Alliance Moving towards a palm oil value chain that contributes to the conservation of forests and a reduction in greenhouse gas emissions CURRENT STATUS, OPPORTUNITIES AND ACTION PLAN FOR THE UCAYALI REGION The Alliance of Bioversity International and the International Center for Tropical Agriculture (CIAT) delivers research-based solutions that address the global crises of malnutrition, climate change, biodiversity loss, and environmental degradation. The Alliance focuses on the nexus of agriculture, environment, and nutrition. We work with local, national, and multinational partners across Africa, Asia, and Latin America and the Caribbean, and with the public and private sectors and civil society. With novel partnerships, the Alliance generates evidence and mainstreams innovations to transform food systems and landscapes so that they sustain the planet, drive prosperity, and nourish people in a climate crisis. The Alliance is part of CGIAR, the world’s largest agricultural research and innovation partnership for a food-secure future dedicated to reducing poverty, enhancing food and nutrition security, and improving natural resources. www.bioversityinternational.org www.ciat.cgiar.org www.cgiar.org Moving towards a palm oil value chain that contributes to the conservation of forests and a reduction in greenhouse gas emissions CURRENT STATUS, OPPORTUNITIES AND ACTION PLAN FOR THE UCAYALI REGION Yovita Ivanova, Maria Claudia Tristán, Miguel Romero, Andrés Charry, Sebastian Lema, José Sanchez Choy, Andrés Vélez, Augusto Castro and Marcela Quintero Alliance of Bioversity International and CIAT Regional Centre for Latin America and the Caribbean Km 17 Recta Cali-Palmira. C.P. 763537 A.A. 6713, Cali, Colombia Call: +57 4450000 Email: Y.Ivanova@cgiar.org Website: www.ciat.cgiar.org CIAT Publication No. 502 August 2020 PROJECT: BUSINESS MODELS TO ADDRESS THE DRIVERS OF DEFORESTATION IN PERU Authors: Ivanova Y; Tristán M; Romero M; Charry A; Lema S; Choy J; Velez A; Castro-Núñez; Quintero M. 2020. Moving towards a palm oil value chain that contributes to the conservation of forests and a reduction in greenhouse gas emissions. CIAT Publication No. 502. SUSTAINABLE AMAZON BUSINESSES (SAB) International Center for Tropical Agriculture (CIAT). Cali, Colombia. 144 p. Leading Entity: Alliance of Bioversity International and the International Center for Tropical Collaborators: Matthias Jaegger, Jhon Jairo Hurtado, Juan Pablo Castro, Simon Koenig Agriculture (ABC) National Political Partners: Cover Photos: Miguel Pinheiro © CIFOR - Neil Palmer © CIAT - © Proyecto SAB Ministry of the Environment (MINAM), Ministry of Agriculture and Irrigation Internal photo credits: © CIAT - © CIFOR. Some rights reserved. This work is licensed under a (MINAGRI), Regional Government of Ucayali (GOREU) Creative Commons Attribution Non-Commercial 4.0 International License (CC-BY-NC) https://creativecommons.org/licenses/by-nc/4.0/ Subcontractor: Photos available Flickr https://www.flickr.com/photos/cifor/ Climate Focus B.V. (CF) https://www.flickr.com/photos/ciat/ Donor organization: German Federal Ministry for the Environment, Nature Conservation and Nuclear Copyright © CIAT 2020. Some rights reserved. Safety (BMU) Period of implementation: CIAT encourages the wide distribution of its printed and electronic publications so that the public obtains the maximum benefit from them. August 2018–July 2021 Therefore, in most cases, colleagues working in research and development should not feel restricted in their use of this material. CIAT materials for non-commercial purposes. However, the Center prohibits modification of these materials and expects to receive credits for their Geographic scope of the intervention: use. Although CIAT produces its publications with great care, it does not guarantee that they are accurate or that the information is complete. Ucayali Region, Peru Acronyms and abbreviations ABC Alliance of Bioversity International and CIAT (International Center for Tropical Agriculture) IKI International Climate Initiative AFS Agroforestry Systems JDI Joint Declaration of Intent BMU Federal Ministry for the Environment, Nature Conservation and Nuclear Safety of Germany JUNPALMA National Board Palm Oil of Peru CF Climate Focus LGs Local Governments CITE Center for Productive Innovation and Technology Transfer LULUCF Land Use, Land Use Change and Forestry CO eq Carbon dioxide equivalent 2 PPP Public-Private Partnership DGA Directorate General for Agriculture NDC Nationally Determined Contributions DGCCD Directorate General for Climate Change and Desertification MINAGRI Ministry of Agriculture and Irrigation DGPA Directorate General for Agricultural Policies MINAM Ministry of the Environment DRAU Regional Agricultural Directorate of Ucayali MVR Monitoring, Verification and Reporting ENBCC National Strategy for Forests and Climate Change NGO Non-governmental organization EEZ Ecological and Economic Zonification PO Producer Organization ENCC National Climate Change Strategy SMEs Small and Medium Enterprises FZ Forestry Zoning REDD+ Reducing Emissions from Deforestation and Forest Degradation GHGs Greenhouse Gases SAB Sustainable Amazon Businesses GOREU Regional Government of Ucayali SERFOR National Forest and Wildlife Service GRDES Regional Office for Economic Development Acknowledgements Foreword This document has been prepared by the International Center for Tropical Agriculture On behalf of the Regional Government of Ucayali (GOREU), I express my appreciation and (CIAT) as part of the Alliance of Bioversity International and CIAT, under the leadership gratitude to the trade unions, public institutions, private companies, non-governmental of the Multifunctional Landscapes Area, and in collaboration with the international organizations and international cooperation agencies, who responded to this call made consultancy Climate Focus. The production of this report has been made possible in conjunction with the Alliance of Bioversity International and the International Center for Tropical Agriculture (CIAT), the Ministry of the Environment (MINAM) and the by the valuable contribution of all the actors of the multi-stakeholder Ministry of Agriculture and Irrigation (MINAGRI), for the discussion, preparation platform established within the framework of the project “Business and agreement of this strategic document. Information and actions embodied models to address the drivers of deforestation in Peru” or Sustainable in this text present a valuable opportunity to reinforce our commitment Amazon Businesses (SAB) funded by the International Climate to the sustainable development of the Amazon and rethink business Initiative from the Federal Ministry for the Environment, Nature models, in favor of the conservation of our forests, the recovery of Conservation and German Nuclear Safety of Germany (BMU). degraded areas and income generation for agricultural producers of our region. The Regional Government of Ucayali and the Peru’s We are currently facing great social and environmental challenges National Board of Palm Oil of fered strategic support that we cannot ignore. However, our region enjoys great and guidance in the design and validation stage of this potential and development opportunities. Only through inter- document. Our gratitude especially extends to the institutional coordination and a collective ef fort, will be able to INDOLMASA, OLAMSA and OLPASA companies as well achieve the commitments that we have with future generations, as the producer organizations COCEPU and ASPASH who to give them a better world than the one we received. shared with us their inspiring stories and vision for the It is up to us to ensure that the ef forts of the IKI project “Business sector. Thanks to the Ministry of the Environment (MINAM), models to address drivers of deforestation in Peru” and others especially to the Directorate General of Climate Change and that operate in our region, help to build a concerted vision of Desertification (DGCCD), to the Ministry of Agriculture and development of the palm oil production chain, a sector which fills us Irrigation (MINAGRI), in particular to the Directorate General with of pride and represents one of our flagship products. We express our sincere gratitude to all of you for participating in this process with of Agricultural Policies (DGPA) and the Directorate General of a proactive attitude, commitment and responsibility. This is a first step, Agricultural (DGA); and the National Forest and Wildlife Service for and we invite you to continue participating with the same or even greater their valuable contributions and support during this process. willingness in stages which are yet to be developed, to keep strengthening the Also, thanks to all the organizations and people in Ucayali who were interviewed palm sector and allow us to position ourselves globally as a value chain, recognized for its leadership in the production, processing and export of palm oil and its derivatives and consulted and of fered valuable comments and recommendations. under a business model that is competitive, sustainable with the Amazon ecosystem, inclusive, and includes the small associated producers with companies and the state. iii iv Executive Summary The report Moving towards a palm oil value chain that contributes to the conservation integrated approach is needed to sustainability for the agricultural sectors and of forests and a reduction in greenhouse gases in the Ucayali region: Current the environment. status, opportunities with a value chain approach and an action plan, This report provides up to date information about the palm oil chain presents an input for the development of an environmentally for national and regional government, industry, producers, non- sustainable palm oil chain in the Ucayali region. The document governmental organizations, and international cooperation has been carried out within the framework of the Sustainable agencies, currently working towards the sustainable Amazon Businesses (SAB) led by CIAT, as part of the Alliance development of agriculture in the Peruvian Amazon. For of Bioversity International and CIAT, in coordination with the development of this document (which was designed MINAM and MINAGRI of Peru, and in alliance with the and agreed with the key actors in the sector), the project international Climate Focus (CF). This project is part has signed a cooperation agreement with the Regional of the International Climate Initiative (IKI), supported Government of Ucayali (GOREU). Through this cooperation, by the Federal Ministry for the Environment, Nature this document has been checked and verified with the Conservation and Nuclear Safety of Germany (BMU). most important land management and development This plan is intended to contribute to the ef fort of the instruments, as well as the most important producers Regional Government of Ucayali (GOREU) to reduce in the region. It is also hoped that the specific elements greenhouse gas (GHG) emissions from the agriculture of this document contribute to the achievement of the sector, because of the change in land use in the Amazon objectives outlined in the Ucayali region’s main management in Peru, in accordance with the international commitments instruments and to climate change in the country including: of the Peruvian Government for the mitigation of climate The Regional Development Plan (PDRC), the Regional Climate change. Change Strategy (ERCC) and the Rural Development Strategy for The document presents an innovative and novel plan to contribute Low Emissions (ERBE). to the environmental sustainability of the palm oil value chain, Based on this report, the SAB project aims to accompany the design and designed from the perspective of conservation of forests and the recovery implementation of a pilot business model in the palm oil chain. The model of degraded ecosystems and solutions provided by value chain actors. The plan will incorporate several elements of this report including emerging opportunities contributes to the ef forts of the Peruvian Government to comply with the Nationally for financial and market-based products that are deforestation free and low in GHG Determined Contributions (NDC) assumed at the Conference of the Parties - COP21, and emissions. It is expected that this business model and its conversion into an investment the agreement between the Governments of Norway, Germany and Peru; Joint Statement model can be replicated and scaled up in the region and in the country. It is also hoped of Intent (JSI). These are two commitments that seek to reduce GHGs. This report seeks that the pilot will conform to internationally recognized models that are deforestation to encourage the development of national plans, policies and programs with a view free. In addition, the pilot is also expected to serve as basis for the generation of public to the Sustainable Development Goals (SDG) and 2030 Agenda, which recognize that policies that contribute to the sustainability of the sector. agriculture and climate change cannot be considered separately. Therefore, a coherent and v vi Key Messages In the worst-case scenario, where there is a change of land use from forest to oil An analysis of the spatial relationship between palm, the emissions per ton of FFB could reach values of up to 2,492, 1,430 and 1,207 deforestation and the cultivation of oil palm kg CO2eq in low, medium and high intensity systems, respectively. Crop management practices to reduce emissions reduction should be directed at the Spatial analyses of districts in the Ucayali region indicate geographically dispersed reduction of emissions from land use change and the reasonable management of relationships between deforestation and the production of agricultural commodities, fertilizers. including oil palm. Although these results are not aimed at attributing causality, Regional plans should focus on establishing new plantations in areas that are they show a coexistence between deforestation processes and oil palm production. already deforested and degraded (mainly grasslands) and avoid converting new This justifies the need and opportunity to work with the palm sector to improve its areas of primary forest or areas that are regenerating. This would make it possible to environmental contribution to the region, through its willingness to join forces to increase the carbon stock at a regional level and to position the oil palm as a key crop reduce deforestation and GHG emissions. in mitigating GHG emissions in the agricultural sector. An analysis of production costs An analysis of GHG emissions and its implications and practices for sustainable for forest conservation land management Production intensification alone is not enough to reduce pressure on the forest GHG emissions generated by the change of land use in Peru represent about 50% of and to generate enough income for palm families, since the benefit /cost of higher the total emissions in the country. Agriculture ranks third with 15% of total emissions. productivity per hectare does not necessarily translate into higher household The carbon footprint makes it possible to quantify emissions associated with a income (as observed when comparing typologies 2 and 3)1. production process and to identify critical points in order to formulate practices for It is necessary to identify the economically optimal levels of fertilization, as well as their mitigation. the most cost-ef ficient supplies for the region, according to the characteristics of its According to the types of oil palm production systems in the region (determined by soils. The increase in fertilization costs of typology 3 does not necessarily translate the intensity in input use and yield), the production of one ton of fresh fruit bunches into better profitability compared to typology 2. (FFB) in Ucayali generates emissions of 89, 100 and 177 kg CO2eq in low, medium and Diversification of farm production is recommended to mitigate market and high intensity systems, respectively. phytosanitary risks, given their high sensitivity to price drops. The results reveal Although in low intensity production systems the emissions per ton of FFB produced that, when prices or production falls, the impact on household income af fects the are lower, so is performance. Therefore, it is inef ficient in land use. In the context of feasibility of cultivation and household income disproportionately. pressure on natural areas, low intensity production is considered the most sensitive It is necessary to identify complementary production alternatives that improve the when increasing the area required to supply FFB demand. If additional areas are flow of cash from households in the first productive years. Production is not sufficient forests, the carbon footprint indicator (as a result of a change of land use) will have to cover costs in the first 7 years; this discourages implementation of good practices a bigger impact. and fertilization during this period and affects future production. 1. For more information on production typologies, see chapter 4.3: Palm production cost analysis and its implications vii viii for conservation It is essential to consider the opportunity cost of land to determine the sustainability of At the meso level, various institutions and organizations provide services to the the crop in the long term. When considering the net income of producers in typologies links in the chain. So, there is an opportunity for those who of fer their technical 2 and 3, it is can be seen that the business model for small producers ceases to be assistance services, to improve production processes together with care for the economically attractive if the cost of land increases to S /. 800. This suggests that if forests. Likewise, those who provide financial services can finance business plans effective controls are not established, the land where the opportunity cost is less than that incorporate commitments to forest conservation and the recovery or reduction S /. 1,600 per hectare will be more vulnerable to palm expansion under business models. of soil degradation. In Peru, at the macro level, there are dif ferent policies, laws, instruments and public management tools that promote value chains in which competitiveness and forest An analysis conservation can go hand in hand. The policies in the Ucayali region are also aligned of value chain with this development commitment. mapping An analysis of the value chain allows us to identify the contributions and ef forts of The development of a business model that its various actors to ensure that they contribute to the conservation of forests, and contributes to the conservation of forests the reduction of emissions in the dif ferent links of the palm oil value chain. and a reduction in GHG emissions At a micro level, the direct actors in the chain contribute from primary production The development of a business model for forest conservation and reduction in GHG, up to the final consumption of the products derived from oil palm. The main is aimed at providing added value to oil palm production that does not af fect natural contribution towards reducing GHG due to deforestation, is the installation of forests. This is why it is necessary to achieve a joint working among all the actors oil palm plantations in areas suitable for agriculture. These areas should not be linked to the product value chain; from the producer to the final consumer, through currently covered by forest and should comply with their technical conditions (in suppliers and investors. This needs to be achieved in such a way, that all actors have accordance with the maximum capacity for their use). the necessary information, incentives and tools, to ensure that the production and consumption of oil palm does not generate deforestation. FFB production is in an initial step towards Roundtable on Sustainable Palm Oil (RSPO) certification. The processing process is also undergoing a shif t towards A fundamental aspect of developing a business model for the conservation of RSPO. The consumption of products with tracing and verification processes forests, is to have a forest monitoring system that can trace the product. The system linked to the conservation of forests has been growing. However, this movement would have a dual purpose; to verify that oil palm plantations have not generated is happening internationally, which means that the national market still does deforestation, and to make it possible to trace a product from the plantation to the not meet these requirements. Therefore, it is important to strengthen national final consumer. demand for these products. Table of Contents ACRONYMS AND ABBREVIATIONS....................... .. I 4. ASSESSMENT OF THE CURRENT STATE 6. A BUSINESS MODEL THAT CONTRIBUTES 9.1. Methodology for GHG emissions OF THE VALUE CHAIN .....................................37 TO FOREST CONSERVATION AND A cost analysis......................................................105 ACKNOWLEDGEMENTS ......................................... III 4.1. Deforestation and its relationship with REDUCTION IN GHG EMISSIONS ....................75 9.2. Analysis of the sensitivity of production FOREWORD ............................................................IV agricultural commodities in the Peruvian 6.1 Business model outline that costs by typology ..............................................106 Amazon: maps and analysis ...........................38 contributes to the conservation of forests ...76 EXECUTIVE SUMMARY ...........................................V 9.3. Comparative analysis of certification 4.2. Analysis of emissions 6.2. Successful business model schemes: socio-environmental KEY MESSAGES ....................................................VII oil palm production ..........................................44 case studies ........................................................80 components .......................................................109 4.3. Palm oil production cost analysis and its 9.4. Methodological tool: 1. INTRODUCTION .................................................3 implications for conservation .........................49 7. ACTION PLAN TO REDUCE DEFORESTATION canvas business model, to build a business 1.1. Background .......................................................... 