International Palm Oil Sustainability Conference

International Palm Oil Sustainability Conference Strengthening the Malaysian world market position for palm oil by ... Source: Directive of the ... ca...

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International Palm Oil Sustainability Conference Strengthening the Malaysian world market position for palm oil by sustainability certification

Putrajaya, September 11, 2012

Meo Carbon Solutions GmbH Weissenburgstr. 53 D-50670 Köln [email protected] www.meo-carbon.com

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Sustainability is a global mega trend – not just a temporarily phenomena

 Requests for sustainable cultivation and production – initially driven by NGOs – are no longer a a temporarily phenomena  Sustainability requirements will affect many market segments in different regions of the world with different intensity in time:

 Food  Feed  Chemical industry  Biofuels  Power generation  Financial industry  … 2

Sustainability requirements will be proliferated to other regions and market segments – one of the most virulent questions always is “when?”

Solid biomass Feed Food Biofuels

Other renewable fuels Chemical applications Bioplastics Pharmazeutical applications

Mandatory

Time ???

Voluntary 3

Company or initiative driven sustainability requests may vary with respect to targets and concreteness …

Source: Lufthansa

Source: ADM

4 Source: Dupont

Source: GIZ

Some industry segments may also be driven by evidence that regulatory actions can be expected …

Source: AEBIOM

Source: EndsEurope

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… some companies may be quite proactive in target setting – however market penetration will depend on a variety of drivers

Sustainability drivers: 

NGO pressure and media campaigns



Consumer behavior



Societal values



Company goals and values



Laws and regulations





 Timeline impact difficult to predict Source: Unilever

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Market participant will have to make a strategic decision, either to ‘wait and see’ or take the ‘first movers advantage’ – example biofuels Market demand in E-27 generated by regulation Market demand drivers: 

EU Directive 2009/28/EC



Member States sustainability ordinances



EU Member States biofuel quotas

Market impact

Source: Directive of the European Parliament and of the Council on the promotion of the use of energy from renewable sources (2009/28/EC)

Clear benefits for a ‚first mover‘ strategy 7



Market short of sustainable biofuels



Price premiums been paid for sustainable biofuels

First movers have been able to generate a price premium of 40$ to 100 $ per ton Price premium 100 $/t 40 $/t 100 $/t 100 $/t 40 $/t Source: Argus Media

Source: Argus Media

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Price premiums can be maintained when ‘first movers’ are able to meet increasing sustainability requirement levels – example RED/biofuels Increasing sustainability requirements anticipated

Significant efforts required for meeting future GHG savings targets ILUC

 GHG savings from 35% to 50% in 2017 and 60% in 2018 (already defined within RED)

2018 2017

 Additional ILUC GHG burden?  Additional RED sustainability criteria?    

Air Water Soil Social

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Growth strategies must not necessarily be focused on quantity – Malaysia may opt for qualitative growth

• Malaysia and Indonesia are the world dominating palm oil producers (38% and 48% market share)

Production in milion tonnes

Global production of crude palm oil (CPO)

• Malaysia with growth limitations due to the availability of arable land • Focus on qualitative growth (i.e. sustainable cultivation and production) can open up new opportunities and secure long term market success

Source: ISTA Mielke, MPOB, Toepfer International

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How to cover the timing risks of a ‘first mover’ strategy? One option may be choosing the right certification system • Certification system recognised by EU for biofuels • High premium for CPO sales (biofuels)

• Certification system not recognised for biofuels • Moderate premium for CPO sales (other segments than biofuels with less demand for sustainable products)

Source: Felda

Specialized standards may limit the access to price premiums, standards open for all market segments and kinds of biomass offer additional opportunities 11

Important features of credible quality standards and sustainability certification systems Important features:  Reliable governance processes  Covering important ecological and social criteria  Open access to certificate database  Providing recognized GHG calculation methodology  Balanced cost – benefit structure and ‘built in’ continuous improvement  Open for multi-stakeholder  Open for flexible adaption to market specifics  One stop shopping for all kinds of biomass, industry segments and other applications 12

Credible sustainability certification systems cover important ecological and social sustainability issues

Land use change

Ecological Sustainability

Social Sustainability

• Amount of forest and primary forest • Existence of No-go areas according to databases like WDPA, Ramsar-Wetlands, Intact Forest Landscape • National biofuels programs and their impacts

• Country-specific use of fertilizer • Registration, use, ban and restriction of pesticides • Forest fires, slash and burn practices • Poisoning statistics, environmental issues

• Ratification of ILO core conventions • Requirements against child labor, forced labor, violence of trade union rights • Recognition of indigenous peoples, traditional land, - and land-use rights

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Credible sustainability certification systems provide open access to their certificate database and additional certificate information

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“First movers” will require a proven and recognized GHG calculation methodology for meeting increasing GHG threshold levels

GHG calculator • uniform procedures

• transparent and fully documented • update of all input data possible • based on recognized RED methodology • Comparability of results • Calculation independent of final use • Can be used for certification audits 15

