fitness to manage international forest carbon funds that may emerge at Copenhagen climate talks.
The World Bank Group’s International Finance Corporation (IFC) ignored its own environmental and social protection standards when it approved over a twenty year period nearly $200 million in loan guarantees for palm oil production in Indonesia. The IFC has temporarily frozen new investments in oil palm projects and is reviewing all current oil palm projects. The message must be conveyed to the World Bank that oil palm and any finance of industrial development that deforests or diminishes primary tropical rainforest must permanently end. And certainly oil palm — or any logging of primary forests, or replacement of primary forests with plantations — is not worthy of REDD forest carbon funding.
Indonesia is home to large primary rainforests and peat swamps, which naturally hold and continue to remove carbon dioxide, the main greenhouse gas that causes climate change. Rampant destruction of these forests, largely to make way for palm oil plantations, has caused giant releases of CO2 into the atmosphere, making Indonesia the third-largest emitter of greenhouse gases on the planet. Oil palm inevitably causes widespread clearance of forests and peatlands and the theft of indigenous peoples’ lands. Auditors found that Wilmar International Ltd., the recipient of IFC loans, was illegally using fire to clear primary forests, and seizing Indigenous peoples land without free, prior, and informed consent.
It is not clear how oil palm fits into the World Bank’s new “strategic framework” for development and climate change. There is no indication investment in palm oil production alleviates poverty long-term in any meaningful way, or that oil palm can be produced in an ecologically sustainable and broadly equitable fashion, as suggested by the IFC. The World Bank group has long history of subsidizing failed “sustainable” forestry in primary forests, and has weakened prohibitions upon financing activities that destroy natural habitats. Oil palm, wherever grown, clearly poses a threat to old forest ecosystem, carbon and biodiversity.
The Bank’s Forest Carbon Partnership Facility (FCPF) seeks to pilot incentive payments for forest carbon protection, yet the integrity of the program is threatened by political pressure to move as quickly as possible. Indonesia may soon access forest carbon market establishment money from the World Bank, and will surely face similar difficulties as with oil palm. The World Bank cannot both fund rainforest and climate damaging activities, and then expect to be entrusted to control forest carbon money. Reviews show Indonesia’s carbon proposals fail to identify the drivers of deforestation and have many of the same problems as oil palm in regard to ecological sustainability, indigenous and human rights, land tenure and governance.
The World Bank must swiftly commit to ending deforestation and degradation of old and intact primary and old growth forest ecosystems, and the ecological restoration of old growth forests, as keystone responses to the climate and biodiversity crises. IFC’s oil palm review should be broadened to the entire World Bank Group, and enlarged to look at other Bank activities subsidizing root causes of primary forest loss and diminishment. There should be no REDD funds for logging (SFM) of either old or other natural forests, or for conversion of natural or semi-natural forests and other ecosystems to plantations. If the World Bank does not share this vision of protecting and restoring old, ecologically intact forests; they should remove themselves from not only oil palm, but all forest carbon and climate finance.
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