When United Nations climate negotiators meet next week in Mexico and debate protecting tropical rainforests, Golden Agri-Resources Ltd. and rival oil- palm growers in Southeast Asia will be paying attention.

Any UN-led accord that restricts clearing rainforest for planting more palm trees would limit the supply of the edible oil crushed from their fruit and be a boon to prices for growers, said Dorab Mistry, a director at oil trader Godrej International Ltd. More than 80 percent of the world’s palm oil comes from the rainforest nations of Malaysia and Indonesia.

“It’s a no-brainer that such exercises are bullish for prices,” said Mistry, who has traded edible oils for more than 30 years. Global supply of edible oils will fail to keep pace with demand for a third year, he said in an interview.

Palm oil climbed to a two-year high this year as more consumers and companies used the substance in cooking, detergents, cosmetics and biodiesel. The boom has helped destroy rainforests as growers expanded plantations of the 20-meter (66- foot) trees.

Because equatorial forests store more carbon dioxide than most other vegetation on earth, UN negotiators have said saving tropical trees is essential to a global effort to limit the man- made greenhouse gas linked to global warming.

Wilmar International Ltd., the world’s largest palm oil trader, as well as producers PT Astra Agro Lestari of Indonesia, Singapore-traded Golden Agri and Kuala Lumpur-based Sime Darby Bhd. operate in the regions that might benefit from a global agreement on tropical forestry protection.

Cancun Talks

Delegates from 194 countries who will meet at UN climate talks through Dec. 10 in Cancun, Mexico, are closer to drawing up an accord on tropical forests than on other issues, said Gerald Steindlegger, policy director for the forest carbon initiative in Vienna for environment group WWF.

Reducing emissions from deforestation and degradation, known as REDD, is “ripe for an agreement,” said Steindlegger, as delegates may want to highlight a breakthrough on deforestation as proof of success at the Mexican meeting.

Global forests contain an estimated 638 gigatons of carbon, more than all the carbon in the earth’s atmosphere, the UN Framework Convention on Climate Change, which sponsors the talks, said on its website. One gigaton is a billion tons.

Supplies of edible oils from soybeans, palms, coconuts, groundnuts, cotton, rapeseed and sunflower will rise by 3.5 million tons in the year to September 2011, while demand may rise as much as 5 million tons, Godrej’s Mistry said.

Palm oil has gained about 17 percent this year and closed on Nov. 23 at 3,115 Malaysian ringgit ($993) a metric ton in Kuala Lumpur, according Bloomberg data.

Supply Pinch

UN-sponsored limits on the use of forest land will likely put the brakes on expansion of the palm oil industry and fuel rising prices, said Carl Bek-Nielsen, vice chairman of Teluk Intan, Malaysia-based United Plantations Bhd.

“If more oil can’t be produced, then what is there will become more valuable,” Bek-Nielsen said in a Nov. 17 interview in London. “If someone could wave a magic wand and not a single tree would fall down in the next 20 years, food prices are going to explode.”

Limits to expansion are already under way. In Malaysia, growth will have to come from improving productivity because 58 percent of the country is forested and the government has a commitment to maintain at least half of all land as natural forest, Plantation Industries and Commodities Minister Bernard Dompok said on Nov. 17 in London.

“I do not see any further large-scale planting of oil palm in Malaysia,” Dompok said.

Raising Yields, Replanting

Analysts agree. Future growth for Golden-Agri, based in Singapore, will come from raising yields by replacing trees that have outlived their useful lives, said Ben Santoso, a plantation analyst at DBSVickers Securities (Singapore) Ltd. on Nov. 8.

Replanting reduces supply and supports prices because oil palms take three years to mature and produce oil, he added. Wetter weather than usual this year has hindered replanting groves in Indonesia and Malaysia and helped prop up prices.