4 AND GHG EMISSIONS IN THE PALM OIL model that contributes to forest 5. OPPORTUNITIES IN THE VALUE CHAIN TO VALUE CHAIN IN THE UCAYALI REGION ......87 1.2. Objectives and methodology ..........................10 conservation (CFC) ...........................................114 CONTRIBUTE TO FOREST CONSERVATION 7.1 Purpose and inputs for the action plan ............88 1.3. Conceptual framework: value chains that AND A REDUCTION IN GHG EMISSIONS ........61 9.5. Mapping of potential funders for a contribute to forest conservation and a reduction 7.2. Framework of activities ....................................92 deforestation free value chain ......................115 5.1. Opportunities for current land of GHG emissions ...........................................................12 use scenarios ....................................................62 9.6. Identifying successful business models 8. REFERENCES ..............................................102 that are deforestation free .............................117 2. LEGAL FRAMEWORK ......................................17 5.2. Options for GHG emissions reduction 9.7. List of actors in the palm oil value chain measures in palm oil production systems ...64 9. APPENDICES...............................................105 2.1 National Context ................................................18 in the Ucayali region ........................................118 5.3. Opportunities and contributions of 2.2. Regional context................................................24 actors in the palm oil value chain ..................67 3. CONTEXT FOR THE DEVELOPMENT OF THE PALM OIL SECTOR IN THE UCAYALI REGION ......27 3.1. The palm oil sector in Ucayali ........................28 3.2. Map of the palm oil value chain in Ucayali ...32 Tables TABLA 1 Legal titles for forest and wildlife management 21 FIGURA 7 Mapping of the palm oil value chain in the Ucayali region 35 Correlations between deforested area and the average cultivated area for cocoa, coffee and FIGURA 8 a) The Peruvian Amazon b) Deforested area from 2001 to 2006 in the Peruvian Amazon for TABLA 2 41 39 palm oil from 2013 to 2016 and number of heads cattle in 2016 each region c) Deforestation by district from 2013 – 2016 TABLA 3 Classification of representative productive systems in the Ucayali region. 44 FIGURA 9 Spatial relationships between deforestation and a) cocoa area, b) coffee area, 43 c) oil palm area and d) number of cattle TABLA 4 Palm oill cultivation carbon footprint for three productive systems in the Ucayali region 47 FIGURA 10 Diagram of the cultivation stage 45 Oil Palm cultivation carbon footprint for three productive systems in the Ucayali region in TABLA 5 49 FIGURA 11 Palm oil cultivation carbon footprint for three production systems in the region which GHG emissions from land use change are included 46 TABLA 6 Oil palm production costs and income in Ucayali by typologies in soles 54 FIGURA 12 Oil Palm cultivation carbon footprint for three production systems in the Ucayali region in 48 which GHG emissions from land use change are included TABLA 7 Financial indicators for oil palm production by typology 59 FIGURA 13 Gross profit for palm oil production by typology (no-credit contexts for working capital) 59 TABLA 8 Financial indicators of oil palm oil production by type excluding the land opportunity cost 59 FIGURA 14 Possible interventions to reduce GHG emissions and conserve forests in areas of Ucayali that 63 TABLA 9 have forests and oil palm production systems, according to the Peruvian legal contextPractices for reducing emissions on plots officially approved for agricultural use 58 FIGURA 15 Opportunities and contributions from the links in the chain at micro level to forest 68 TABLA 10 Actors linked to a business model that contributes to forest conservation 79 conservation and GHG emission reduction FIGURA 16 Contribution and opportunities for meso level actors in the of the palm oil value chain to 71 contribute to forest conservation and a reduction in GHG emissions FIGURA 17 Contribution of macro level actors to forest conservation and a reduction in GHG emissions 72 Figuras FIGURA 18 General outline of a business model that contributes to forest conservation 77 FIGURA 19 General outline of the case study business model 81 FIGURA 1 Trifecta: REDD+, private sector commitments and sustainable jurisdictions 6 FIGURA 20 Loss of forest coverage in Jambi Province 82 FIGURA 2 SAB project: Theory of change 8 FIGURA 21 Value proposition for producers, investors and buyers 83 FIGURA 3 Methodological steps for building a value chain that is deforestation free and low 11 FIGURA 22 Business model challenges and opportunities 83 in GHG emissions FIGURA 4 Implications for the design of a value chain that contributes to forest conservation 13 FIGURA 23 Multi-actor platform for the palm oil value chain, second workshop 90 (Pucallpa, November 2019) FIGURA 5 Production (t), harvested area (ha) and palm oil cultivation yields (t/ha) in the Ucayali region. 29 FIGURA 24 Francisco Pezo, Regional Governor of Ucayali, at the palm oil value chain multi-stakeholder 121 platform together with the SAB project team (Pucallpa, November 2019) FIGURA 6 Mapping of potential and existing oil palm areas in the Ucayali region 31 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS CHAPTER 01 INTRODUCTION © CIFOR 2 3 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS According to the International Union for the United Nations (UN) 2030 Agenda for Sustainable Conservation of Nature (IUCN), 15 % of global Development, in which the reduction of loss and forest emissions from GHGs come from land use change degradation represent a priority that is reflected in (LULUCF)3. The main factor in the change of land use many of the 17 sustainable development goals (SDGs). and coverage is deforestation. More than 70% of This is specifically the case with objective 15, goal 2, deforestation is due to the expansion of agriculture, which refers to the sustainable management of all types mainly for the production of commodities4. Globally, in of forests, by stopping deforestation and degradation, the period (2001-2015), more than 71.76 million hectares as well as by increasing af forestation and reforestation of land were deforested for commodity production5. globally by 2020 . The development challenge is how to increase the A specific tool that comes from these initiatives, is contribution of the production of these products to the the REDD+ mechanism. This encourages countries to economy, while reducing negative ef fects in terms of increase reportable, measurable and verifiable actions degradation, deforestation, GHG emissions and the loss of associated biodiversity. To promote more sustainable agriculture and 3. https://www.iucn.org/es/regiones/am%C3%A9rica-del-sur/ forest activities, several international initiatives nuestro-trabajo/cambio-clim%C3%A1tico-en-am%C3%A9r- INTRODUCTION have emerged in recent years from various sectors ica-del-sur/bosques-y-cambio-clim%C3%A1tico/deforestac- of society that underline the transversality of the i%C3%B3n-y-degradaci%C3%B3n problem. At a public level, there are the new European 4. FAO. 2016. The State of the World’s Forests 2016. Forests and agriculture: Parliament trade regulations for importing products Challenges and opportunities in relation to land use. Rome. Available at that are deforestation free6, and at a private level, the http://www.fao.org/3/a-i5588s.pdf commitments of several multinational companies 5. GCF Task Force: https://gcftaskforce.exposure.co/atacando-la-de- to eliminate deforestation in their supply chain . The forestacion-por-commodities-es-hora-de-ponerse-aburridos#! 1.1. Background companies which have signed these commitments, 6. See for example the: EU draft action plan to conserve and pro- consider that the legal and reputational cost of being tect the world’s forests. Available at https://eur-lex.europa.eu/le- gal-content/ES/TXT/DOC/?uri=CELEX:52019DC0352&from=ES The Fif th Assessment Report of the Intergovernmental Panel on Climate Change indicates associated with issues related to deforestation is that the average temperature of the earth’s surface has increased by 0.85 degrees Celsius very high. However, this challenge can become an 7. See for example the following initiatives – Cargill https://www.car- opportunity by creating additional benefits such as gill.com/doc/1432136544290/cargill-policy-on-forests.pdf , Ferrero: (°C), which has caused sea levels to rise as a result of melting ice and thermal expansion2. It https://www.ferrero.com/group-news/Ferrero%E2%80%99s-ded- also indicates that glacier ice has decreased, and the concentration of greenhouse gases has a good and constant supply of raw materials on a par ication-to-a-deforestation-free-Global-Cocoa-Supply-Chain, increased. As a result, there has been an increase and intensification of droughts, floods, with forest conservation. These new trends in policies McDonald’s:https://corporate.mcdonalds.com/content/dam/ and heatwaves, af fecting water availability, food quality and production. This process and markets have also initiated several coalitions and gwscorp/scale-for-good/McDonaldsCommitmentOnForests.pdf) is also leading to a proliferation of pests and diseases, generating the loss of cultivated public-private partnerships (PPPs), that of fer broad 8. See for example the following initiatives – New York Declaration of areas, a reduction in productivity, and an increase in livestock mortality. This is reflected platforms with multi-actors to discuss, design and Forests (NYDF): https://nydfglobalplatform.org/ , Tropical Forest in a decrease in people’s income and is putting their food security and nutrition at risk, implement actions, as well as mobilizing resources to Alliance (TFA) https://www.tropicalforestalliance.org/ , We Mean particularly in rural societies. The impact of climate change on resources or commodities promote sustainable agriculture . Business Coalition: https://www.wemeanbusinesscoalition.org/, has an impact on prices, supply chains, marketing, investment, and even on political Global Consumer Forum (GCF): https://www.theconsumergoods-All these initiatives are consistent with the agreements forum.com/ relations, harming the economic growth of the country. and most relevant international commitments related 9. See UN, Goal N15 - Promote the sustainable use of land-based ecosystems, to climate change, including: (1) The Paris Agreement combat desertification, halt and reverse land degradation and halt the loss on Climate Change which states that forests are of biological diversity. Available at http://onu.org.pe/ods-15/ 2. The Fifth Assessment Report of the Intergovernmental Panel on Climate Change Available at https://archive.ipcc. fundamental to solving climate change, and (2) The 4 5 ch/home_languages_main_spanish.shtml MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS to reduce emissions from deforestation and forest degradation through conservation and implementation of Consequently, the country presented its NDC12 in phase and in a dif ferent global context, which requires sustainable management practices10. In recent years, REDD+ mechanisms, the private sector’s commitments to September 2015, indicating that it will reduce GHG finding mechanisms that enable economic growth that deforestation free products, and the pursuit of increasing sustainability for jurisdictions (Figure 1), have shown great emissions by 30% (89.4 million tons of CO2eq) with is deforestation free and that break the paradigm that potential for reducing deforestation for agricultural commodities at a scale and level with long-term impact. respect to projections for 2030. 20% (59 million tons of the concepts of agriculture and forests are mutually CO2eq) will be implemented with public, private and exclusive. Figure 1. Trifecta: REDD+, private sector commitments and sustainable jurisdictions internal resources, and the other 10 % (30.4 million Additionally, the need for jurisdictions in the Amazon tons of CO2eq) is a proposal subject to the availability of to focus their production towards the reduction external funding and public and private conditions13. and elimination of deforestation has started several The Peruvian government has identified 62 mitigation political initiatives, including: (1) the international REDD+ measures which it plans to implement by 2030, in 5 platform Governors’ Climate & Forests (GCF) Task PROGRAMS prioritized areas, where the actions of the land use sector Force which brings together 29 provinces, states and and change of land use (USCUSS) represent 70% of the regions, including the United States, Brazil, Peru, country’s mitigation goal14. The following mitigation Nigeria, Indonesia, Ivory Coast and Mexico18; and measures for permanent crops in the Amazon are expected with regards to this plan: TRIFECTA 12. Anticipated and Determined Contributions at a national level JURISDICTION “Through the promotion of associativity, access and (Nationally Determined Contributions - NDC) are a commitment by the use of organic supplies and fertilizers, along with the international community to reduce GHG emissions (in accordance JURISDICTIONAL PRIVATE development of technological skills15”, a reduction in with the UNFCCC) and to not exceed the planet’s temperature by APPROACHES SECTOR GHG can be achieved and also create additional benefits, 2°C.COMMITMENTS including: “a decrease in pollution, an improvement in 13. Baseline 2010: 170.6 million tons of CO2eq, Baseline to 2030 (BAU): family income and the technification of crops ” 16 298.3 million tons of CO2 eq. 14. At COP 25 in December 2019 in Madrid, the country announced an In order to reverse the increase in GHG caused by increase in its GHG reduction commitments from 30 % to 35% by LULUCF, the country is promoting the sustainable 2030, including the private sector. Source: Umunay P.; Lujan B.; Meyer C.; Cobián J. 2018. Trifecta of Success for Reducing Commodity-Driven Deforestation: Assessing the Intersection of REDD+ Programs, Jurisdictional Approaches, and Private development of agricultural and forestry sectors. This 15. Presentation: The Integral Management of Climate Change for Peru Sector Commitments. Forests, 9(10):9. is being achieved by adopting important measures in Action against Climate Change, MINAM-General Directorate of Climate Change and Desertification October 2019. for the palm oil value chain to increase productivity Peru’s GHG emissions are not significant, they represent in already deforested lands and achieve deforestation 16. Idem. free agricultural production, using a model that is 17. The pillars of green growth are:less than 1% of worldwide emissions. However, in 2011 10. The original concept of REDD+ (Reducing Emissions from Deforestation and Forest Degradation) was established in 2007 y Greater productivity and efficiency in the use of natural capital, to the Peruvian government reiterated its strong will to economically and socially viable. It is an approach of by the member countries of the Conference of Parties (COP) of the minimize environmental pressure on natural resources. the Executive Secretariat of the UNFCCC. It pledged to great complexity but also of great potential for product UNFCCC. It referred to mechanisms to reduce deforestation and strengthen collective action to mitigate climate change development in areas at the forefront of agricultural y Technological innovations, policies, and enabling conditions that forest degradation in developing countries through payments for create new opportunities and solve environmental problems such through the development of a growth economy that that need to conserve their forests. The approach seeks reductions in GHG emissions by developed countries. Since that as deforestation. is sustainable and low in carbon emissions, for which date, in practice the concept has been developing towards one to strengthen all of links in the value chain and adapt y The creation of new markets and the stimulation of demand for it committed to take the following voluntary action whose objectives are multiple and more extensive. the capacities of actors to the demands of the new green technologies, goods, and services, thus promoting new job related to this document: 11 In the specific case of Peru, the main source of GHG is from Land economic model for green growth 17. Deforestation is opportunities and prosperity. Use, Land Use Change and Forestry - LULUCF (51%), mostly pro- not only an environmental problem, but an economic 18. At the subnational level, six regions of the Peruvian Amazon are “Reduce 47% of its emissions in ten years through control duced by deforestation (92 %). one too. Therefore, solutions must be derived from signatories to the Rio Branco Declaration, the document that con- cost analyses and the additional benefits that may be tains a political commitment by the GCF Task Force to reduce 80% of deforestation, to achieve a net zero deforestation rate, contributing to global mitigation ef forts11.” generated through the “greening” of the supply chain. of GHG with adequate financing. See https://gcftaskforce.exposure. co/atacando-la-deforestacion-por-commodities-es-hora-de-po- 6 Production chains of the agricultural sector are in a new nerse-aburrid os#! 7 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS (2) the Public-Private Partnership (PPP) for Rural International Alliance and CIAT), in coordination with Project goals include: (1) two participative value chain The project will be carried out with medium and Development Low in Emissions to achieve Sustainable MINAM and MINAGRI of Peru, and in alliance with strategies, which contain a common vision agreed small producers from the Ucayali region and through Jurisdictions in the Peruvian Amazon, based on the the international consultancy Climate Focus (CF). The by all value chain stakeholders focused on achieving commercial allies in the palm oil and cocoa chains . It commitment of MINAM and MINAGRI to promote project is part of the International Climate Initiative verifiable commitments that are deforestation free is expected that the analysis, data and information deforestation free value chains. The coalition is a (IKI) which is supported by the Federal Ministry for the and that seek a reduction in emissions. This includes produced within the development of the framework multi-stakeholder space (37 institutions, including Environment, Nature Conservation and Nuclear Safety moving from strategy to practice, giving the project of this plan (such as the scheduled interventions within ministries, regional governments, local governments, of Germany (BMU). It is also part of the Joint Declaration has the following objective, (2) to implement two pilot the framework of the business models), contribute to private companies, associations of producers and of Intent (DCI) for the fulfillment of Peru’s NDC goals, business models with commercial alliances from the environmental sustainability, a halt to deforestation civil society organizations), which seeks to promote which are related to the reduction of deforestation area (in cocoa and palm oil), which demonstrate that and a reduction in GHG emissions in Ucayali. sustainable jurisdictions and productive chains free and GHG emissions in the agricultural sector. The the actions of these business models are economically from deforestation in Peru. project applies the territorial approach (which involves profitable, ready for investment and socially inclusive. This report has been prepared within the framework a value chain and low-level emissions), in order to Business models include sustainable management of the project “Business models to address drivers align its commitments with a deforestation free vision practices (previously agreed upon with chain actors) of deforestation in Peru” (Sustainable Amazonian that reconciles sustainable and competitive uses with to reduce GHG. The vision of this project is to convert Businesses, SAB) It is led by CIAT (as part of the Bioversity commitments for mitigation measures (Figure 2). these business models into a blue print for other productive alliances (not just in other regions in Peru, 19. Cooperation for reducing emissions from deforestation and forest but also other countries the Amazon region). This will degradation (REDD +) and to promote sustainable development be achieved by demonstrating that strategies and in the Peru under the Joint Declaration of Intent (JDI), is an coope- Figure 2. SAB project: Theory of change business models exist to reduce deforestation and ration volunteer agreement signed by the Governments of Peru, Norway and Germany. The agreement seeks to achieve a reduction the emission of GHGs, and that they are viable and in GHG emissions, and the greenhouse gas effect produced by de- replicable. The following points describe the activities forestation and degradation of the forests in Peru. It was signed in proposed by the project: September 2014 and is valid until 2020 and includes actions for fo- Value chains evaluated, prioritized and Business models that are low in carbon rests conservation in the Peruvian Amazon. The Joint Declaration of adjusted in conjunction with their actors and deforestation free, implemented with and government in such a way as to Intent (DCI) has the following objectives:investment case studies for scaling up Contextual analysis of specific scenarios for improve competitiveness and goals to reduce 1 2 development. forest conservation. y Contribute to significant reductions in GHG emissions resulting deforestation and low carbon development  IMPACT from deforestation and forest degradation in Peru. Contribute to Analysis of the competitiveness of value chains. y Contribute to achieving the zero emissions goal from land use, deforestation free land use and the conservation land use change and forests (LULUCF) by 2021; as well as the na- of biodiversity in the Assessments of GHG emissions throughout tional goal of reducing deforestation by 50%. Peruvian Amazon value chains. y Contribute to the sustainable development of the agricultural and forestry sectors; as well as environmentally sound mining Productive alliances between producer 3 4 Relevant actors in the value chains Sustainable business model design with in Peru.organizations and private sector companies, with improved capabilities to achieve goals that lead to business models that are deforestation free approach. For more information see https://cdn.www.gob.pe/uploads/docu-that are deforestation free deforestation free, low in carbon emissions, and low in missions ment/file/12001/cartilla_dci.pdf and designed jointly with all parties Development of implementation plans 20. The two crops are part of the permanent group of crops included Business models. within the NDC measures for the agricultural sector. The cultivation of cocoa is also reported as a low AFS RESULTADO: Value chain strategies with a deforestation free and low in carbon emissions approach developed with the Scaling up development and finance strategies participation of all parties and piloted through sustainable and scalable business models in Peru. through investment