Green groups on Thursday revealed that Asia Pulp and Paper (APP), Indonesia’s largest paper company, has quietly started operations at its massive new mill in South Sumatra, and denounced the move as one that would damage Indonesia’s peatlands and the global climate for decades.
Announced in 2013, APP’s new PT Ogan Komering Ilir (OKI) pulp mill is an S$3.7 billion, majority Chinese-funded project with a production capacity of 2.8 million tonnes of pulp per year. News of production beginning at the facility surfaced in a paywall-only article published on December 23 in pulp and paper trade magazine RISI.
According to the article, the company has started up one of the mill’s two production lines, each of which can make 1.4 million tonnes of pulp per year. APP reportedly intends to start the other line by March this year. Indonesian trade media also covered the news.
While APP has not made a public announcement about firing up the PT OKI mill, it confirmed to Eco-Business that it had done so “on a trial basis” in December.
The news attracted strong criticism from six environmental NGOs: Wetlands International, Rainforest Action Network, Woods & Wayside International, Hutan Kita Institute, Auriga, and Eyes on the Forest (EoF). EoF is a coalition of three NGOs: Jikalahari, Walhi Riau, and World Wide Fund for Nature (WWF) Indonesia’s programme in the Tesso Nilo National Park.
The same group of NGOs had raised an alarm about the OKI Mill in April 2016, questioning whether APP’s plantation base would be enough to meet mill’s huge production capacity or if the company would need to clear forests to make more plantations. At the time, APP responded that production would be subject to the availability of sustainable raw materials, and that its suppliers were still bound by its 2013 Forest Conservation Policy, which forbids forest clearance.
Phasing out peat
In Thursday’s statement, the six NGOs said that while APP claims the mill will create thousands of jobs and fuel economic growth in Indonesia, it “comes with high costs for Indonesia and the global environment”.
The statement went on to point out that about three quarters of the concessions that supply wood to the mill—an area about 6,000 square kilometres, or seven times the size of Singapore—is on peatland. Peat is a waterlogged, carbon-rich soil found across much of Indonesia’s forests. It has to be drained before companies can grow acacia trees for pulpwood.
However, dry peat is extremely flammable. Burning peat has been blamed for much of the fires that caused Southeast Asia’s worst haze crisis on record, killing at least 20 people in Indonesia and costing the archipelago nation’s economy US$16 billion in economic losses in 2015.
Green groups have maintained that companies must rewet any peat that has been drained for plantations and replace crops such as oil palm or acacia for pulpwood with wetland-compatible species. However, pulp and paper companies say they have yet to find commercially viable alternatives.
About 60 per cent of APP’s plantations are on peat, and while the company has said that it implemented a moratorium on new peatland development in 2013, and uses best practices to “manage” peatlands so that they do not get too dry, it has not made any long-term commitment to phasing out existing plantations on peat.
Now, the NGOs behind the statement said that by operationalising the PT OKI mill, APP has locked in a dependency on an unsustainable resource base—drained peat plantations.
Marcel Silvius, programme head, climate-smart land use, Wetlands International, told Eco-Business: “We wonder how such an irresponsible development can have been allowed and financed, and even supported by a tax holiday.” The last comment is a reference to a 10-year tax break granted by the Indonesian government to the OKI mill in 2015, whereby it will pay no corporate tax for the first eight years, and only half of the normal rate for the next two years.
The NGO coalition did acknowledge that APP has taken some steps to protect its peat landscape. These include a 2015 decision to rewet and restore 7,000 of the 600,000 hectares of peat plantations it owns, and a Peatland Best Practice Management (PBPM) initiative that involves blocking canals on plantations to raise water levels in peat plantations and satellite mapping the peat landscape to identify critical areas that need restoration.
But these are just “half-measures”, said the group.
Nyoman Suryadiputra, Indonesia country director for Wetlands International said in a statement that “APP needs to acknowledge the severity of the problem and stop draining peatlands to grow [acacia] trees”.
“This starts with a commitment to phase out all drainage-based plantations on peatlands, and a credible plan to rewet and restore those areas,” he added.
In response, APP pointed to its PBPM initiatives, and said that since January 2016 it has been leading a research project to identify production-suitable species that grow well on rewetted peat.
“The full implementation of responsible PBMP in plantation and agricultural practices across the landscape to support the global target in greenhouse gas emissions will require time and proper research and planning,” said the company.
The NGO coalition also said that the Indonesian government “must choose whether it will prioritise supplying wood to APP’s pulp mills, or enforce the rewetting and restoring of peatlands”.
Following the 2015 haze crisis, Indonesia’s leadership moved swiftly to set up a Peatland Protection Agency (BRG) and tasked it with restoring 2 million hectares of badly burnt peat across the country. The country’s president Joko Widodo also announced that the government would no longer issue plantation licenses for peatland areas, and may even claw back existing permits on fragile landscapes.
However, a forthcoming report by Eyes on the Forest shows that 43 per cent of APP’s concessions are in areas earmarked by the government for restoration, an overlap that is likely to pose major challenges for the government’s peat restoration strategy.
Acknowledging this, Nazir Foead, head of Indonesia’s BRG, told Eco-Business that the agency is concerned that peatland restoration efforts in company concessions, such as those of APP suppliers in South Sumatra, could be compromised by the need to meet targets for supplying fiber to the mill.
He added that APP has provided peat data to BRG, which the agency is now verifying. It will use this information to decide which parts of its concessions can be cultivated, and which must be protected. The agency also plans to monitor APP’s hydrological management of its peat landscape through water logger sensors.
But despite BRG’s peat protection efforts, Wetlands International’s Silvius noted that in the government as a whole, “there appears to be an inconsistency that enables and encourages the development of this OKI mill”.
He added: “It would seem important for the Indonesian government to encourage sustainable development of the pulp sector, and this cannot be achieved by allowing the large scale destruction of Indonesia’s lowland peatland landscapes.”
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