With most of the world’s palm oil coming from Malaysia and Indonesia, destruction of their rainforests raised the ire of environmental and non-governmental organizations. One NGO, WWF, seeks to end deforestation and protect habitats of endangered species such as the orangutan and Sumatran rhinoceros.

“We want to plant as much as possible,” Kuok Khoon Hong, chief executive officer of Wilmar, said on Nov. 10. “Now with NGOs so active, it is difficult. In the past, you get the land and you start to plant. Now everything is slower as we need licenses.”

Tightening supplies and “inelastic demand” from countries including China will extend the “crazy” price rallies this year, Tao Chen, chairman of Louis Dreyfus Commodities (Beijing) Trading Co., said on Nov. 7.

Biodiesel Demand

Growers also want to meet demand for biodiesel, one of the few alternatives to fossil fuels that can power heavy trucks. The pressure to increase palm oil supply will rise because it’s suitable for biofuels, said James Fry, managing director of LMC International. The company studies the economics of edible oils and their meal residue, which can be used as livestock feed.

“Biofuel policies add to oil demand without lifting meal demand,” Fry said by e-mail. “Biofuels have tipped the market balance towards crops high in oil and low in meal. Oil palm is the ideal crop to meet the market’s new needs.”

Oil palms produce 8 tons of oil for each ton of meal, while soybeans produce 0.25 tons of oil per ton of meal, he said.

Amazon Destruction

About 2 percent of the 302,149 hectares of Amazon forest destroyed in Brazil’s states of Mato Grosso, Para and Rondonia can be attributed to soybean planting, a July survey commissioned by Brazil’s Environment Ministry and trading companies showed. The three states are the largest producers of the oilseed in the Amazon region.

To inhibit soybean planting in the Amazon, trading companies that handle about 90 percent of the crop in Brazil agreed to ban sales of the oilseed illegally grown in the rainforest. The agreement between companies, the Environment Ministry and non-government organizations was signed in 2006 and renewed each year since.

Restrictions on forest clearing are already being felt in Indonesia where the government in May agreed to a two-year moratorium on logging and clearing of forests, with $1 billion in aid from Norway.

Restricted expansion of oil palm plantations “will have profound implications for price behavior,” said Mistry, who correctly predicted in March that prices would exceed 3,000 ringgit ($962) a ton on supply constraints. “The world must be braced for much higher prices in the years to come.” (By Jeremy van Loon and Claire Leow)

To contact the reporters on this story: Jeremy van Loon in Berlin at This e-mail address is being protected from spambots. You need JavaScript enabled to view it ; Claire Leow in Singapore at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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© 2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Source: Bloomberg

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Talks in Cancún on climate change are not expected to produce an international agreement, but they are crucial for the UN process.

After the sky-high hopes for Copenhagen came back to earth, the mood is business-like ahead of the next round of United Nations talks on climate change. No one expects that this two-week session, which starts in Cancún on Monday (29 November, and runs through to 10 December), will result in the all-or-nothing agreement that Copenhagen was meant to provide. But unless the Mexican summit yields something meaningful the entire UN process could be derailed. 

The Kyoto protocol, a legally binding pledge by 37 rich countries to reduce their emissions, will expire at the end of 2012. The UN process is meant to produce a new agreement that squares the urgency of climate science with the obligations of historic polluters, such as Europe and the United States, and the growth path of emerging economies, such as China, India and Brazil.

This process came unstuck in Copenhagen. The US does not want to agree to reductions in climate-warming gases unless it has proof that the biggest developing economies are doing the same. But developing countries have so far been reluctant to sign up to binding treaties. This stand-off will not be resolved in Cancún. Instead, negotiators hope that by making progress on important technical issues, the talks will keep moving forward and retain faith in the UN multilateral process.