models. Source: SAB Project 8 9 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS 1.2. Objectives and GHG emissions. To do this, it is important to generate and transfer information about aspects of the tools and methodology methodologies mentioned in the previous paragraph. Platforms also need to be set up with actors in the value The objective of this report, “Moving towards a palm oil chain, to create trust and participatory action planning value chain that contributes to the conservation of forests that promote forest conservation in the Ucayali region and a reduction in greenhouse gases in the Ucayali region: and economic sustainability for the actors in the value Current status, opportunities with a value chain approach chain. The work will be carried out within the Ucayali and action plan”, is to develop an integral management region, with a focus on areas of greatest production, instrument, that is co-designed with key value chain which are the areas surrounding the productive corridor actors both regionally and nationally, to guide and of the Federico Basadre way, throughout the provinces facilitate the development of a low-GHG value chain of Padre Abad and Coronel Portillo. and to contribute to forest conservation in the Ucayali This document is structured according to the pre- region. established approach. It begins with the presentation The expected impact is as follows: of results from the various analyzes carried out (such as input for the design of a strategy that is deforestation Reduce deforestation in the Peruvian free in the palm oil value chain). These include: (1) an Amazon by strengthening the sector’s analysis of the relationship between commodities and capacity to reduce GHG emissions, deforestation in Peru, (2) mapping and analysis of the especially those from deforestation actors and links that make up the regional palm oil value chain, (3) an analysis of the competitiveness of the value Improving the welfare of farmers chain and (4) an estimation of GHG emissions for the involved in the palm oil value chain production of fresh fruit bunches (FFB) from oil palm. In later sections, the document addresses the results For this endeavour, the SAB project has developed and of the analysis and participatory construction of applied an approach that combines methodologies the sectoral strategy (deforestation free and low in and tools from multiple disciplines. These include; an emissions for the palm oil value chain) in the Ucayali analysis of land uses and coverage, a description of region, Peru. Each analysis and activity carried out value chains and an analysis of competitiveness, an included specific methodologies and tools, including analysis of GHG emissions in the productive link of the documentary analysis, interviews, focus groups, value chain, a financial and legal framework analysis, analysis of geographical areas, and multi-stakeholder and the development and facilitation of participatory workshops, among others. These are described in strategic planning processes, among others. All greater detail in their respective chapters and in the aforementioned are the result of the combined the appendices section. The SAB project acts as a experience of CIAT and Climate Focus and the work they neutral evidence generator, so that stakeholders can have undertaken in Latin America, Africa and Southeast access information objectively and openly to discuss Asia for more than two decades. available options and to identify actions in the chain The process and methodologies implemented seek to that contribute to the conservation of forests, by redirect the development of production chains, so that maintaining or improving the competitiveness of the they integrate the concepts and approaches of inclusive chain. The activities and analyzes were carried out in 10 value chains, that are deforestation free and low in 2019 according to following structure (Figure 3). 11 Figure 3. Methodological steps for building a value chain that is deforestation free and low in GHG emissions. Methodological steps for building a value chain that is deforestation free and low in GHG emissions Definition of 1 Compilation Compilation of Second value chains 2 First and analysis and areas of 3 Socialization MultiStakeholder complementary multi-stakeholder of resultsintervention of information Platform 4 information 5 platform 6 Review, synthesis and Collection, synthesis Presentation and Collection and Presentation and Socialization of final analysis of secondary and analysis of validation of analysis of validation of findings results, agreed information primary and preliminary findings complementary actions between key secondary information information Socialization and actors and next • Spatial relationship Exercises validation of the new steps between deforestation and • Mapping and value chain participatory: Checking the value vision proposal agricultural commodities analysis chain vision - • Relationship between the Co-design of sectoral Strengthening of • Quick assessment of state • Types of actors and Development and value chain and capacities for production costs assessment of action plan that is of the art of value chains deforestation, and preliminary proposal deforestation free strategy • Analysis of GHG emissions possible solutions and low in GHG implementation Exploratory missions from the value chain • SWOT analysis by link Survey of possible emissionsactions to achieve a Definition of the way and project • Deforestation and its deforestation free Preliminary in which results are presentation relationship with the value value and low in GHG identification of to be integrated with Identification and chain: causes and emissions commercial regional and local alliances to pilot government plans prioritization of value opportunities chains and areas of • Market opportunities and actions and strategies Work plan to pilot intervention barriers, legal and some of the lines of regulatory framework action through the • Public instruments for land business model planning and management Exploratory missions and project presentation Capacity building: Production, transfer and feedback Analysis refinement based on Integration with current and potential key actors (regional and local governments, of findings and knowledge with key actors in the new findings. environmental and agricultural authorities, buyers, financial entities, service providers, value chain NGOs, research centers, etc.) Source: SAB Project. MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS 1.3. Conceptual However, a new challenge has emerged to create a value The following is a comparison chart of a standard chain model and a value chain model that is deforestation free and chain concept that specifically adds environmental low in emissions. framework: value through activities that are deforestation free value chains that identified by the actors and the links in the chain. The concept assumes that the actors are the ones that have Figure 4. Implications for the design of a value chain that contributes to forest conservation. contribute to the potential to influence (directly or indirectly), the conservation of forests and contribute to a reduction forest conservation METHODOLOGICAL VALUE CHAIN FOR FOREST in GHG resulting from land use sector. A value chain STEPS TRADITIONAL VALUE CHAIN CONSERVATION and a reduction that is deforestation free and low in GHG emissions, incorporates various innovations and interventions of GHG emissions that actors along the chain (at the micro, meso and Income and Forest conservation and macro levels), must perform to be much more ef fective competitiveness biodiversity maintaining in terms of generating environmental benefits without competitiveness or improving it When considering the negative environmental OBJETIVEreducing economic benefits. These interventions impacts of the business model and the productive use include sustainable management practices and of land in various parts of the Amazon region (along management throughout all the links, from primary with the impacts of GHG emissions, loss of biodiversity production to the final consumer. and land degradation), there is a need to explore new Producers Other actors in the value chain together with consumers conceptual frameworks and land development models In a value chain that contributes to the conservation of in which economic growth and the environment forests and GHG reduction, there are a number of new META GROUP support each and are not opposed to each other. assumptions: These new concepts provide the basis for various “new formulas” for economic and environmental integration, Potential to reduce emissions which operate in particular through the introduction Addressing the problem of deforestation is also Market potential and from deforestation and restore poverty reduction degraded areas throughout the of new patterns of production, commercialization contributing to sustainable rural development VALUE CHAIN value chain and consumption. All these new models are especially in the Amazon region. SELECTION relevant for the economies of developing countries, To broaden the pre-established notion, in which since their economies (and in particular the agricultural a contribution can be made not only within sector), are mainly based on the commercialization of the producer-buyer relationship, but also by Standard Analysis + Emissions raw material that increases the rate in which natural Standard analysis (mapping, throughout the value chain, type considering other chain actors and enabling land borders, competitiveness) of value chain relationship with resources are used. factors. VALUE CHAIN deforestation A concept that is gaining popularity and environmental ANALYSIS integrity is the “value chain”. It was initially introduced as Improving the competitiveness of the value part of a number of small poverty reduction strategies chain may or may not reduce deforestation. Actions (technological, economic, financial, for producers in developing countries, especially in the other) in different links that promote or The value added by forest conservation to the agricultural sector. It is a concept that points towards a Market access and increase encourage forest conservation and reduction value chain should be measured not only by a in productivity of GHG emissions, market access and strengthening of the production chain by adding value differentiated incentives cost-benefit analysis of the business, but also STRATEGIES / to each of its links and seeking a balance between INTERVENTIONS by a valuation of the resources and ecosystem opportunities and risks for all actors. Currently, there services that come from forests. are numerous studies Source: SAB Project. 12 13 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Considering the implications for the design of a value chain that contributes to the conservation of forests and reduction of GHG emissions, Figure 4 below describes the 3 pillars that are key inputs for the development of this document. Relationship between deforestation and agriculture commodities in the Peruvian Amazon Value chain analysis When thinking about value chain strategies that contribute to the conservation of forests in the The purpose of the value chain analysis is to understand the current level of economic income framework of Peru’s climate change mitigation commitments, the first question that arises is to with the aim of exploring possibilities for its improvement, including the distribution of economic what extent is deforestation associated with the production of the four prioritized chains that benefits between the links of the value chain, and the importance that the conservation of serve to achieve these commitments - including oil palm21. To answer this question, analyses of natural resources has for actors, among others factors. With this information, it will be possible correlations and spatial relationships were carried out. Although these analyses were not aimed to promote a process of change towards an improvement in value chains, in search of greater at attributing causality, they help us understand where and how deforestation coincides with value (in this case environmental), and provide information on the sector to companies and value chains prioritized by Peru. This analysis justifies exploring and discussing actions that the public organizations interested in supporting this improvement process (Springer- Heinze, value chain should promote to conserve forests. 2007). Value chain analysis provides an overview and a good understanding of a specific socioeconomic reality. However, value chain analysis is not an end in itself, since its results feed the decisions Description and reduction possibilities for GHG of stakeholders (both in public and private sectors) in the development of the value chain. In emissions reduction by LULUCF in the value chain this way, private companies can use these results to establish a joint vision of change. They can determine self-improvement strategies (as can public agencies and development programs), in order to implement value chain promotion projects, and plan support actions. These analyses According to the IPCC and FAO22, mitigation consists of human intervention aimed at reducing can then be used to formulate impact indicators and for monitoring development projects. greenhouse gas emissions at source or enhancing carbon sequestration through sinkholes. Since the analysis of the value chain is closely linked to its improvement and the promotion In the case of the agriculture sector and agricultural product value chains in agriculture, the process, it is essential that the information used for the analysis reflects the current situation options that can be explored to reduce emissions include the following: as accurately as possible (Springer-Heinze, 2007). y The reduction of emissions derived from changes in land use, and the management and use of productive land. y An increase in coal stocks through their sequestration and storage in soils, biomass and wood products. y A reduction of emissions derived from electricity production through the replacement of fossil fuels with biomass. y An increase in production without a proportional increase in emissions reduces their intensity (GHG emissions per product unit). 21. These channels are prioritized in the Joint Declaration of Intent between the governments of Peru, Norway and Germany. y The reduction of GHG emissions by reducing losses and food waste and wood recycling. 22. IPCC (2014). Climate Change 2014: Mitigation of Climate Change. Working Group III Contribution to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. See https://www.ipcc.ch/site/assets/uploads/2018/02/ipcc_ wg3_ar5_full.pdf 14 15 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS CHAPTER 02 LEGAL FRAMEWORK © Neil Palmer / CIAT Flickr 16 17 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Likewise, the report has a multisectoral approach of Climate Change (PNCBMCC)28. It is managed by mainly related to national policies, environment MINAM and is designed to: “identify and map areas and agriculture sectors. In the environmental for forest conservation; promote the development context, the actions identified in this document of services and production systems that are forest- are framed in the following legal documents: based, generate income for local populations; and strengthen capacities for the conservation of forests Law No. 30754 - Framework Law on Climate 02 for regional and local governments, members of Exchange, enacted on April 17, 201823, as well as the peasant population and native communities, in its respective recently approved, Regulation among others ”. Additionally, the implementation of of the Law24 the REDD + mechanisms is being developed in Peru National Government Policy - DS Nº 056-2018– within the framework of Ministerial Resolution No. PCM25, Axis 3 Economic growth, equitable, 187-2016-MINAM in accordance with the ENBCC and competitive and sustainable. other policies and standards that have an impact on reducing GHG emissions. The National Climate Change Strategy (ENCC)26, which is the guiding document for all LEGAL FRAMEWORK policies and activities related to climate change that are being developed in Peru, with specific goals for reducing forest emissions. The National Strategy for Forests and Climate Change (ENBCC)27 contains elements that make it possible to put into operation new ENCC guidelines and green 2.1. National Context growth in the LULUCF sector. This will be achieved through forest conservation and the promotion of 23. The Framework Law, on Climate Change. Available at https://bus- enterprises and markets for goods and services that quedas.elperuano.pe/normaslegales/ley-marco-sobre-cambio-cli- This report is framed within the main objectives and international commitments of the are eco-innovative, as well as environmental factors matico-ley-n-30754-1638161-1/ country’s climate change mitigation goals for reducing deforestation and development low that reduce GHG emissions and vulnerability to 24. The regulation of the Framework Law on Climate Change. in GHG emissions. These objectives and commitments are mainly: climate change. Available at http://www.minam.gob.pe/cambioclimatico/wp- content/uploads/sites/127/2018/09/Documento-de-avance-con- These legal documents contribute to the country’s fecha-30-de-agosto.pdf objective to meet its commitment to reduce 35% of Sustainable development 25. National Government Policy. Available at https://www.gob.pe/insti-its GHG emissions by 2030. The documents establish tucion/pcm/normas-legales/3102-056-2018-pcm “the mandatory nature of the instruments for the integral 26. The National Strategy for Climate Change (ENCC). Available at: management of climate change” and designate the roles en:http://www.minam.gob.pe/wp-content/uploads/2015/09/ Nationally Determined Contributions in the and responsibilities for dif ferent sectors and levels of ENCC-FINAL-250915-web.pdf framework of the Paris Agreement government that must act throughout the country. 27. The National Strategy for Forests and Climate Change (ENBCC). An additional political management system that Available at http://www.bosques.gob.pe/estrategia-nacional is directly related to this report is the National 28. MINAM, National Forest Conservation Program for the Mitigation Forest Conservation Program for the Mitigation of Climate Change (PNCBMCC). Available at http://www.bosques. Joint Declaration of Intent between the gob.pe/ Governments of Peru, Norway and Germany 18 19 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Table 1. Legal titles for forest and wildlife management FOREST WILDLIFE Timber Forest products other than wood Concessions Wildlife concessions Ecoturism Conservation Plantations Private properties Private Properties Permits Peasant and Native Permits Peasant and Communities Native Communities Zookeepers Zoos Authorizations Non-forest vegetation Authorizations Rescue Centers Conservation Centers Contracts to For agroforestry systems transfer use For residual forests Local forests On public land © José Sánchez / Proyecto SAB Source: SERFOR. Land ownership and lands that have similar qualities and characteristics approved by Supreme Decree 017-2009-AG31. The last h) Health, research, extension, technology transfer management in Peru in terms of their natural ability to sustain production (f and x) classifications are not titled. The Forestry and other services related to agricultural activity. The of clean crops (a), permanent crops (c), pasture (p) and Wildlife Law No. 29763 prohibits change of use for National Agrarian Policy (PNA), approved by Supreme and forest production (f). Those that do not meet protected forest land. It is possible to change the use Decree No. 002-2016-MINAGRI, has specific objectives An important factor to consider in understanding the these conditions are considered protected lands. of agricultural land if it is owned and authorization is to increase competitiveness and open markets (with dynamics of deforestation is the lack of clarity about (x) (see Table 1). According to the regulations that granted from the regional forestry authority, provided an emphasis on small agricultural producers), and land tenure. 46 % (52.000 ha) of the 113.000 hectares classify land according to their capacity of main use, the change is well-planned. to sustainably manage resources and the biological deforested each year occurs in lands classified as diversity in the agricultural sector. forests with unallocated rights and 12% occurs in The Ministry of Agriculture and Irrigation (MINAGRI) Permanent Production Forests (BPP) without granted has authority in the following areas: a) Agricultural concessions29. The process of titling rural properties in and grazing lands, forest lands and uncultivated land the Peruvian Amazon has been governed by DL 108930 29. Fuente: MINAM, PNCB, Proyecto REDD+ with agricultural potential; b) Forest resources and regulations in which the criteria for titling a property 30. Legislative decree establishing the Extraordinary Temporary Regime their use; c) Flora and fauna; d) Water resources e) 31. See https://www.serfor.gob.pe/pdf/normatividad/2009/decresup/ are set out. for the Formalization and Titling of Rural Properties (28/06/2008), Agricultural infrastructure; f) Irrigation and use of DS%20N%C3%82%C2%BA%20017-2009-AG(Reglamento%20 Available at http://www2.congreso.gob.pe/sicr/cendocbib/con2_ water for agriculture; g) Cultivation and breeding; The soil classification system makes it possible to de%20Clasif%20%20de%20Tierras).pdf uibd.nsf/B07FE3C54C126F76052575C2007F931A/$FILE/D.Leg.1089_ group lands according to their use, that is to say, to Reg_Temp_Formaliz_Titul_Predios_Rurales.pdf 20 21 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS © Ricky Martin/CIFOR Regulations for the Environmental Management of for implementation and compliance with the National Semi-detailed Environment Environmental Declaration of Ongoing the Agricultural Sector (approved by Supreme Decree Environmental Policy and National Agricultural Policy. Impact Study (EIA-sd): Activities (DAAC) or Environmental No. 019-2012-AG32, published in the Of ficial Gazette El They prevent, control and mitigate the impacts that Applicable to investment projects that Management and Adaptation Program Peruano, on November 14 of 2012), aim to promote and investment projects (and other activities connected to could generate environmental impacts (PAMA in Spanish): regulate environmental management as competition the agricultural sector) may have on the environment, that are moderately damaging. For ongoing activities, according to scale of the develops in the agricultural sector. It does so in by ensuring the protection and sustainable use of activity and the negative impact that it may accordance with article 4 of the Legislative Decree No. renewable natural resources. Environmental Management Report have on the environment or natural renewable 997 (Organization and Functions from the Ministry of Landowners and/or those proposing investment (IGA in Spanish resources (water, soil, flora and fauna). Agriculture Law, modified by Law N ° 30048 and its projects (and other activities) under the agricultural For investment projects not included Regulations for Organization and Functions), approved sector’s management are obliged to present the in the National Environmental Impact Closure Plan: through Supreme Decree No. 008-2014-MINAGRI. following environmental management instruments33: Assessment System, that is, those that For investment projects and / or activities that The law also covers conservation and sustainable use are not in the List in Annex II regulated are closing their operations; to ensure that of renewable natural resources, water, soil, flora and by the SEIA Law and its updates. no negative environmental impacts remain. fauna, under the management of the agricultural sector. Additionally, the legislation also regulates 32. Supreme Decree No. 019-2012-AG, available at https://www. environmental management instruments, procedures, minagri.gob.pe/portal/74-marco-legal/decreto-supremo/decre- measures and other aspects relating to competition in tos-supremos/8244-decreto-supremo-n019-2012-ag the agriculture sector. 