A balanced cost/benefit structure should an integral part of the continuous improvement program of a certification systems Reduction of audit costs  Equivalence benchmarking for integrating existing legal frameworks or other standards

 Implementation of remote sensing tools to detect land use change Remote sensing (e.g. Land Viewer tool)

Equivalence benchmarking

Source: Steffen Mueller, Ken Copenhaver University of Illinois 2012

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One stop shopping opportunity for all kinds of biomass, industry segments and applications is a key success factor for system users Biomass

Renewable Energy Directive

Conversion BioKraftNachV

Upgrading

BioStrNachV

Energy

Chemical/ technical applications

Food and feed

Trade and retailers

Consumers and final industry users (carbon trading, quota obilgated parties, etc.) worldwide 17

Is there a certification system available meeting those important features? – There is : International Sustainability and Carbon Certification

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ISCC is currently the market leader with respect to the number of issued certificates and global coverage – more than 1600 certificates …

* Numbers per August 29, 2012

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… from system users in 66 countries

GRL

ISL NOR

SWE RUS

ES T LVA LTU

DNK

CAN

IRL

BLR

NLD BEL

LUX

KAZ

CHE

USA

SCG

ITA

BGR

GEO ARM AZE

ALB MKD

ESP

PRT

MLT

TUN

BMU

MNG

ROU

HRV

SYR LBN

CYP

MAR

ISR

UZB TKM

DZA

KOR AFG

IRQ

CUB

DOM JAM

BHR SAU

TCA

CYM

HND NIC

VEN

CPV GMB GNB

SUR

SDN

BF A

GIN CIV

BEN TGO GHA

STP

GNQ GAB

KHM SOM

UGA RWA

COD

MWI

ZMB

SHN

ZWE PR Y

NAM

MYS

FSM

BRN

NRU PNG

SYC

SLB

COM

AGO

BOL

PHL

KEN

TZA PER

VNM

LKA

MDV COG

TWN

MNP

THA

BDI

BRA

MAC

LAO

CAF

CMR

ECU

HKG MMR

YEM

ETH

BTN BGD

IND

OMN

DJI

NGA

LBR

GUF

ERI

TCD

SEN

SLE

GUY

COL

NER

MLI

TTO

CRI PAN

QAT ARE

MRT PRI

ATG GLP DMA MTQ LCA VCT BRB GRD

HTI

NPL

KWT

ESH

JPN

CHN

IRN PAK

EGY

LBY

PRK

TJK

JOR BHS

KGZ

MOZ

MYT

VUT

MDG

MUS NCL

REU

BWA SWZ ZAF

LSO

URY CHL ARG NZL

ISCC registration /certificates

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FJI

ISCC certification services can be provided by currently 22 certification bodies worldwide

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ISCC is open for all stakeholder groups – agriculture, trade, industry, NGOs and research institutions

Stakeholder

Agriculture & Conversion

Trade, Logistics & users

NGOs, Social, Research etc.

General Assembly

Board

ISCC Association (e.V.)

ISCC System GmbH

ISCC Operation  Registration  Qualification  Quality Control  Marketing  Development/ Projects

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Technical Technische Technische Committee Technische Arbeitsgruppe Arbeitsgruppe Arbeitsgruppe

ISCC members represent all kinds of biomass, industry segments and applications

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The ISCC certificate database is open for everybody and offers a variety of information ...

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... such as insights into the location of an ISCC certificate holder and the certificate

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ISCC also provides remote sensing detection services – example identification of areas where forest delogging took place after 2008

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ISCC offers one stop shopping for all kinds of biomass – ISCC DE/EU for regulated biofuels markets and ISCC PLUS for all other applications

Sustainable biomass

Sustainable products ISCC EU ISCC DE

• Sustainable biofuel RED compliant ISCC certified operator

• Food • Feed • Tech. /chemical • Solid biomass (bioenergy)

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ISCC PLUS

Already RED certified system users have the chance to untap additional market opportunities – example oil mill

Example oil mill

Sustainable FFBs

Sustainable crude oil for biofuel use

ISCC certified Oil Mill

Sustainable oil for food, chemical or other uses Sustainable by-products for other uses

Additional market opportunities and economies of scale for ISCC system users    

Oil mills and refineries may extend their sustainable product portfolio with the ISCC PLUS certificate Additional revenues by selling sustainable food, feed and other by-products Traders and first gathering points: economies of scale (i.e. allocation of certification costs to higher volumes) Plantations: untapping additional customer channels 28

ISCC DE/EU and ISCC PLUS sustainability requirements are equivalent – system users may apply add-ons to best comply with their customer needs

Consumables efficiency (e.g. water)

Biofuels

Sustainability requirements

ISCC DE/EU

Classified chemical Biodiversity action plan

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Voluntary add-on modules

ISCC PLUS

Thank you for your attention! Andreas Feige Managing Director Meo Carbon Solutions GmbH Mühlenweg 19 D-88079 Kressbronn Germany Tel.: +49 7543 3029053 Fax: +49 7543 3029054 [email protected] www.meo-carbon.com 30