One of the tasks of Cancún is to work out the status of the Copenhagen accord, a basic agreement endorsed by more than 120 countries but which did not originally have any formal status in the UN process. The Copenhagen accord was less than negotiators had wanted, but is seen by the European Commission as containing some important numbers: 2°C (the ‘acceptable' upper limit of global warming); $100 billion (€74.6bn) annual funds from developed to developing countries by 2020; and $30bn (€74.6bn) public funds from rich to developing countries to be delivered between 2010-2012.

For the Commission, not retreating from this agreement counts as an objective for Cancún. “Not backtracking from Copenhagen is key,” Connie Hedegaard, the European commissioner for climate action, told journalists last week (19 November). “I would warn against re-opening the Copenhagen accord. It is important that we build on the Copenhagen accord, not rewind.”

Checking on pledges

The Commission, along with the UN secretariat, hopes to make progress on a host of issues: an agreement on reducing deforestation; the architecture of the $100bn climate fund, mechanisms to spread low-carbon technologies around the world and ‘fast-start' finance. The EU also hopes for progress on a system to “monitor, report and verify” climate gases to check the emissions-reduction pledges that countries have made. This is in line with the EU's “stepwise approach”, of seeking progress on individual topics, rather than going for an all-or-nothing deal.

Negotiators will, of course, come back to the emissions-reduction pledges that are the fundamentals of the talks at the next round, in Johannesburg in 2011. Environmental campaigners think the road to a final agreement in South Africa will be smoother if Cancún can untangle some of the legal issues. Jason Anderson at WWF says that negotiators need to decide on the precise legal form of a new agreement for 2013-17. They need to resolve a long-running dispute between developed and developing countries over whether the new global accord should be a continuation of the Kyoto protocol or a brand new agreement. Without an agreement on such ‘meta issues', negotiators may struggle to make progress on substance, he thinks. “We have to overcome this problem of the chicken and egg over the final legal form,” says Anderson.

Lower expectations make it unlikely that Cancún will end in the same débacle as Copenhagen. However, the multilateral process remains vulnerable to drift and lack of substance. “If Cancún delivers nothing, or not much, then the UN process is in danger,” says Hedegaard, because fewer ministers and top-level officials would go to UN meetings. And while the UN process may be flawed, it is not obvious that the basic problems would be any easier to solve in a different global forum. (By Jennifer Rankin)

© 2010 European Voice. All rights reserved.

Source: EuropeanVoice.com

US President Barack Obama's decision to shelve plans for an emissions trading scheme and the adoption of only modest goals at the international climate change summit next month will have no bearing on the Australian government's plans to put a price on carbon, Julia Gillard says.

In an interview with the Herald after her meeting with Mr Obama, the Prime Minister said the US President still supported a cap and trade system but had accepted the political reality that Congress would not pass the legislation.

''Any sense that he's doing anything more than reacting to his domestic political circumstances is wrong,'' she said.

''He hasn't changed his mind about cap and trade. What was always going to be difficult has been rendered impossible.''

Mr Obama, who told Ms Gillard he was now looking at other options to reduce greenhouse gas emissions, shelved his emissions trading plans after the Republicans took control of the House of Representatives at the midterm elections. This prompted calls from the federal opposition for the Gillard government to abandon its plans.

"[Opposition Leader Tony] Abbott and others are obviously trying to spin that as President Obama has abandoned his commitment to cap and trade, as if he's sat in the White House and said 'that's a bad idea','' Ms Gillard said. ''That's not what's going on.''

It was in Australia's interests to push ahead. ''It's in the interests of our economy to be ready for what is going to be a low carbon pollution future.''

Ms Gillard was backed yesterday by a report from the Organisation for Economic Co-operation and Development that called for the introduction of a carbon price.

At the Asia-Pacific Economic Co-operation summit in Yokohama yesterday, Ms Gillard dismissed the significance of a carbon price or greenhouse gas reduction targets not being on the agenda for the international climate change summit in Cancun, Mexico.

The Mexican President, Felipe Calderon, told Ms Gillard that after the failure of the summit in Copenhagen last year, Cancun's agenda would be limited to funding to help developed countries fight climate change and measures to stop the destruction of forests.