33. Source: Directorate General of Agricultural and Environmental Affairs, Ministry of Agriculture and Irrigation The instruments used for Environmental Management 22 in the Agricultural Sector are the guiding mechanisms 23 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Regulations for Forest Management (approved by 2.2. Regional context guides and facilitates regional actions to reduce institutional performance, coordination and linkage Supreme Decree No. 018 - 2015 – MINAGRI34, September GHG emissions associated with a change in land use between institutions and their policies, improving 29, 2015), were introduced to regulate (through Title II to due to deforestation. It is aligned with the ENCC and governance conditions (that involve GORE), the plans Peru’s Political Constitution, international treaties VI), institutions, planning, zonification, and information contributes to the implementation of NDCs for the for other sectors, and international cooperation on and commitments signed by the country provide a relating to forest and wildlife management. The law Ucayali region. forests and climate change. However, it is still evident framework to create public policies in a range of areas also supervises and promotes (through the Title VII to that there is a lack of a formal regional framework to that include; promoting sustainable development, The Ucayali region makes use of Ecological XXVIII), the following aspects of the management of drive cooperation in the environmental and agricultural encouraging government intervention at all levels and Economic Zonification (EEZ) through its forest and wildlife heritage: in areas vulnerable to natural disasters and climate Regional Regulation OR No. 015-2017-GRU-CR35. sector in order to ensure a portfolio approach, which fosters joint working between the various programs Forest ecosystems and other wild vegetation change, developing prevention, adaptation and This management instrument aims to guide the ecosystems. mitigation measures that allow the use and formulation, approval and implementation of and projects in progress and being designed. conservation of natural resources. The Ucayali region national, sectoral, regional and local policies for the Forest resources, regardless of their location in has also incorporated the issue of climate change sustainable use of land and natural resources, as well the country, except forest plantations that are within its own planning instruments. as environmental management. These policies are governed by their own regulations. created in accordance with the features and potential The Regional Government of Ucayali will implement Forest ecosystem services and other wild of ecosystems, conservation of the environment and its Regional Development Plan (PDRC) by 2021, and vegetation ecosystems, in accordance with the welfare of the population.together with the Institutional Strategic Plan (PEI), the regulations. they are the main public management instruments Additionally, it provides technical information and a in the region. The PDRC is a comprehensive land- framework of reference to promote and guide public Forest biological diversity, including its based instrument and regional development guide and private investment. The document has identified associated genetic resources. with a joint budget. It contains agreements about the 116,600 ha (1.1% of the land in Ucayali) for permanent Forest landscapes ecosystems and other wild “Development Vision and its Strategic Objectives” crops. Currently, it is being developed the Forest Zoning vegetation ecosystems, that are the subject of (medium and long term) in line with national and document (ZF) for the Ucayali region to determine the economic use. sectoral plans. The PDRC includes 2 components which units of forest management and the granting of rights are aligned with the development of the palm oil value of use. In addition, the ZF seeks to promote public Similarly, forestry and related activities (except for chain; that it is deforestation free and low in carbon investment more ef fectively and privately oriented to agroforestry), are also governed in accordance with the emissions: Component Nº 4, Diversified Economy, the multiple use of the forest and the other ecosystems. provisions of Forest Management Law. Competitiveness and Employment, and Component No. In addition to the above, the Ucayali region will also Additionally, in 2018, Law 3325/2018-CR was introduced 6, Environment, biological diversity and disaster risk make use of the following laws and plans: to improve competitiveness in the palm oil production management. These emphasize the importance of the chain for the production of biodiesel, in order to environment in strategic planning, related to land and A Palm Oil Competitiveness Plan for Ucayali make it economically, socially and environmentally conservation. (2016 – 2026), approved by Regional Regulation sustainable. In line with this legislation, Law 3325 On the other hand, the Regional Strategy for Climate No. 006-2016-GRU-CR and the Regional / 2018- CR also established general objectives and © Neil Palmer / CIATChange 2022 is the comprehensive management Implementation Group through Regional guidelines to achieve this objective whilst ensuring instrument used to tackle climate change. This strategy Executive Resolution Nº 160-2019-GRU-GR. care for the environment (Article 1 of the proposed Palm oil has been declared a flagship product law “… sustainable fuel”) and the sustainable generation under Regional Regulation No. 006-2012-GRU- of employment (Articles 2 and 3) that “… promote 34. Supreme Decree No. 018 - 2015 - MINAGRI, see https://www.mina- CR. production, commercialization and national consumption”. gri.gob.pe/portal/decreto-supremo/ds-2015/13917-decreto-supre- 35. Ucayali Region EEZ, at the Mesozonificacion level. See https:// mo-n-018-2015-minagri busquedas.elperuano.pe/normaslegales/aprueban-la-zonifica-Together, these strategies and planning instruments cion-ecologica-y-economica-zee-de-la-r-ordenanza-no-015-2017- have several objectives which include; improving gru-cr-1578040-1/ 24 25 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS CHAPTER 03 CONTEXT FOR THE DEVELOPMENT OF THE PALM OIL SECTOR IN THE UCAYALI REGION © Neil Palmer / CIAT Flickr 26 27 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Regional Office for Economic Development36(GRDES), According to a JUNPALMA report, in 2017, oil palm which supported 444 oil palm producers through loans contributed to 28% of the agricultural and forestry GDP approaching five million soles37 (MINAGRI, 2019)38. of Ucayali. In 2018, MINAGRI reported a historic high in According to GOREU (2016)39, most of the oil palm production of 350,200 t of FFB, which represented 38% plantations are found in the Padre Abad province (62%) of national aggregate production. In the same year, and in the Irazola, Padre Abad and Curimaná districts. production increased by 17%. This, however, was less 03 Coronel Portillo province also has plantations (38%), than the 34% increase which was reported in 2017.most of which are in the Campo Verde district. For the Between 2009 and 2015, crop yields varied between past ten years, the amount of land used to cultivate 10.61 t/ha and 13.87 t/ha, but since then, yields have oil palm has steadily increased year on year, except in slowly improved by more than 14 t/ha. In 2018, they 2010 when a drop of 9% in production was recorded. surpassed the yields of the San Martin region for the In 2018, 24,000 hectares was used to cultivate oil palm first time. in Ucayali, which is around 38% of the total land used nationally to produce palm oil. CONTEXT FOR THE DEVELOPMENT Figure 5. Production (t), harvested area (ha) and oil palm cultivation yields (t/ha) in the Ucayali region. OF THE PALM OIL SECTOR IN THE UCAYALI REGION 400 30 350 25 300 20 250 3.1. The palm oil sector in Ucayali 200 15 The use of oil palm as an alternative to the coca crop plant started in the Ucayali region in 150 10 1992, when the Central Committee of Ucayali Oil Palm Producers (COCEPU) was founded 100 by a cooperative of small producers. Following this, an extraction plant Oleaginosas 5 Amazónicas S.A. (OLAMSA) started in 1997, which was set up under a business model in 50 which the majority ownership lay with COCEPU, creating what is known as a “United 0 0 Nations Model” (GRADE, 2016). 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 The production of oil palm is of great importance to the Ucayali region. During the period Harvested Area (ha) 4,48 4,06 6,72 10,18 10,91 12,21 15,26 15,73 20,70 24,04 between 2009 and 2018, the volume of FFB production of increased at a stable rate year-on- Production (thousands of t) 54 56 75 108 119 147 188 223 299 350 year (Figure 5). In 2012, production reached its highest annual rate (45%), which was the direct Yields (t/ha) 12,00 13,86 11,11 10,60 10,93 12,1 12,3 14 14,42 14,56 result of the 2008 plantation program coming into ef fect, which benefitted 900 farmers in Source: Based on data provided in agricultural production yearbooks, MINAGRI (2019). the Neshuya and Shambillo districts. The plantation program developed by GOREU and the Development Finance Corporation (COFIDE), in addition to a project developed by the 37. 3.2 Peruvian soles are 1 USD (currency exchange rate Peruvian sol/US$) 36. The Regional Office for Economic Development, is an organization belonging to the Regional General Manage- ment of Ucayali, which is responsible for the design, direction, coordination, supervision and assessment of re- 38. MINAGRI. 2019. Statistical Yearbook of Agricultural Production. [Database]. See http://siea.minagri.gob.pe/siea/?q=produccion-agricola gional public policies relating to economic development. It performs specific regional functions in the agriculture, 39. GOREU. 2016. Palm Oil Competitiveness Plan for Ucayali 2016-2026. See http://www.regionucayali.gob.pe/institucional/instrumentos_gestion/28 29 industry, commerce, tourism, crafts, fishing, mining, energy and hydrocarbons sectors. OTROS_PLANES/Plan-Competitividad-Palma-Aceitera-PCPA/PCPA-2016-2026.pdf Thousands of tons Thousands of hectares MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS ©Miguel Pinheiro/CIFOR The Ucayali oil palm plantations are the result of 2016, reaching 50,000 ha by 201841, representing a 200% Regional Law No 006-212-GRU/CR40, which has made growth in six years. An additional 254,100 hectares it possible to produce yields of up to 20 t/ha. Annual with the suitable conditions to plant oil palm have been profits of around US $1000 are expected per hectare, identified (excluding BPP and Native Communities). which means that a farmer would need to have at This means that only 19% of the potential land is being least 5 hectares of oil palm in order to generate a used, as can be seen in Figure 6. 67% of these potential minimum monthly income. The social impact of oil lands (170,100 ha) are found in the Campo Verde, palm cultivation is measured in terms of the amount Neshuya and Nueva Requena districts. of jobs it can create. For every 5 hectares planted, oil palm generates one direct job and five indirect jobs. According to GOREU, the palm oil value chain involves 81 organizations which represent more than 3,200 40. See https://elperuano.pe/NormasElperuano/2012/06/22/803989-1. families (GOREU, 2016). html According to the regional Competitiveness Plan, 41. See https://andina.pe/agencia/noticia-region-ucayali-posee- 30 plantations grew from 23,700 ha in 2012 to 35,000 ha in mayor-plantacion-hectareas-palma-aceitera-708897.aspx Figure 6. Mapping of potential and existing oil palm areas in the Ucayali region LOCATION MAP Existing and potential areas of Ucayali oil palm SOILS SUITABLE FOR OIL PALM CULTIVATION SYMBOL DISTRICTS AREA IN ha CALLERIA 219,58 MANANTAY 728,24 YARINACOCHA 10.764,80 NUEVA REQUENA 44.312,70 CAMPO VERDE 76.945,90 NESHUYA 45.977,50 CURIMANA 24.092,80 ALEXANDER VON HUMBOLDT 6.431,62 IRAZOLA 249,66 PADRE ABAD 18.556,90 TOTAL 228.279,70 Prepared by: Directorate of Land Management ARAU. 3.2. Map of the palm technical assistance services, training to producers, Agricultural supplies are distributed mainly through the their associates including; technical assistance, access and access to capital, among services. agroshops in town centers that also sell; fertilizers (both to finance for fertilizer, assistance in pest and disease oil value chain The following links can be identified in the palm oil organic and conventional), foliar fertilizer, herbicides, control as well as the purchase of supplies and services, in Ucayali value chain at the micro level: fungicides, insecticides, among others. Since fertilization among others. Additionally, committees and extraction is a very important stage in the palm’s growth, larger plants collect information and monitor their associate’s producers’ organizations (such as COCEPU and ASPASH) production, allowing them to project production and plan The map of the palm oil value chain is a simplified visual usually make direct contracts with fertilizer companies plant operations. This also makes it possible to identify representation of the dif ferent actors and interactions in order to make fertilizers available to their associates. producers with lower yields and identify areas with pests which are involved in taking a product from its first This also happens with crude palm oil (CPO) extraction and diseases and prevent them from spreading. stages of production to the final consumer. It serves as Plant Material and delivery of supplies: the actors in this plants that make fertilizers available to their suppliers. a starting point in the development of an improvement The main committees in the region are the Central link are those that provide supplies and services needed strategy, as it makes it possible to identify commercial Committee of Ucayali Producers (COCEPU) and the for planting and maintaining the oil palm cultivation. relationships and product flows between actors, as Association of Shambillo-Aguaytía Palm Growers Although these actors do not directly manipulate well as services provided within the system (Springer- (ASPASH) with their respective subcommittees.oil palm cultivation, they are included in the analysis Heinz, 2007). In addition, the stakeholder map allows because this is where the chain begins. us to explore opportunities for the various actors in the palm oil value chain to contribute to forest conservation Peru does not produce oil palm seeds, so it imports them Primary Production: : this refers to the actors and tasks and the reduction of greenhouse gas emissions (see from countries such as Colombia, Ecuador and Costa at farm level that produce and sell FFB. This link includes section 5.1). Rica (mainly the CIRAD variety). Due to the possibility farm management, establishing and managing crops, of diseases in the seeds SENASA (in compliance with the post-harvest processes (when carried out by the Transformación: The FFB transformation process has In the following map (Figure 7) actors are grouped into Supreme Decree No 032-2003-AG) carries out a post- two main stages: i) crude palm oil extraction (CPO), three levels: the first (micro level) is made up of direct producers themselves) and marketing FFB.entry quarantine procedure to check for pests in palm kernel oil production (PKO) and/or palm oil flour actors or palm oil value chain operators involved in imported plant material. During the process (which can According to MINAGRI (2019), there are 7,200 oil palm production, and ii) industrial transformation of palm oil dif ferent production functions such as transformation, take up to 10 months depending on the country of origin) producers in Peru, 2,800 (39%) of which are in Ucayali. for the production of edible oils and fats, and biofuels. distribution and commercialization of palm oil and its plant material is kept in a nursery and subject to four According to GOREU (2016), there are currently 81 oil derivatives. What these actors all have in common, palm growers’ associations made up of a total of 3,200 In the Ucayali region there are 13 extraction plants mandatory inspections before seeds can be released. is that at some point in the palm oil value chain they associated producers who report average yields of 11 t/ including plants owned by OchoSur Group and Industrias become owners of the product. In the second (meso In Ucayali, there are four commercial nurseries which ha. In Ucayali, two associations and companies have been Tulumayo of Palmas Group, which are expected to start level), are the public, private or mixed actors that compete in the palm oil corridor: Mayoral nursery with founded through the alternative development program: operation in 2020, and which are equipped for CPO, PKO provide support services for the micro level actors at a capacity 100 hectares per year; Palma de Tulumayo Central Committee of Ucayali Producers (COCEPU) and and/or palm oil flour production. The average palm oil the micro level and/or represent the interests of several nursery with 700 hectares per year; and Arias nursery its Amazon Oilseed Plant (OLAMSA) in Neshuya; and extraction rate in the region is approximately 24% and groups of actors in the palm oil value chain. The third with 200 hectares per year. These nurseries normally the Association of Shambillo-Aguaytía Palm Growers it is estimated that CPO production in the region will level (macro level), includes government institutions in operate on a “to order” basis and work mainly with (ASPASH) and its Padre Abad Oilseed Plant (OLPASA) in be approximately 85 to 90 thousand mt (metric tons) charge of policy design and political implementation producer associations through contracts to provide Aguaytía. COCEPU is the largest producers’ organization per year. Palm kernel oil can also be produced by the of productive, land, environmental and commercial seedlings to small and medium farmers. Among the in the region, bringing together nearly a thousand transformation process, from the seed of the fruit known regulations. This level includes ministries, local and producer associations, only the Association of Shambillo oil palm producers. Other companies include Grupo as the kernel. regional governments and other state and international Oil Palm Growers (ASPASH) has a small nursery that OchoSur, Grupo Rossel, Grupo Arias and other smaller The second transformation stage takes place mainly institutions. (Springer-Heinz, 2017). It is common for serves to provide seedlings to its partners. The price businesses, that have land ranging from 500 ha to more outside the region; however, an CPA refining initiative some actors to participate in several links of the chain per seedling is approximately 13.5 soles per unit with an than 8,000 ha. has been proposed for Ucayali but with relatively small and at dif ferent levels, as in the case of producer average age of 8 months. In the region there are first and second level committees production capacity. In other parts if the country refining associations or agribusiness companies. In addition There are very few nurseries that provide an after-sales and associations of producers, which provide services to is carried out by extraction plants that sell CPO mainly to collecting, transforming and commercializing FFB service planting and plantations management. 32 and its derivatives, these multi-level actors provide 33 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS to businesses in the food sector (such as the Romero Group’s ALICORP and Alpamayo located in Lima and Callao), and to a lesser extent to biodiesel companies. Export: Consortium Sol de Palma (which includes 6 CPO processing plants, 3 of which are in the Ucayali region), currently exports CPO and PKO using a sustainable production approach. Wholesale marketing: : the main use of palm oil is the production of edible oils and fats for the national market. Alicorp S.A.A. is the most important food company in Peru and its main ingredients are vegetable oils and compounds, and edible fats. Among these ingredients are CPO and PKO. According to the Ucayali Palm Oil Competitiveness Plan, in 2015 there was a deficit between national supply and demand. It was estimated that internal demand was 600 thousand tons, while national production was just 300 thousand tons. Added to this was a growth in oil consumption, which at that time was 5% per year. At present, there is an opportunity for the palm oil sector to enter the national biodiesel market. Several extraction plants in the region have a contract with Heaven Petroleum Operator S.A. to provide CPO that will be converted into biodiesel. The project is in its pilot stage, but if it produces positive results, the volume of CPO destined for biodiesel would be increased, since it offers better prices than the food market. 34 © James Maiden/CIFOR 35 Figure 7. Mapping of the palm oil value chain in the Ucayali region PRIMARY OIL EXTRACTION REFINING PROCESSING CONSUMPTION PRODUCTION INDUSTRY (oils and fats or olechemical industry) Production of oils and fats Consumers of finished Liquid edible oils, products butters, margarines, Producers Extraction Plants Edible fats, soaps, ~ 3,200 (13): Mixtures for concentrated OLAMSA (2), OLPASA, Refining Plants foods. Hectares INDOLMASA, ROSSEL, ~ 40,500 OLPASA (2), INDEPAL, Lima: Alicorp, Alpamayo, Alicorp, Alpamayo, Compañía Bioandes, Palm Oleo S.A.C., Oleoficio Lima, Industrial Oleaginosas, Production Tulumayo, Biodiesel Ucayali, Agroindustrias Integradas others 350,200 mt FFB Ocho Sur. S.A., Tempo Industria S.A.A, Various Industries Industria de Grasas y Aceites 60 % in this area are Processing Capacity S.A., Agrinsa, otras. small producers >700,000 mt of FFB/year Ucayali: Palm Oleo S.A.C Individuals: 16 % Industria OleoquímicaCPA Production (2018) Associates: 84 % ~ 85,000 MT Combustibles, lubricantes, Committees: (-69) pinturas, sulfactantes Internal ARF market (Chile, Colombia and Ecuador) 21,159 mt in 2018 Exporters: Romex, Sol de Palma, R trading, others International CPA market (Colombia, Ecuador) 61,708 mt in 2018 Source: SAB Project. MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS CHAPTER 04 ASSESSMENT OF THE CURRENT STATE OF THE VALUE CHAIN Juan Carlos Huayllapuma/CIFOR 36 37 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Figure 8. a) The Peruvian Amazon b) Deforested area from 2001 to 2006 in the Peruvian Amazon for each region c) Deforestation by district from 2013 – 2016 a c 04 Amazonas LoretoPiura CajamarcaSan Martín La Libertad Huánuco Ucayali ASSESSMENT OF THE CURRENT Junín Madre deHuancavelica Dios Cusco STATE OF THE VALUE CHAIN Ayacucho Puno Peruvian Amazon Deforested land (%) 0 300 600 0 300 600 Kilometers Kilometers 4.1. Deforestation and its relationship b with agricultural commodities in the Peruvian Amazon: 150.000 San Martín 125.000 maps and analysis Loreto 100.000 Ucayali 75.000 Huánuco According to MINAM data (2018), rates of deforestation in the Peruvian Amazon nearly 50.000 Madre de Dios doubled between 2001 and 2016 (Figure 8b). However, it did not occur uniformly. More JunínAmazonas than half of the deforested area in this period was located in the San Martín, Loreto, Ucayali 25.000 PascoCusco and Huánuco regions. It should be noted that while San Martin had the highest rates of 0 Other deforestation between 2001 and 2011, those of Ucayali and Loreto have been higher in recent years. Source: Castro-Nuñez, Bax, Ganzenmuller & Francesconi, 202042 42. Castro-Nuñez, A., Bax, V., Ganzenmuller, R. and Francesconi, W. (2020). Emerging scenarios on the role of supply chain initiatives in reducing 38 39 deforestation: evidence from Peru. Manuscript submitted for publication. Deforested land (Ha) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Table 2. Correlations between deforested area and the average cultivated area for cocoa, coffee and oil palm from 2013 to 2016 and number of heads cattle in 201644. DISTRICT (#) COCOA COFFEE OIL PALM CATTLE Amazonas 83 0,37 0,57 NA 0,27 Ayacucho 7 no sig. no sig. NA not sig. Cajamarca 19 no sig. 0,82 NA 0,57 Cusco 18 0,52 not sig. NA not sig. Huancavelica 4 NA NA NA NA Huánuco 25 0,64 no sig. 0,45 no sig. Junín 27 0,60 0,72 NA no sig. La Libertad 3 NA NA NA NA © Neil Palmer / CIAT Loreto 47 no sig. no sig. 0,37 0,56 Madre de Dios 10 0,83 no sig. NA no sig, Big dif ferences can be identified in the deforested area correlation coef ficients between deforested areas and Pasco 10 0,80 0,64 NA 0,66 at the district level (Figure 8c). Most areas in northern the four value chains, as well as among the regions. Peru and the smaller regions in the south have low Deforestation and the cocoa plantations have a Piura 5 NA no sig. NA no sig. rates of deforestation. Nevertheless, hot deforestation positive correlation in nine of the 15 analyzed regions. Puno 16 0,66 0,69 NA no sig. spots have been identified in the center of Peru. The The highest correlations between deforestation and districts with the largest area of deforestation from cocoa crops were found in Madre de Dios (0.83), Pasco San Martín 77 0,60 0,49 0,37 0,27 2013 to 2016 were: Curimaná (Ucayali, 18,000 ha); Codo (0.80) and Ucayali (0.74). Despite having the lowest Del Pozuzo (Huánuco, 16,800 ha); Inambari (Madre de correlation coef ficient nationally, deforestation and Ucayali 14 0,74 0,76 no sig, 0,72 Dios, 16,397 ha); Irazola (Ucayali, 16,100 ha); Puerto Inca cof fee cultivation have high positive correlations in (Huánuco, 16,000 ha). eight regions, in Cajamarca (0.82), Ucayali (0.76) and Source: Castro-Nuñez, Bax, Ganzenmuller & Francesconi, 2020, based on MINAGRI (2018). District level data on cacao, coffee, oil palm and cattle production in Peru (unpublished dataset). Lima, Perú, Ministry of Agriculture and Irrigation. With the aim of reducing GHG emissions from Junín (0.72). Conversely, oil palm cultivation is limited deforestation, an analysis of the correlation between to only four regions, and only three have a positive To better understand the overlap between the deforested areas and farming areas for Peru’s four correlation with deforestation; Huánuco (0.45), Loreto 43. The project initially assessed the impact of different value chains on production of the four commodities and the high prioritized value chains (cocoa, cof fee, oil palm (0.37), and San Martin (0.37). The number of cattle deforestation processes. As a result, four value chains were prioritized and livestock)43, was undertaken, but no significant and deforested areas were correlated in six of the rates of deforestation in the Peruvian Amazon, an (in coordination with MINAGRI) because of their relationship with coef ficients were found. The correlation coef ficient 15 regions. The regions with the highest correlation examination of spatial relationship was conducted deforestation processes in the Peruvian Amazon. between deforested areas and areas planted with coef ficients for cattle were; Ucayali (0.72), Pasco (0.66), at district level using the Moran Index, also known as 44. The correlations were calculated regionally, and 365 districts were 45 cocoa was found to be the highest (0.49), followed by Cajamarca (0.57) and Loreto (0.56). Three departments Local Indicators of Spatial Relationship (Anselin 1995) . considered. Regions where value chains do not report data are oil palm (0.32), cattle rearing (0.23) and cof fee (0,19). stand out in the correlation analysis; San Martín is the Figure 9 highlights the districts that have significant shown as not applicable (NA). only region where deforestation is correlated with the local Moran indices (p<0.05) for associations between 45 Anselin, L. 1995. “Local Indicators of Spatial Relationship—LISA”. These correlations were also estimated for each value chains of the four prioritized products, followed deforestation and the prioritized value chain products. Geographical Analysis 27:93–115. doi:10.1111/j.1538-4632. 1995. 40 region (Table 2). Major dif ferences were found in the by Ucayali and Pasco. Districts with a high rate of deforestation and high tb00338.x. 41 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Figure 9. Spatial relationships between deforestation and a) cocoa area, b) coffee area, c) oil palm area and d) number of cattle 46. a Deforested Land - Cocoa Area b Deforested Land - Coffee Area © José Sánchez / Proyecto SAB High -High High -High High - Low High - Low Low - High Low - High Low - Low Low - Low Not-Significant Not-Significant rates of these products are highlighted in red (High- oil palm trees did not directly cause deforestation, but High). Districts with high rates of deforestation and rather replaced other land uses (such as illicit crops c Deforested Land - Oil palm area d Deforested Land – Amount of cattle low rates of products are marked in pink (High-Low). and corn). In these areas, a greater level of detail Figure 9c highlights the 69 districts that have is needed to understand the location, the actors significant Moran rates for deforestation and areas involved, reasons for oil palm production and the under oil palm cultivation. Five of these districts coverage that previously existed. Even though the way were classified as Low-High. This group indicates in which oil palm plantations relate to deforestation the districts where oil palm production is associated processes has not been fully explained, the results with low deforestation. The association between show that both deforestation and oil palm production deforestation and oil palm production in the other 2 coexist in these districts. Therefore, it is important to groups is not clear. The 49 districts classified as High- work with members of the palm oil value chain to align Low may indicate districts where oil palm production ef forts to reduce deforestation. Turning to the Upper- does not explain the high rate of deforestation. While High districts, these areas are spatially distributed High -High High -High High - Low the 15 districts classified as High-High may indicate in three main blocks. The largest stretches from the High - Low Low - High districts where oil palm production coincides with south to the center of the Peruvian Amazon, covering Low - High Low - Low deforestation. the districts of Junín (5), Madre de Dios (2), Cusco (2) Not-Significant Not-Significant and Ucayali (2). The other two are located in the center However, understanding the spatial relationship in Fuente: Castro-Nuñez, Bax, Ganzenmuller & Francesconi, 2020 47. and north of Peru in San Martin (8), Huánuco (2), and these districts would require additional studies to Amazonas (1). In the Ucayali region, it covers Atalaya prove this causality. It is possible that in these districts, 46. It should be noted that the districts with high deforestation rates surrounded by districts with high crop rates are colored in red (High-High). province and Raymondi and Sepahua as well. Districts with high deforestation rates surrounded by districts with low crop rates are colored pink (High-Low). Districts with low deforestation rates surrounded by districts with high crop rates are colored light blue (Low-High). Districts with low deforestation rates surrounded by districts with low crop rates are colored blue (Low-Low). The districts where there is no spatial relationship are colored in grey. 47. Castro-Nuñez, A., Bax, V., Ganzenmuller, R. and Francesconi, W. (2020). Emerging scenarios on the role of supply chain initiatives in reducing deforestation: evidence from Peru. Manuscript submitted for publication. 42 43 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS 4.2. Analysis of Carbon footprint of products - Requirements and Phase 1 - Land preparation: and all others activities carried out from the guidelines for quantification and communication”) considers the activities necessary establishing the plant until the moment the emissions oil palm (ISO, 2103), and 2) PAS 2050: 2011 (“Specification for to adapt the land for sowing. oil palms start to produce FFB (3 years) production the assessment of life cycle greenhouse gas emissions Phase 2 - Establishing the plant Phase 3 - Production: this phase starts from goods and services”) (British Standards and maintenance: all: all the activities carried from the first productive year until the Institutions, 2011). The time limit corresponds to 2018. out to plant oil palm seedlings, (done only moment the crop ends its cycle (25 years). This means that a product’s life cycle will be assessed once during the life cycle of the product), Greenhouse gas (GHG) emissions from deforestation by considering crop management practices and the associated with agriculture and livestock have doubled technology developed for this period. globally since 1961. It is estimated that emissions Figure 10. Diagram of the cultivation stage. generated by Land Use, Land Use Change and Forestry The product’s carbon footprint (LULUCF) make up the largest part of Peru’s total Based on conventional farm methodology, three GHG emissions (45%), of which the main source are production categories were defined for the region. the conversion of forests to agricultural land, which PESTICIDES ORGANIC WASTEThe main classification criteria included the intensity represents 59% of emissions. Agriculture is the LAND of the use of supplies and average performance, once FUEL PREPARATION third biggest contributor to the country’s total GHG GHG EMISSIONSproduction stability had been achieved (Table 3). emissions (16%), from which emissions generated by the management of agricultural soils represent 51%, followed by enteric fermentation, that makes up 36% SEEDLINGS of the sector’s emissions (INGEI, 2014). Table 3. Classification of representative productive systems in the Ucayali region. FERTILIZERS INORGANIC WASTE The estimation of GHG emissions allows us to measure ESTABLISHMENT the impact of human activity on the atmosphere and LOW MEDIUM HIGH HANDLING PESTICIDES AND MAINTENANCE INTENSITY INTENSITY INTENSITY ORGANIC WASTE to generate the necessary information to reduce Intensity of the use global pollution levels. These estimates are made Low Medium High WATERof supplies GHG EMISSIONS through environmental indicators (such as the carbon Type of fertilizer Synthetic Synthetic Synthetic MACHINERY footprint), which makes it possible to measure the Fertilizer dose / 3,5 6,5 13 impact of an activity on global warming. An evaluation palm (kg/year) of the carbon footprint on a value chain makes it Average cultivated 10 20 30 land (ha) possible to identify the critical points at which GHG emissions are greatest and the implementation Soil Fertility Low Low Medium EMPTY BRANCHES of relevant measures to reduce the emissions. INORGANIC WASTEPerformance To implement this strategy, a carbon footprint 11 20 25 FERTILIZERS(t FFB/ha) assessment (using a Life Cycle Analysis approach) has PESTICIDES ORGANIC WASTE Source: SAB Project been focused on the production phase, to measure PRODUCTION the amount of GHG emissions produced by oil palm WATER GHG EMISSIONS production in the Ucayali region. Based on the identification of the activities in the MACHINERY In order to calculate the carbon footprint created by FRESH FRUIT production cycle, three management phases were BUNCH products, two international standards have been Transportationdefined in three producers’ focus groups (Figure 10 and adopted: 1) ISO 14067: 2013 (“Greenhouse gases – Table 4): 44 Source: SAB Project 45 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Carbon footprint without changing land use Table 4. Oil palm cultivation carbon footprint for three productive systems in the Ucayali region Using a scenario in which the establishment of oil palm cultivation occurred 20 years af ter the deforestation process Carbon Footprint (kg CO eq /t RFF)ITEMS 2 (which does not include emissions produced by change of land use), the production of each ton of FFB in the Ucayali Low Intensity Medium Intensity High Intensity region would generate 89 kg CO2eq in emissions in systems that are low intensity in their use of supplies, 143 kg Use of Machinery 0.1 2.3 0.0 CO2eq in medium intensity systems, and 177 kg CO2eq in systems with a high intensity use of supplies (Figure 11). Use of Fertilizers 35.9 54.9 59.9 Handling of Inorganic Wastes 0.2 0.4 0.6 Manufacturing of Supplies 44.8 72.1 95.7 Figure 11. Oil palm cultivation carbon footprint for three production systems in the region Transportation of Supplies 8.3 13.3 21.4 TOTAL CF 89.5 143.2 177.7 LOW INTENSITY MEDIUM INTENSITY Source: SAB Project 0,32 % 0,13 % 0,33 % 1,64 % A comparison of the three types of production shows comparison to the high intensity system to produce 9,34 % 9,31 % significant dif ferences in total GHG emissions per 22 tons of FFB/ha. This has significant implications 40,13 % 38,34 % ton of FFB (Table 4). The dif ferences between the in terms of pressure on natural areas, since the low- typologies are mainly due to emissions from the intensity system is considered the most sensitive in 89 143 manufacturing of supplies and use in the field. In all increasing the area required to meet demand for FFB. kg CO eq/ton RFF kg CO eq/ton RFF three systems, applications of urea, potassium chloride If the additional areas are forests, the carbon footprint 2 2 Handling of inorganic wastes (KCl), phosphate rock, boron, magnesium and lime indicator of the FFB is substantially increased by this are common. The most heavily used fertilizer is urea, change of land use (from forest to oil palm), as shown Change of Land Use 50,08 % 50,39 % with approximately 50% of its emissions generated by below. its manufacture. In the second category the highest Use of Machinery emissions are those associated with the use of urea Carbon footprint with a change in the field, including direct emissions and those of land use HIGH INTENSITY Use of Fertilizers associated with the volatilization process and the In the scenario in which the establishment of the leaching compounds containing nitrogen. crop occurs within a period of 20 years after the time 0,35 % 0,00 % 12,06 % Manufacturing of Supplies It can be seen that, despite the higher performance of of deforestation, it is essential to include emissions 33,73 % the high intensity system in its use of supplies, (which resulting from a change in land use. According to the Transportation of supplies doubles performance compared to the low intensity IPCC (2003), carbon contained in the forest is released 177 system), the use of these resources for maintenance over a period of 20 years, so this amount emitted must is high as well as the resulting emissions, which are be divided by 20 to obtain an annual rate of emissions. kg CO eq/ton RFF 2 almost double compared to the low intensity system. In a scenario where there is a direct change from Even though the use of supplies in the low intensity forest coverage to oil palm cultivation, the 20 years of 53,86 % system produces fewer emissions per ton of FFB, emissions (or the total carbon contained in the forest) this handling shows increased inef ficiency in the must be included in the crop accountability. Under Source: SAB Project use of area, since it would require twice the area in these conditions, the production of each ton of FFB in 46 47 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS the Ucayali region would generate emissions of 2430 kg CO2eq in low intensity production systems, 1430 kg CO2eq Table 5. Oil palm cultivation carbon footprint for three productive systems in the Ucayali region in which GHG emissions in medium intensity systems, and 1210 kg CO2eq in high intensity systems. In this scenario, emissions from land use from land use change are included change would represent 96%, 90% and 85% in low, medium and high intensity systems, respectively (Figure 12 and Carbon Footprint (kg CO eq /t RFF) ITEMS 2Table 5). Low Intensity Medium Intensity High Intensity Land Use Change 2339.7 1287.0 1029.8 Figure 12. Oil palm cultivation carbon footprint for three production systems in the Ucayali region Use of Machinery 0.1 2.3 0.0 in which GHG emissions from land use change are included Use of Fertilizers 35.9 54.9 59.9 Inorganic Waste Management 0.2 0.4 0.6 LOW INTENSITY MEDIUM INTENSITY Manufacturing of Supplies 44.8 72.1 95.7 1,48 % 1,85 % 0,34 % 5,05 % 0,93 % Transportation of Supplies 8.3 13.3 21.4 0,00 % 0,01 % 0,03 % 3,84 % 0,16 % TOTAL CF 2429.2 1420.2 1207.6 Source: SAB Project 2429 1430 kg CO eq/t RFF 2 kg CO eq/t RFF2 Handling of inorganic wastes Land Use Change 96,31% 89,98 % 4.3. Oil palm Use of Machinery production cost HIGH INTENSITY analysis and Use of Fertilizers 1,77 % 7,93 % 0,05 % its implications 4,97 % Manufacturing of Supplies 0,00 % for conservation 1207 Transportation of supplies In order to define the viability and sustainability of conservation strategies for producers’ farms (especially kg CO eq/t RFF 2 if they are using finance programs), it is important to know the economic feasibility of their current crop 85,28 % and to identify areas for improvement that can make it possible to optimize the financial performance of Source: SAB Project the crop. Doing so would guarantee that cash flow will cover the costs generated from the steps that need to be taken. To achieve this, regional production costs were In this case the dif ferences between the systems are determined by the performance. The higher the number of estimated by holding workshops and collaborative FFB tons produced in the high-intensity system, the smaller the deforestation emissions footprint per ton of FFB. groups based on typical oil palm farm methodologies (Annex 9.2), through which three separate typologies for productive systems were defined. These typologies © José Sánchez / Proyecto SAB represent the three main production models used in the region today. 