Ms Gillard suggested these modest goals were to prevent a repeat of Copenhagen where expectations were too high. She said Australia would persist with a price in carbon and noted other economies, including that of California, already had an emissions trading scheme.

The government, the Greens and the independents are negotiating through a committee on how to put a price on carbon, be it with an emission trading scheme, a carbon tax or a hybrid. The government wants an agreement by the end of next year.

Ms Gillard would not be drawn on the likelihood of a split with the Greens at the end of the process. The Greens blocked the previous emissions scheme because they thought it was flawed. ''We're engaging in this process in good faith to see genuinely how far we can get,'' she said.

Ms Gillard will arrive back in Australia this morning and leave again on Thursday for the NATO summit in Lisbon, Portugal, where an exit strategy from Afghanistan will be discussed.

Ms Gillard, who has previously said Australia will stay engaged in Afghanistan for another decade, said she and Mr Obama did not specifically discuss timetables but the US and Australia were ''on the same page''.

Both supported a handover of security to the Afghans followed by a continuing civilian and diplomatic presence as troops were withdrawn.

''Security transition and then you've still got to be there providing assistance to the people of Afghanistan as they go about the task of building a democracy.'' (By Phillip Coorey)

Source: The Sydney Morning Herald

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SEOUL — The world's 20 largest rich and emerging economies including China vowed Friday to "spare no effort" at upcoming climate change talks in Mexico, a year after Beijing stymied a deal in Copenhagen.

"We will spare no effort to reach a balanced and successful outcome in Cancun," the Group of 20 said in a statement issued at the end of two days of talks in Seoul.

The vow came less than three weeks before 194 countries meet in the Mexican resort city of Cancun for a second go at hammering out an agreement to curb greenhouse gases after 2012, when the current arrangement expires.

The climate gathering will take place in the lingering shadow of last December's Copenhagen summit, which ended in near-fiasco, due in no large part, critics say, to Chinese reluctance to agree to binding commitments.

"Addressing the threat of global climate change is an urgent priority for all nations," the G20 statement said.

"We reiterate our commitment to take strong and action-oriented measures and remain fully dedicated to UN climate change negotiations."

Despite the promise in Friday's statement, China has routinely voiced reluctance to take the lead in curbing greenhouse gases, saying it is not to blame for the situation the world is in now.

"Developed countries have their historic responsibility over climate change," Sun Zhen, a top China climate change official said earlier this month in Hong Kong. "There is no reason not to deal with this primary concern."

China and the United States clashed at a UN climate gathering last month in the Chinese city of Tianjin, accusing each other of blocking progress ahead of the Cancun summit.

The United States wants China, the world's largest source of the greenhouse gases blamed for climate change, to commit to curbing carbon emissions and developing countries to agree to more scrutiny of their climate claims.

China has rejected pressure for outside verification, saying it was a US attempt to divert attention from the fact the United States has so far failed to get emissions-cut legislation through Congress.

This law now appears even less likely to get the green light following massive wins in this month's mid-term elections for Republicans, who are generally less welcoming of environmental constraints on business.

As the prospect of a path-breaking deal in Cancun has dimmed, efforts have moved towards more modest and incremental steps.

This has resulted in a focus on smaller goals -- deals on deforestation, progress on financing and technology transfer -- which were echoed in the G20 statement.

"We all are committed to achieving a successful, balanced result that includes the core issues of mitigation, transparency, finance, technology, adaptation, and forest preservation," the statement said.

The G20 members pledged to back sustainable development, enabling countries to "leapfrog old technologies in many sectors".

"We are committed to support country-led green growth policies that promote environmentally sustainable global growth along with employment creation while ensuring energy access for the poor," it said. (By Peter Harmsen)

Copyright © 2010 AFP. All rights reserved.

Source: AFP/Google

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