48 The methodology used offers several advantages, but Description of the typologies of oil palm production systems in the Ucayali region48 also presents certain limitations since its objective is to simulate cases of farms that fit the regional reality and that do not necessarily offer statistically representative figures. Therefore, it should be emphasized that the Typology 1. Low-intensity management results presented are not statistically representative and should not be generalized. However, it does offer a realistic perspective of the operations and processes Producers with approximately 10 hectares of oil palm of that occur every day in the field. It also makes it possible productive age with plots between 10 and 20 years old. to observe the effects of changes in the parameters The total area of the farms is close to 20 hectares. In addition to the oil palms there are areas of for multiple activities carried out on farms over time. primary and secondary forest, rivers and streams and other small-scale production systems such It should also be noted that the typologies shown are as cassava, plantains and fruit trees. They carry out conventional agricultural management and not necessarily the only ones belonging to the region, obtain yields of approximately 11 t/ha FFB. They are members of a cooperative and market their FFB and that both the characteristics and the specific costs through a local extractor who (through the cooperative) provides them with technical assistance will vary among farms according to; economies of scale, services, pest and disease management (PDM) and access to inputs and projects. the distance to towns, intensity and efficiency in the implementation of agronomic and non-agronomic Prior to planting oil palms, these producers generally used their land for pasture, illicit crops, practices, and the use of resources. It is for this reason and primary or secondary forest. These were then replaced by oil palm through projects that that producers and actors interested in participating are encouraged illicit crop substitution and alternative development. These projects have been led by invited to implement the recommended structure and international cooperation and regional government. The final production program includes 143 report information pertinent to their region, in order to plants per hectare in monoculture. model their experiences and to be able to create more Most of the cultural work is carried out under contract and mainly involves harvesting and pruning. reliable comparisons. These activities represent the largest labor requirements, which is why the number of days that Finally, the results presented may contain bias as a result family members are employed is low and represents just 10% of the total labor costs. The land is of the assumptions used to facilitate the modeling of the fertilized at sowing time, but very little or no fertilizer is used at all over the 3 years of maintenance. farm. For example, the model is based on a plantation that During the oil palm’s productive period, the land may be fertilized just once per year with a mixture has reached a stage where its production has become of different elements which add up to about 3.5 kg of fertilizer per plant. Additionally, pruning, land stable (approximately 8 years) and ignores possible loosening and interline cleaning is carried out every year. Pest monitoring is also done at harvest climatic and phytosanitary effects that may affect time and at least once every 15 or 20 days depending on the season. The farm has basic tools for productivity, and the use of supplies, in a particular year. crop handling (wheelbarrows, pruning tools, a manual fumigation pump and electric fumigators) The model includes an administrative cost equivalent and investment goes into infrastructure that includes the construction of roads and a warehouse. to 5% of the variable costs and an opportunity cost The transportation of FFB is contracted at US$ 10 per ton, which is discounted from the final value equivalent to the annual lease of one hectare in the area at the time of payment by the extraction plant. Generally, the farms are located around 10 km from for an agricultural alternative with similar requirements. the nearest town and 70 km from Pucallpa, where they purchase most of their supplies and tools It also assumes that 40% of the operating expenses depending on availability. are financed with commercial credit at a rate of 27% per annum. Establishment and maintenance costs are included in the fixed costs as a deferred expense over the life of the plantation on a straight-line basis (30 years). 48. Typologies were defined for oil palm production systems according to typical farm methodologies developed by Feuz & Skold (1990) and These costs are not assumed to be covered by credit. The Agribenchmark (2019). Geographical information and statistics on production, yield and available area were used in addition to consultation 50 models and detailed description of the assumptions and with local experts. This allowed the identification of the types of productive systems that are used in the region, which in turn represents a con-© Miguel Pinheiro/CIFOR 51 the parameters used are available on request. siderable proportion of oil palm production. MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS 20 ha Typology 2. Medium-intensity management Typology 3. High-intensity management Producers with approximately 20 ha at the production Producers with approximately 30 or more hectares of oil palm stage and others plots at different stages of growth at different stages of production and stages of growth Farms have a total area of between 40 and 50 hectares, which include areas of primary and secondary forest The total area of the farms is close to 40 or more hectares. In addition to oil palm, there is a less forest than and other productive systems on a smaller scale such as cassava, plantain, cocoa and fruit trees, in addition in the previous typologies and a smaller area used to grow other crops. Fertilizer is regularly used at the to oil palm. The producers use considerable amounts of fertilizers and obtain yields of approximately recommended levels (and in the available technological packages) and yields obtained are approximately 20 t/ha FFB. They are members of a cooperative and market FFB with a local extractor who (through the 25 t/ha FFB. They are members of a cooperative and market their FFB through a local extractor who, cooperative), provides them with technical assistance services, pest and disease management (PDM) and (through the cooperative), provides them with technical assistance, pest and disease management (PDM) access to supplies and projects. services and access to supplies and projects. Prior to planting oil palms, these producers generally used their land for pasture, illicit crops, primary or Prior to planting oil palms, these producers generally used their land for pasture, illicit crops, primary or secondary forest. These were then replaced by oil palm through the projects that encouraged substitution secondary forest. These were then replaced by oil palm through projects that encouraged substitution of of illicit crop and alternative development. These projects have been led by international cooperation and illicit crop and alternative development. These projects have been led by international cooperation and regional government. The final production program includes 143 plants per hectare in monoculture. regional government. The final production program includes 143 plants per/ha in monoculture. All cultural work is carried out under contract, and family work is limited to sporadic monitoring and All cultural work is handled by contract, and family work is limited to sporadic monitoring and crop crop management costs. These plantations are managed as small businesses, investing around S/ 2.000 management costs. These plantations are managed as small businesses, investing around S/ 2,200 per hectare in labor and allocating more than S/ 1.000 for fertilizer. During the first year of growth, the per hectare in labor and allocating more than S/ 2,000 for fertilizer. During the first year of growth, the producers use fertilizer once or twice, as well as carrying out crop maintenance. During the productive producers use fertilizer once or twice, as well as carrying out crop maintenance. During the productive stage, fertilizer is used twice annually, with a mixture of elements that add up to about 6.5 kg of fertilizer stage, fertilizer is used twice annually, with a mixture of elements that add up to about 13 kg of fertilizer per per plant. During this period, producers also carry out pruning, land loosening, chemical weed control and plant. During this period, producers also carry out a pruning, land loosening, 3 weed control and interline 2 interline cleanings. This also includes monthly pest monitoring and harvesting which is done once every cleanings. This also includes monthly pest monitoring and harvesting which is carried out once every 15 15 or 20 days, depending on the season. The farm has basic tools for crop handling (wheelbarrows, pruning or 20 days, depending on the season. The farm has basic tools for crop handling (wheelbarrows, pruning tools, a manual fumigation pump, electric fumigators, weed wacker and a chainsaw). Investments are tools, a manual fumigation pump, electric fumigators, weed wacker and a chainsaw). Investments are also made into infrastructure, including the construction of roads and a warehouse. The transportation of also made into infrastructure, including the construction of roads and a warehouse. The transportation of FFB is contracted at US$ 10 per ton, which is discounted from the final value at the time of payment by the FFB is contracted at US$ 10 per ton, which is discounted from the final value at the time of payment by the extraction plant. extraction plant © José Sánchez / Proyecto SAB © José Sánchez / Proyecto SAB 52 53 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Table 6. Oil palm production costs and income in Ucayali by typologies in soles49. Cost analysis by production system type TIPOLOGY 1 TIPOLOGY 2 TIPOLOGY 3 NO CREDIT WITH CREDIT NO CREDIT WITH CREDIT NO CREDIT WITH CREDIT Type 1 - Productivity (FFB t/ha): 11 20 25 Low Intensity Total Income (S/.): 3.267,0 3.267,0 5.940,0 5.940,0 7.425,0 7.425,0 The item with the highest cost is manual labor (ML) yields by 1 t increases the area needed to generate the Variable Costs: making up 32.4% of total costs, followed by land same level of income by 12 ha. This should be a warning Family Labor Costs 3,2 % 3,0 % 0,0 % 0,0 % 0,0 % 0,0 % (18%), supplies (15%), product transportation (11%) to the sector, as it demonstrates that numerous factors Hired Manual Labor 29,2 % 27,3 % 37,5 % 34,5 % 33,7 % 30,9 % and contribution to establishment costs (8%) (Table (such as climate, or pest and disease issues that af fect Supplies 14,7 % 13,8 % 20,8 % 19,1 % 31,6 % 29,0 % 6). Most of these costs represent cash transactions and productivity, or market fluctuations that reduce Maintenance and Repairs to Equipment 1,0 % 0,9 % 0,9 % 0,9 % 0,0 % 0,0 % demand working capital, making the financial cost (if the price of the crop for the producer), can have an and Machinery using loans at regional commercial rates), 6.3%. This especially adverse ef fect by increasing pressure on the Interest on Operating Capital 0,0 % 6,3 % 0,0 % 7,5 % 0,0 % 8,0 % Transport of Supplies 2,9 % 2,7 % 2,1 % 2,0 % 1,5 % 1,4 % gives a negative profit of (- S/. 68 per/yr) per hectare, forests and af fecting families’ livelihoods. Product Transport 10,9 % 10,2 % 12,9 % 11,9 % 12,6 % 11,5 % increasing to - S/. 303, if loans are being repaid. If the There is significant potential for improved productivity Soil and Leaf Analysis 0,3 % 0,3 % 0,4 % 0,4 % 0,3 % 0,3 % cost of manual labor per household is added back, when making conservation agreements with producers Pest and Disease Management (PDM) 0,3 % 0,3 % 0,4 % 0,4 % 0,4 % 0,3 % along with administrative costs and the opportunity belonging to this typology, since a slight increase Total Variable Costs: 62,6 % 64,7 % 75,0 % 76,6 % 80,1 % 81,4 % cost of the land, the annual income per family per in yield could free up considerable areas of land for hectare will be S/ 744. The break-even points in volume conservation or more sustainable uses. However, and price are 11.2 t and US$ 91.9 respectively. Under Fixed Costs: it is necessary to develop mechanisms in order to these conditions, a family would need between 30 Contribution to Establishment and mitigate climate and market risks, since their ef fect 8,1 % 7,6 % 6,4 % 5,9 % 4,2 % 3,9 % Maintenance Costs and 43 hectares of oil palm oil to generate 2 monthly is not only on family income but also on the pressure Depreciation of Equipment and Machinery 3,8 % 3,5 % 1,4 % 1,2 % 1,4 % 1,3 % minimum wages. of the forest. According to experts consulted for this Real Estate Depreciation 0,4 % 0,4 % 0,1 % 0,1 % 0,1 % 0,1 % It should be noted that in these models the cost of PDM report, it is possible to achieve productivity gains with Real Estate Maintenance and Repair 1,9 % 1,8 % 0,5 % 0,5 % 0,3 % 0,3 % is partially subsidized for all typologies when producers minor investments in fertilization projects. However, Land Costs 18,0 % 16,8 % 11,8 % 10,8 % 9,2 % 8,4 % are members of association, since producers only pay the ef fects of fertilization on production can take up Utilities 0,9 % 0,8 % 0,3 % 0,2 % 0,2 % 0,2 % S /. 1 per t/FFB sold to the extraction plant. Therefore, to two years. Therefore, it is essential that support or Other Services 0,5 % 0,5 % 0,3 % 0,3 % 0,1 % 0,1 % the total cost of production could increase if the financing models (designed to promote sustainable Taxes 0,3 % 0,3 % 0,2 % 0,2 % 0,0 % 0,0 % producer does not belong to an association. intensification towards these producers) consider JUNPALMA Tariff 0,3 % 0,3 % 0,4 % 0,4 % 0,4 % 0,3 % Administration Costs 3,1 % 3,2 % 3,8 % 3,8 % 4,0 % 4,1 % According to sensitivity analyses (Appendix 9.3), the reasonable payment periods and rates that would Total Fixed Costs (S/.) 37,4 % 35,3 % 25,0 % 23,4 % 19,9 % 18,6 % productive system for typology 1 manages to generate prevent them from defaulting on their payments. positive profits by increasing its yields by 1 t/ha, thus Likewise, by proportionally increasing variable costs Total Costs (S/.) 3.335,2 3.569,9 5.099,1 5.534,6 6.553,4 7.153,3 increasing net income by more than S/. 200. Similarly, (with greater investment in fertilization), the influence Net Income (S/.) (68,2) (302,9) 840,9 405,4 871,6 271,7 it should be noted that the area needed to generate 2 of fixed costs is reduced. This applies in particular to Break-even point (Amount - t) 11,2 12 17,2 18,6 22,1 24,1 minimum monthly wages is reduced by 7 ha when the the contribution to the establishment cost and the Break-even point (Price - USD) $91,9 $98,35 $77,3 $83,9 $79,4 $86,71 current yield is increased by 1 t. opportunity cost of the land, which substantially af fect Anual Family Income (S/.) 744,2 520,7 1.632,2 1.217,4 1.734,1 1.162,7 the system’s cash flow. Ha needed to generate 2 monthly mínimum wages 30 42,9 13,7 18,3 12,9 19,2 This productive system’s profits are more sensitive to *Sales Price FFB = USD 90/t or S/. 297/t. losses than to gains in yield or price, since reducing 54 55 49. 3.2 Peruvian soles are 1 USD (currency exchange rate Peruvian sol/US$) MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS improve the profitability of the model. The financial S/. 45,000 per yr. for the whole farm. In comparison with Type 2 - costs under this model are higher than typology 1 the previous typologies, this records the least amount Medium intensity farms, mainly due to higher capital requirements. of land released per increase in production, with only Therefore, it is important to identify possible risk 0.9 ha released by an increase in yield of 1 t. Given reduction strategies in order to of fer lower interest the more entrepreneurial nature of the producers of The item with the highest cost is manual labor (ML), rates, which are beneficial for better environmental this typology, the 2 monthly minimum wage criteria making up 37% of total costs, followed by supplies practices. do not necessarily apply. This is since their economic (21%), product transportation (12.9%) and land (11.8%). objective is more aimed at profit maximization than The working capital requirements make the financial household income, indicating that the conservation cost 7.5% when using loans at regional commercial Type 3 - incentive agreements and disincentives for expansion rates (Table 6). The net profit per hectare is S/. 840 per/ Semi-technified should be managed dif ferently to the previous yr which decreases to S/. 405 if loans are used. If the typologies. opportunity cost is added back, the annual income per The highest cost is manual labor (ML) making up family per hectare will be S/ 1,632. The break-even points Under these parameters, there is increased potential 33.7% of total costs, followed by supplies (31%), in volume and price are 17.2 t and US$ 77.3, respectively, to optimize the use of fertilizers and look for strategies product transportation (12.6%) and land (9.2%) (Table increasing to 18.6 t and US$ 83.9 if credits are being to reduce their cost per unit, as well as improving the 6). It has been noted that higher levels of technology used for working capital. Under these conditions, a management of supplies, optimizing their use, and at substantially increase the cost of fertilization. However, family would need between 13.7 and 18.3 ha of oil palm the same time reducing the ef fect they have on the in spite of doubling the amount of fertilizer used, yields to generate two monthly minimum wages. environment. The amount of land with forest on these do not exceed those of the previous typology by more farms may be up to 30% of current regulations or As with typology 1 farms, an increase in productivity than 25%. According to the producers interviewed, less. Therefore, this typology may require restoration of 1 t/ha considerably improves income and profits, higher yields can be achieved. However, the lack of and remediation. Given the decrease in marginal which means that 1.7 ha less are required to generate fertilizer used in previous periods, or climatic ef fects, returns on production, it is necessary to develop an income of 2 monthly minimum wages. However, the may have af fected the yields in some of their plots. procedures which would allow for the reduction of system is also more sensitive to losses than to gains in The financial cost of working capital loans is 8%, like risk due to climate and market variations. This is prices and productivity. the cost of land. The net profit per hectare is S/. 872 per because a reduction in prices and yields represents There is a potential to reduce production costs by yr. which decreases to S/. 272 when loans are used. a negative impact that is proportionally greater than optimizing the management of supplies according to If the opportunity costs are added, the annual family profitability, which increases pressure on forest land. conservation agreements, since these producers have income per hectare will be S/. 1,734. The break-even As with typology 2 farms, it is very important to forest land available and the capacity to improve their points in volume and price are 22.1 t and US$ 79.4 identify actions that would allow for the reduction of yields or reduce their variable costs. As with typology 1 respectively. These increase to 24.1 t and US$ 86.7 if labor and transportation costs, in addition to reducing farms, it is necessary to develop techniques in order to producers take out loans for working capital. Based on the financial cost. mitigate possible climate and market risks. According these results, a family would need between 12.9 and to experts consulted for this report, it is possible to 19.2 ha of oil palm under these conditions to generate Financial Analysis achieve profits in productivity at this level. However, it an income of 2 monthly minimum wages. To assess the viability of the investment, a study was is more dif ficult to do so than if they were at a more As can be seen in the previous typologies, the marginal carried out to analyze the estimated cash flows and cash advanced level of production. Conducting more ef fect of increasing production on profit is negligible. projections over a 30-year period. As seen in Table 7 and frequent soil and leaf analyses as well as adapting to Nevertheless, with a yield of 28 t (considered viable Figure 13, under the conditions explained by farmers of the fertilization packages can have a significant ef fect at this level of fertilization), the model generates all typologies, none of the models manages to generate on profitability. Similarly, actions taken to reduce labor substantial income, close to S/. 1,500 per/ha, or close to positive current net values and the cost-benefit ratio and supply costs also have a considerable potential to in all cases is less than 1. This is mainly due to the high 56 initial investment required and the years of crop growth © CIFOR 57 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS in which substantial expenses are accumulated, during the price of a hectare in pasture or palm tree areas with Table 7. Financial indicators for oil palm production by typology which time producers cannot rely on any income for access to roads can vary between S/. 2,000 and S/. 5,000. working capital during the production stage of the In these cases, the same land could be rented out for the TIPOLOGY 1 TIPOLOGY 2 TIPOLOGY 3 FINANCIAL INDICATORS venture. If producers need to raise credit for working cultivation of other crops such as plantain or papaya, for With credit No credit With credit No credit With credit No credit capital, no model succeeds in repaying the loan, which about S/. 600 per year, which represents the opportunity Net present value (NPV) (14.655) (12.867) (14.989) (11.903) (14.933) (11.078) makes the crop an unviable and unattractive investment costs of the land for these producers. Looking at the Internal rate of return (IRR) NN -6.6 % -2.0 % 1.5 % -3.7 % 1.6 % for external investors. Considering that a significant financial indicators for the different models, it is clear Cost benefit 0.55 0.58 0.68 0.73 0.73 0.78 portion of the established costs have been subsidized that this opportunity cost in regions with productive Repayment Period 31 31 31 26 31 25 through public and cooperative projects, it is reasonable capacity can be restrictive for external investors, which to assume that the rates of return for producers are indicates that the means by which the farms can remain Source: SAB Project actually higher than those stated. However, under competitive in the market are: 1) achieve large economies these conditions there are no incentives to invest in new of scale in order to reduce transaction costs, manual Table 8. Financial indicators of oil palm oil production by type excluding the land opportunity cost plantations without subsidized resources. Likewise, it is labor, and supplies, 2) achieve high productivity using clear that producers find it difficult to finance fertilization appropriate technology, 3) obtain land at low prices to TIPOLOGY 1 TIPOLOGY 2 TIPOLOGY 3FINANCIAL INDICATORS through credits, and with interest rates close to 27%, the reduce total costs (up to 10% depending on the model), With credit No credit With credit No credit With credit No credit project becomes infeasible. It should be clarified that and 4) operate their own extraction plants for greater Net present value (NPV) (8.999) (7.211) (9..33) (6.247) (9.277) (5.422) this analysis does not include large-scale economies that product aggregation and product value capture. Internal rate of return -0.3% 2.4 % 3.1 % 5.7 % 2.4 % 6.0 % large plantations can manage, where both the cost of Some cases, such as Ocho Sur (formerly known as the Cost benefit 0.66 0.71 0.77 0.84 0.81 0.88 supplies and manual labor can be substantially reduced. Melka Group), seem to comply with all these conditions. Repayment Period 31 23 21 17 23 16 However, such investments are not viable for small and According to numerous sources (Dammert, 2019; Salazar, Source: SAB Project medium producers. 2018; La Republica, 2017; Sierra Praeli, 2018; Forest Additionally, a separate financial scenario was included Peoples Program 2017), Ocho Sur has two plantations in which the opportunity cost of land was excluded, since totaling more than 11,000 hectares planted with oil palm Figure 13. Gross profit for oil palm production by typology (no-credit contexts for working capital) it can reflect the investment decisions of small producers in Ucayali. There are allegations of irregular acquisition; with available land (that is not being used productively, that nearly 6,000 ha were acquired at prices between 113 2.000 or is difficult to rent), to which they can assign a zero and 910 soles, well below the opportunity cost of small 1.000 opportunity cost (Table 8). In this case it can be seen that producers in the region (Castro et al., 2017). The company 0 typology 1 producers begin to show a positive internal also has an extraction plant close to its plantations for 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 YEARS(1.000) rate of return (IRR) when they do not use loans. However, processing the fruit. (2.000) this remains below the discount rate. Typology 2 data Although three of the mechanisms previously (3.000) indicates the shortest repayment period for producers mentioned represent valid studies within the dynamics (4.000) who take out a loan, while typology 3 shows the best of the market, the purchase of land under such favorable (5.000) financial indicators for producers who do not take out conditions and subsequent deforestation, not only (6.000) loans. It should be noted, that in none of the cases represent a substantial social and environmental impact, does the IRR exceed 6%, which would indicate that the (7.000)but also put greater pressure on small producers. Such business is not particularly attractive to foreign investors. (8.000)conditions pose a huge disadvantage for them in terms In view of these facts, there is an association that deserves of competition, in which only some producers can access Typology 1 Typology 2 Typology 3 to be explored further, regarding the opportunity cost the nation’s natural resources at a low cost (without Source: SAB Project of land and the use of land with low commercial value being compensated for the negative impacts), which can such as primary forest land and areas with low or no eventually artificially drive regional prices down. 58 population. The producers interviewed reported that 59 SOLES MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS CHAPTER 05 OPPORTUNITIES IN THE VALUE CHAIN TO CONTRIBUTE TO FOREST CONSERVATION AND A REDUCTION IN GHG EMISSIONS © Neil Palmer / CIAT Flickr 60 61 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS GHG emissions, in addition to those reduced by avoiding deforestation. Under no circumstances should this plan, and the resulting business models involve clearing forests. The following figure shows these options as a decision tree (see Figure 14). By taking into account this legal context for land use in Peru and considering the technical conditions (according to the greater land use capacity), this report describes the opportunities to promote deforestation free oil palm production and a reduction in GHG emissions in the value chain. These opportunities are identified and grouped as follows: 05 opportunities in different stages in the chain, opportunities in the production system, and opportunities in the type of business models that can be set up.Figure 14. Possible interventions to reduce GHG emissions and conserve forests in areas of Ucayali that have forests and oil palm production systems, according to the Peruvian legal context OPPORTUNITIES IN THE VALUE CHAIN TO CONTRIBUTE TO FOREST CONSERVATION AND A REDUCTION IN GHG EMISSIONS 1 2 yali Uca s in 5.1. Opportunities for current land scapedLan use scenarios Oil palm is a crop that is grown in districts with high deforestation50. Therefore, it makes sense to develop a strategy with a value-chain approach (within the context of legal regulations for STRATEGIES FOR FOREST CONSERVATION land use in Peru) that identifies actions for the different stages in the chain that can result USABILITY ACTUAL LAND AND GHG REDUCTION, WITH A VALUE USE SCENARIO CHAIN APPROACH AND DEFORESTATION FREE BUSINESS MODELS in a contribution by the sector to forest conservation and the mitigation of greenhouse gas emissions. This section proposes improvements in oil palm production practices and other actions to promote a value chain that contributes to environmental protection in its different stages, as established by the Forestry and Wildlife Law (Law No. 29763), in terms of usability 1 FOREST Forest Forest conservation (see section 2.1.1). It is of paramount importance that opportunities to contribute to forest conservation identified in the value chain are aligned with this legal framework. If this is taken into account in areas of agricultural suitability, palm oil will be a viable activity. Within the scope Good Practices for reducing GHG Emissions of this document, it is highly recommended that the cultivating activity is developed under Palm2 AGRICULTURE Agroforestry Practices systems with practices that, on the one hand, increase crop productivity and performance, Other Uses Forest Conservation and on the other hand, maximize the carbon stored in the production system, thus mitigating Agreements in Landscapes 62 63 50. For more details, review section 4.1, on the spatial relationship between crops and deforestation Source: SAB Project based on Forest and Wildlife Law (Law No. 29763) and Castro-Nuñez et al. (under review) MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS 5.2. Options for GHG emissions reduction Af ter carrying out these practices to reduce emissions on plantations, it is important to then implement measures in oil palm production systems51 additional practices that of fset the remaining emissions. Some of the activities that can be used Crop management practices designed to reduce GHG emissions are aimed at mitigating the impact on the most Promoting the planting of oil to compensate for the remaining emissions are the critical points in the production system or those with the highest emissions. According to the results of the carbon palm trees in areas without forest establishment of forest conservation or recovery areas footprint assessment, such crop management practices should be aimed at reducing emissions from land use coverage suitable for agriculture (due to their high carbon fixing potential), allowing change, which can represent up to 96% of emissions from established crops in recently deforested areas. The for the protection of biodiversity in the region. In Peru, emissions generated by the Land Use, Land second critical point is fertilizer management, as the peak of the emissions in the primary production system is Use Change and Forestry (LULUCF) sector represent represented by the manufacturing of supplies, followed by field use and transportation. The following are potential practices for reducing emissions in the crop (Table 9). the largest contribution of total emissions (45%), of which the main source of emissions is the conversion of forests to agricultural land with (59%) (INGEI, Table 9. Practices for reducing emissions on plots officially approved for agricultural use 2014). Therefore, national policies address the control Optimizing the application of of deforestation as a key point in regional agendas. fertilizers and soil improvers REDUCTION OTHER PRACTICE COMPONENT POINT OF REDUCTION Similarly, regional plans should be focused on POTENTIAL IMPACTS Agriculture is the third sector in Peru with the highest establishing new plantations in areas that are already To avoid deforestation of emissions, accounting for 16% of the country’s Biodiversity areas with high carbon Change in Land Use High deforested and in degraded areas. However, they total, with emissions generated by agricultural land stocks Water balance must comply with the conditions of formalized tenure, To promote the planting of new areas of management accounting for 51% of the sector (INGEI, palm oil trees in affected areas, without Planting in deforested and and ensure that the land has technical conditions Change in Land Use High Restoration 2014). This category includes emissions generated by forest cover degraded areas of use, in order to avoid the conversion of new fertilizers. It is estimated that, for each kilogram of To avoid planting in Change in Land Use  High Biodiversity areas of primary forest or areas being regenerated. nitrogen applied to the soil, about 50 grams of N2O are peatlands Plantations should be established in areas that were emitted (Groenigen et al., 2011). deforested before 201152, so that their products can be To Implement agroforestry Incorporation of trees in In the carbon footprint assessment (without the Mitigation Medium Biodiversity considered deforestation free. systems the crop influence of land use change through deforestation), In these degraded areas close to oil plantations, the use of fertilizers and soil improvers is the process Management of dosage, practices to recover the integrity of the ecosystem can that generates the highest GHG emissions in the type of fertilizer sources, Medium be developed, while generating increases in the crop three types of systems evaluated. Strategies must be time and place of use Eutrophication  productivity. Some of these are organic fertilization aimed at implementing management alternatives that To optimize the application of fertilizers Nitrification inhibitors Manufactura, transporte High Air quality and the establishment of coverage which improve improve fertilization ef ficiency, such as; fertilization and soil improvers y uso de fertilizantes Organic fertilizers Medium Pollution the biological, physical and chemical conditions management based on soil analysis, the fractioning of of the soil. They are easy to implement, increase applications, the use of coated materials that are slow Introduction of legumes Medium performance, and reduce the need for producers to release, the incorporation of nitrogen-fixing species, expand to new areas. and the use of nitrification inhibitors, among others. Increase crop production Cover crops Use of fertilizers Medium Water balance per unit area 52. According to MINAM, agricultural production that is deforestation free refers to existing or new agricultural activities in deforested areas occupied Source: SAB Project before 2011 that were developed by farmers and stock breeders (individually, in associations, cooperatives, or in alliances), in order to avoid further loss of forest in the geographical area under its control, in accordance with the current legal framework. Products from plantations established before 2000 can also be considered deforestation free, if the carbon footprint is required by buyers in some of the deforestation free business 64 65 51. Oil palm plantations must be on officially designated land allocated for agricultural use, in compliance with Peruvian laws models. The establishment of new oil palm areas in degraded areas makes it possible to increase the stock of carbon emissions in the region MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Balanced nitrogen management practices and crop emissions by up to 50% in dry climates, in wet climates rotation have been shown to reduce N2O emissions they can vary considerably (Millar et al, 2014). Similarly, (Snyder et al., 2009; Adviento Borbe et al., 2007). This soils with high leaching potential would have greater can be seen in the application of nitrogen based on benefits from these types of fertilizers than the poorly fractioned soil analyses. It has been found that excessive drained ones (Nelson et al., 2008). nitrogen applications increase the release of N2O into the In other production systems, such as irrigated maize, atmosphere. Applications of up to 10 kg of N/ha above the use of urea coated with a special polymer has been the plant’s nutritional requirements do not generate tested allowing a slower and more controlled release significant differences in N2O emissions, while surpluses of nitrogen at specific humidity and temperature of up to 90 kg of N/ha increase N2O emissions by up to conditions. This practice reduced N2O emissions by 42% three times (Groenigen et al., 2011). compared to traditional urea, and 14% compared to the Selecting the right type of fertilizer and application urea-NH4NO3 solution. Stabilized urea (urea added method has the potential to reduce emissions. with nitrification inhibitors and ureases) reduced N2O Assessments carried out on oil palm, to compare emissions by 46% compared to conventional urea, and inorganic (urea) and organic fertilizers, indicated that 21% compared to urea-NH4NO3. Some source mixtures although organic soil improvers were a major source of can reduce emissions by up to 61% of N2O emissions N2O and CH4 emissions, N2O emissions were 66-86% (Halvorson et al., 2014). lower than inorganic fertilizers (Rahman et al., 2019). Other results from the same authors indicate that when fertilizing with organic soil improvers, stack application leads to increases in N2O and CH4 emissions by 63 and 71 % respectively, when compared to the use of the spread application (Rahman et al., 2019). Fertilization carried Use of living coverage © José Sánchez / Proyecto SAB out under optimal humidity conditions can avoid higher or noble weeds GHG emissions, because if this practice is carried out under saturation humidity conditions, it can increase The implementation of living coverage is recommended GHG emissions by up to 77%, compared to soils at field for oil palm plantations as they produce positive ef fects, such as the conservation of soil moisture, in 5.3. Opportunities and contributions of actors capacity (Rahman et al., 2019). addition to serving as a natural pest control of pests Likewise, the application of new technologies such as in the palm oil value chainand diseases. With the implementation of this practice, nitrification and urease inhibitors are an option to reduce direct emissions from the soil (when replacing mineral nitrogen losses in the form of. Research has shown that Using the Ucayali palm oil value chain map as a starting point (see in section 3.2), we revised explored the contribution nitrogen fertilizers) and CO2 emissions (generated by fertilizers with nitrification inhibitors and polymer- and opportunities from the various producers in order to promote and encourage a chain that contributes to forest manufacturing and transportation of mineral sources) coated fertilizers, reduce N O emissions by 38% and 35% conservation and the reduction of GHG emissions. Secondary information was collected for this purpose (through 2 decrease, while the system’s carbon stock increases. respectively, compared to conventional nitrogenous national and regional legal frameworks and public policy instruments) and primary information, mainly through Studies report contributions from related legumes of fertilizers (Akiyama et al., 2010). Thus, it is important to semi-structured interviews with the palm oil chain producers that had already been mapped. over 50 kg N/ha. This would avoid the application of consider that the action and potential of these materials chemical fertilizers and the emission of about 200 kg Figure 15 shows the micro level: actors directly involved in the palm oil value chain and their potential contributions may vary according to the soil and climate conditions. CO2 eq/ha (Domingo et al, 2014; Kaye and Quemada, to the development of a process that contributes towards forest conservation. In the first link of the chain Although nitrification inhibitors and urease can reduce 2017). (agricultural supplies and plant material), ef forts could be directed more towards innovation, marketing, and promotion of slow-release nitrogenous fertilizers and nitrification inhibitors. These actions would contribute to the reduction of GHG emissions. 66 67 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Figure 15. Opportunities and contributions from the links in the chain at micro level to forest conservation and GHG emission reduction. MICRO LEVEL AGRICULTURAL SUPPLIES PRIMARY PRODUCTION: OIL EXTRACTION REFINEMENT: INDUSTRIAL PROCESSING: CONSUMPTION AND PLANT MATERIAL INDIVIDUAL PRODUCERS REFINING PLANTS OILS, FATS AND THE AND MEMBERS OLEOCHEMICAL INDUSTRY • Marketing of certified supplies with • Planting oil palm in former coca • Wastewater Treatment Plant (WWTP) • Plans for Solid waste management • Area of Sustainability • Growing international demand environmental criteria fields and pastures for environmentally sustainable • RSPO Certification Process • Wastewater Treatment Plant (WWTP • Identification of gaps in traceability products that are deforestation free • Research into innovation for • Soil analysis and application and low in GHG emissions chemical compounds fractioning • Innovation in natural products • Organic production pilot • Agricultural waste management • RSPO Certification Process Source: SAB Project The second link (primary production of oil palm: of legal activity. Staying within the framework of this In the Ucayali region, a pilot project is being developed to has been facilitating this process, along with strategic individual producers and associates), shows that the plan, the installation and implementation of new oil produce organic oil palm FFB. It is the first project of its partners, in order to certify part of its productive base. biggest task is the installation of oil palm cultivation in palm plantations or projects should only happen on kind nationally, and it will make a valuable contribution The third link that refers to the extraction of crude palm areas that have been cleared of forests, or have previously regulated lands suitable for agriculture, thus avoiding towards the production of a commodity that has had oil (CPO) (as the main by-product), is comprised of the been used for coca crops or pastures. This prevents deforestation. little development in the organic field. Certification is extraction plants in the Ucayali region, who are also in the oil palm plantations being established of forest areas. In the primary production link, it is also important being offered to small and medium-sized producers of process of acquiring their RSPO certification. They also Bearing in mind that the main source of emissions in the to carry out soil analyses to identify the nutritional organic palm oil by the Roundtable for Sustainable Palm have wastewater treatment plants (WWTP) that reduce production of FFB comes from changing land use (see requirements of the soil and define what agricultural Oil (RSPO). Production under this certification scheme environmental pollution. The fourth link that refers to section 4.2 for more detail), it is of the utmost importance components it might require. This is important in order ensures the protection of the ecosystem and/or lands with refining plants, contributes mainly to the reduction of that small farmers and their organizations set up new to avoid the ineffective use of fertilizers that would result high preservation values. Worldwide, this certification is GHG emissions by treating their wastewater, in addition plantations on land that is suitable for agriculture by in higher GHG emissions. The lack of economic resources, the minimum standard qualification needed in order to to reducing emissions of other gases with solid waste respecting greater use capacity and land regulations, the absence of knowledge about the importance of enter markets with environmental care requirements. management systems. This link has the potential to refraining from damaging activities such as logging, and conducting soil analysis and poor technical assistance It should be noted that the RSPO certification requires develop a traceability system to ensure that refined CPO taking into account the rules of forest management (see on proper agricultural practices, are factors that need to modifications to the production process which implies is derived from palm oil crops that do not affect forests. section 2.1.1). Oil palm oil was promoted in the 1990s as be solved in order to improve productivity, reduce GHG additional costs for producers, who generally cannot afford them. Currently, the extraction plant OLAMSA The fif th link that refers to industrial processing has part of the alternative development program to replace emissions and reduce the pressure being put on the the potential to contribute to a strategy that conserves 68 coca plantations and to recover land for the development forests. 69 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS forests and reduces GHG emissions in the region Figure 16. Contribution and opportunities for meso level actors in the of the palm oil value chain to contribute to forest conservation through the sustainability of businesses (e.g. the and a reduction in GHG emissions Alicorp company). These companies also support the closing of gaps in traceability processes that promote MESO LEVEL the use of raw materials produced on lands which are deforestation free. Alicorp has already been working on studies to identify gaps in these processes. These ` Promotion and technical assistance to increase productivity in current areas studies seek to address the needs of the whole value INSTITUTO NACIONAL DE ` Promoting forest conservation chain in order to make it a fully traceable process, INNOVACIÓN ` Promotion and assistance for the use of microorganisms ensuring the compliance of minimum standards AGRARIA for forest conservation. Lastly, the consumer link ` Promotion and assistance of Good Agricultural Practices (GAP) could also play an important role in this process by demanding that products have clear traceability in relation to their contribution to forest conservation. On ` Promotion of sustainable forest management the international market there are already demands INSTITUTO DE ` Research on capturing carbon and plantation management to reduce emissions for products with palm oil produced on lands that are INVESTIGACIONES DE LA AMAZONÍA ` Technical assistance to producers for waste management, compost preparation, etc. deforestation free. At the national level, this demand is ` Research into agroforestry systems associated with oil palm still marginal. However, everything seems to indicate that the market trend is going that way, towards an end product which can be verified and that shows PROGRAMA DE COMPENSACIONES that forests are not af fected and that the products are ` Co-Financing of projects for the reconversion of agricultural productionPARA LA contributing to the reduction of GHGs. COMPETITIVIDAD – ` Ban on financing business plans in Permanent Production Forests (BPP) AGROIDEAS At the meso level there are various institutions and organizations that provide services, mainly in the production of FFBs and processing of CPO, to the palm PROCOMPITE ` Incorporation of environmental sustainability criteria for the selection of co-financed business plans oil value chain. These are public and private institutions that provide technical assistance, waste management services, and institutional and commercial alliances to actors in the value chain. Figure 16 describes their main CAMPO contributions to the development of a palm oil value LIMPIO ` Integrated management of empty agrochemical containers chain that contributes to forest conservation and a reduction in GHG emissions. Lastly, at the macro level, there are government agencies that create public policy by defining and ` Solutions for the sustainability of the palm oil value chain SOLIDARIDAD implementing regulatory frameworks for the palm oil ` Assessment of Alicorp’s supply chain for recommendations for traceability and investment proposals to close traceability gaps value chain (see Section 2 for more detail). Figure 17 shows the main mechanisms, policies, laws, regulations and tools for developing a palm oil value chain that contributes to forest conservation and a reduction in Source: SAB Project GHG emissions. 70 © Axel Fassio/CIFOR 71 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Figure 17. Contribution of macro level actors to forest conservation and a reduction in GHG emissions MACRO LEVEL MINISTRY OF THE MINISTRY OF NATIONAL FOREST AND REGIONAL ENVIRONMENT AGRICULTURE AND WILDLIFE SERVICE GOVERNMENT OF IRRIGATION UCAYALI • National Environmental • National Agricultural Policy • National Forestry and • Concerted Regional Policy Wildlife Information Development  Plan for • National Small Farming System Ucayali 2011 - 2021 • National Environmental Strategy (forthcoming) Management System • Forestry and Wildlife Law • Land Classification • CC 2019 - 2022 Regional • Legal Framework for Regulation by Major Use • Forest Zonification Strategy Climate Change (CC) Capacity (forthcoming) • Ecological Economic • National CC Strategy • Environmental • Sustainable Program for Zonification Management Regulations Inclusive and Competitive • National Strategy for for the Agricultural Sector Forestry Development • Ucayali Palm Oil Forests and CC in the Peruvian Amazon Competitiveness Plan (SERFOR - CAF) 2016 - 2026 • National Forest Conservation Program for Climate Change Mitigation • Green Growth Guidelines Source: SAB Project 72 © José Sánchez / Proyecto SAB 73 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS CHAPTER 06 A BUSINESS MODEL THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GHG EMISSIONS © Miguel Pinheiro/CIFOR 74 75 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS to generate added value for the production of palm oil contributions that each actor in the chain can make to that contributes to forest conservation (see Appendix promote conservation (see section 5.1), and the analysis 9.4). Adopting the deforestation free conceptual of case studies that have implemented deforestation framework for the palm oil value chain (see Figure free business models that are in other countries. 4), is an ef fective way of turning the concept into Figure 18 represents a proposed general outline of reality. Additionally, international case studies will be a palm oil business model that contributes to forest 06 analyzed in order to identify successful practices to conservation, identifying the dif ferent actors linked to ensure that palm oil production addresses the causes of the product value chain and their respective interaction deforestation. Therefore, it is possible to build a general based on flows of the product, money, information and outline of a business model for palm oil production purchase contracts.that helps to address the drivers of deforestation by combining several items; the experience of existing 53 Osterwalder A. 2010, “Business Model Generation: A Handbook for business models used for the production of palm oil A BUSINESS MODEL THAT Visionaries, Game Changers, and Challengers”, Publisher: Wiley; 1 and its derivatives in the Ucayali region, the possible edition (July 23, 2010). CONTRIBUTES TO FOREST CONSERVATION AND A REDUCTION Figure 18. General outline of a business model that contributes to forest conservation. IN GHG EMISSIONS Information Loan + InsurancePRODUCERS Technical Assistance Contracts zero deforestation The development of a business model that is deforestation free aims to provided added value to the production of palm oil that contributes to the conservation of forests and a IMPACT Investment INVESTOR reduction in GHG emissions. In order to achieve this purpose, it is necessary to align all Loan Grant those linked to the product value chain, from the producer to the final consumer, including Technical Assistance the suppliers and investors. This should be done in such a way that all those involved TECHNICAL Loan Return on PUBLIC ASSISTANCE AND COOPERATIVE INVESTMENT investment should have access to relevant information, incentives and tools, so that the production Payment FUNDERSMONITORING Information VEHICLE and consumption of palm oil does not lead to deforestation. (TOOLS) Info Information INTERNATIONAL COOPERATION 6.1. Business model outline that Non-refundable cooperation contributes to the conservation LoanPayment of forests POST-HARVEST CENTERS Deforestation free business models are a relatively new concept and to date, there is no Information consolidated technique to carry out their ef fective implementation. However, in order to TRADING COMPANY Product flow develop a business model that contributes to forest conservation in the Ucayali region, Cash Flow Product Alexander Osterwalder in 201053 proposed using the canvas business model, and adapt it MANUFACTURING COMPANIES Payment FINAL CONSUMER Flow of information AAA Contracts 76 77 Source: SAB Project MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Purchase contracts for Purchase contracts for zero deforestation zero deforestation Payment Payment Fruit Info Collected fruit Technical Assitence Info Table 10. Actors linked to a business model that contributes to forest conservation The development of the deforestation free canvas business model has at its center the associations of ROLE IN THE BUSINESS MODEL THAT CONTRIBUTES producers through which agreements to purchase ACTOR DESCRIPTION OF ACTIVITIES TO FOREST CONSERVATION AND A REDUCTION IN GHG EMISSIONS products from deforestation free businesses can be established with their associates, as well as with the To obtain approval for the production area it is necessary to traders and manufacturers of the product. Similarly, Cultivate oil palm and take its fruit to make sure the land has the technical conditions according to its capacity of greater use, to guarantee that the production of palm through associations, technical assistance services Producer the producers’ organization. oil is not carried out on land in natural forests. To carry out soil can be provided in order to improve crop yields and analyses to identify nutritional needs and make efficient use of thus discourage possible expansions into new areas agricultural supplies (to reduce GHG emissions) of natural forest. Promote and require that the fruit comes from plantations which One of the main challenges faced by producers is the are deforestation free. Cooperative organization or private company that groups the lack of adequate funding to carry out fertilization or Producers’ producers of a certain area. Its main function is to purchase fruit Promote the adoption of standards and/or schemes that allow Association crop renewal activities. Producer associations can from the producers in the area for its subsequent collection and for the verification of compliance with deforestation free processing. Additionally, it provides technical assistance services commitments. arrange access to financing services, with preferential and facilitates access to financing for its members. conditions for those producers who commit to a Access to markets that provide added value to products from deforestation free plantations. deforestation free production. In order to of fer preferential financial services, it will be necessary to They must promote and demand that the processed and combine public funding or private financial resources marketed fruit be deforestation free, which implies that added Post-Harvest Centers / Corresponding to the different actors who are in charge of the value be given to the product that is deforestation free, that secured through international cooperation, so as to be Transporters/ Marketers / processing and commercialization of the product, from the product traceability be guaranteed along the supply chain, from able to of fer better than market financing conditions, Manufacturing Companies producers’ association to the final consumer. the producer to the final consumer, and that the final consumer in terms of interest rates, or grace periods. be informed that the product is deforestation free. An additional requirement to of fer and guarantee a The main role of the technical assistance service is to improve deforestation free product, is to have a monitoring, An independent entity, or one directly linked to the producers’ production on existing plantations, in order to discourage the Agricultural technical reporting and verification system (MRV). The aim association that’s main purpose is to improve the productive expansion of crops into new areas outside the agricultural assistance service capacities of the palm oil farmers. boundaries. Additionally, to provide technological packages that of this system is to verify that oil palm plantations contribute to the reduction of GHG emissions in the field. have not generated deforestation and to ensure the traceability of the product from the plantation to the An information system that allows monitoring, reporting and The MRV system must provide clear, accurate and up-to-date Monitoring, reporting and final consumer. verification that the production of palm oil is carried out in areas information to all actors in the production chain, and on the verification system that are deforestation free. impacts of palm oil production on natural forests. Table 10 describes in more detail the role of each of the producers linked to the palm oil business model The MRV system must provide clear, accurate and up-to-date and their role in contributing to a deforestation free Final Consumer The last customer along the product value chain. information to all actors in the production chain, and on the business model. impacts of palm oil production on natural forests. Corresponding to public, private or international cooperation Su rol principal está en no financiar la producción de palma Investors or financial institutions that offer international cooperation, that aceitera que esté vinculada a actividades de deforestación y financers make investments or offer financing services for the different en ofrecer condiciones preferenciales de financiamiento para actors linked to the product’s value chain. promover la producción de un producto libre deforestación. Source: SAB Project 78 © CIFOR 79 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS 6.2. Successful Case study of oil palm crop Figure 19. General outline of the case study business model business model renewal in indonesia Information Information case studies The case study of oil palm crop renewal in Indonesia PRODUCERS seeks to avoid deforestation by increasing the The analysis of an international case study provides productivity and renewal of existing crops, thus valuable input for the successful development of reducing the incentive to expand cultivation to new a business model for a deforestation free palm oil land. The project was aimed at benefitting 6,500 Information value chain. Among the elements analyzed are; the producers in six cooperatives, through the renovation Info Qualifiers methodology used for the selection of the case study, a of 5,000 hectares of oil palm plantations. For this BERBAK GREEN Investments PROSPERITY general description of the selected business model with purpose, access to markets and financial services were PARTNERSHIP Technical assistance Credit Return on COOPERATIVES (6) its actors and their respective roles in the value-added of fered through technical assistance services, and investmentPayments chain, the proposal and the identification of challenges Informationproducer cooperatives. Additionally, as part of the and opportunities. Also included, are the lessons Agreements Infomarket access component and in order to participate in learned and possible success factors for developing the project, producers had to commit to implementing VENTURE CAPITAL FUND IMPACT INVESTORS deforestation free business models. deforestation free production plans (Bronkhorst, s.f.). To select the case studies, an initial pre-selection was As illustrated in Figure 19, Millennium Challenge made of seven deforestation free models in the coffee, Corporation created a venture capital fund with impact cacao and palm oil chains (see Appendix 9.6). From the investors and Financial Access and Forest Carbon 7 oversaw POST-HARVEST CENTERS / seven case studies selected, the case of palm oil crop analyzing the credit risk of the producers benefiting EXTRACTION PLANT renewal in Indonesia is the most relevant to the SAB from the loans. Farmers received financing through Information project in Ucayali, considering the advanced age of some DISTRIBUTORScooperatives, which acted as loan agents who of the oil palm crops and the fact that several producer distributed and serviced the loans. For their part, the Products organizations need to renew their crops. MANUFACTURING COMPANIESagricultural cooperatives received technical assistance Payments FINAL CONSUMER from the Netherlands Development Cooperation Service (SNV). To finance the improvements, impact Source: SAB Project investors provided US$ 4.3 million in the first round of capital, consisting of about 500 loans to renovate oil palm plantations (Bronkhorst, s.f.). Since 2016, when this business model was implemented, deforestation in the province of Jambi, (located on the island of Sumatra where the cooperatives participating in the project are located), has been reduced by 55.41%. Financial Access and SNV developed a farmer credit The loss of forest coverage was reduced from 157 kha in 2016 to 70 kha in 2018 (see Figure 20) (World Resources scoring tool, which uses cash flow models to predict Institute, 2020). future farmer income levels to assess the ability of small farmers to secure financing. Therefore, loan © Nanang Sujana/CIFOR repayment was based on the credit score obtained (Bronkhorst, n.d.). 80 81 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Contratos de compra cero deforestación Acuerdos de compra cero deforestación Crédito Pago Pago Fruto Fruto acopiado Info Info Asistencia técnica Figure 20. Loss of forest coverage in Jambi Province Value proposition Figure 21 presents the value proposition for producers, investors and buyers involved in the Indonesia case study. 180 157 160 140 Figure 21. Value proposition for producers, investors and buyers. 120 100 PRODUCERS AND COOPERATIVES INVESTORS PURCHASERS86.2 80 70 60 Technical assistance: 60 Social and environmental impact Certified product Farm management and planning Controlled risk through monitoring and Opportunity to differentiate their products in 40 Plantation renewal techniques technical assistance front of the consumers 20 Productivity increases by 20% in 3 Yields Risk mitigation years after renovation, and with proper Possibility to sell product portfolio in a Assured product volumes 0 management secondary market 2016 2017 2018 YEARS Access to markets through purchase agreements with processing plants YEARS Differentiated financial services Source: Prepared by Climate Focus with information from (World Resources Institute, 2020). Source: SAB Project Actors Involved Challenges and opportunities SNV: the Netherlands Development Cooperation forests. Its main role on the project was to carry out an Figure 22 summarizes the challenges identified for the study case with the corresponding opportunities for each one of Service provides technical assistance to cooperatives, assessment of producers based on the credit rating tool them. in the expectation of increasing productivity by 20% in (Forest Carbon, 2020). 3 years. In this case, technical assistance was focused Figure 22. Business model challenges and opportunitiesMillennium Challenge Corporation: is a U.S. government on plot programming and management, as well as bilateral foreign aid agency established in 2004 as an crop renewal techniques. It was also involved in the independent agency by the State Department and CHALLENGES OPPORTUNITIES development of the credit rating tool (SNV, 2020). USAID. Their role within the project was to provide Financial Access: is a financial services company focused the venture capital and attract impact investors exclusively on emerging markets. Its main role was (Millennium Challenge Corporation, 2020). to design the credit rating tool based on the farmers’ Farmers do not meet the minimum requirements established to Banking services for small agricultural producers and use of Cooperatives: some of the main functions within the qualify for credit microfinance to expand credit terms. cash flow projections, and on their crop management six associated cooperatives are to provide technical practices (Financial Access, 2020). Thin balance between risk, impact and profitability Obtain local public funding to reduce risk level for private investorsassistance, of fer credit to members, sign the credit Forest Carbon: is a company based in Southeast Asia, Accountability for long-term environmental commitments Generate short-term incentives for the different actors. In this way, contract with the venture capital fund and carry out they will not have to wait 3 years for the financial results of the that is focused on providing technical services for activities for the purchase, collection and sale of the renewal. REDD+ and forestry projects in countries with tropical final product. 82 Source: SAB Project 83 Kha MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Lessons learned and potential success factors The following are the lessons learned from the case study: Coordination of all the actor’s objectives in the palm oil value chain, through constant dialogue and feedback. Use of alternative methods and technological tools for assessing credit, in order to facilitate the distribution of resources. Focus on elements that contribute to an increase in producers’ cash flow in a way that facilitates access to and repayment of loans. The value of the proposition to the dif ferent actors must be suf ficiently attractive for them to consider participating in the business model, and in particular for the financiers to assume the risk of investment. To have an information system that is updated, reliable and readily accessible. 84 © José Sánchez / Proyecto SAB 85 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS CHAPTER 07 ACTION PLAN TO REDUCE DEFORESTATION AND GHG EMISSIONS IN THE PALM OIL VALUE CHAIN IN THE UCAYALI REGION © Ricky Martin/CIFOR 86 87 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS This plan is coordinated and based on regional public 07 policy instruments and the development vision for the region set out in the Regional Strategy on Climate Change, which indicates that: ACTION PLAN TO REDUCE DEFORESTATION AND GHG EMISSIONS “By the year 2030, Ucayali will be an Amazon region IN THE PALM OIL VALUE CHAIN which preserves its forests through various conservation IN THE UCAYALI REGION mechanisms such as natural areas, conservation concessions, and indigenous reserves, among other initiatives. At the same time, this region aims to; promote the resilience of these natural areas through sustainable production of their forests, contribute to the national commitment to mitigate GHG emissions associated with the LULUCF sectors, reduce the vulnerability of biodiversity, and the forest landscape of 7.1. Purpose and inputs indigenous, non-indigenous and related rural populations, which depend on the ecosystem services of the forest”. for the action plan Regarding the sector’s competitiveness plan and the revised vision under the SAB project, the chain’s actors have proposed the incorporation of the environmental issue as Through strengthening and improving of the palm oil value chain, this action plan aims follows: “By 2030, the oil palm value chain in Ucayali will be to support GOREU in its commitment to reduce GHG emissions from deforestation in recognized nationally and internationally for its leadership the agricultural sector and thus to contribute to the economic greening of the region. in the production, transformation and export of palm oil and The plan also seeks to create the conditions to; improve ef ficient and sustainable soil its derivatives under a business model that is competitive, management in order to increase land productivity, reduce production costs by making sustainable with the Amazon ecosystem, inclusive, and that it more profitable for the producer, optimize the cost-benefit for companies, generate joins smallholder partners, with business and the state”. enabling conditions for investment in chain development, and to achieve better coordination between the various actors in the value chain. Consequently, with all these actions, this plan aims to contribute to reducing emissions from deforestation and other practices within oil palm cultivation. 88 © BMU PROJECT 89 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS The results of the multi-stakeholder platform workshops, interviews with key actors in the public and private sectors, and strategic planning meetings with experts and regional management instruments were used as inputs for the construction of the current action plan. The multi-stakeholder sector platform (Figure 23) has been of great importance since it brings together representatives from the various links in the chain, from primary production of oil palm, through processing to crude palm oil and its derivatives, as well as actors who provide various services to the chain, both from the public and private sectors, including distributors and traders. Figure 23. Multi-actor platform for the palm oil value chain, second workshop (Pucallpa, November 2019) Source: Proyecto SAB. The platform has built a plural space, enabling discussions to channel ef forts towards a palm oil value chain that is deforestation free and low in GHG emissions. The action plan has been co-designed with the multi-stakeholder platform actors, which facilitates its implementation. 90 © Neil Palmer / CIAT 91 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS 92 7.2. Framework of activities BOTTLENECKS ACTIVITIES INDICATOR GOAL RESPONSIBLE ESTIMATED ENTITIES PARTNERS TIME FRAME JUNPALMA 100% of the Negative environmental International CooperationN ° of PAMAS plants in the Regional Technical impacts associated with Updating PAMAs54 Financial organizations 5 years AGRO-INDUSTRY extraction plants updates sector have an Committeeupdated PAMAs MINAM AND BUSINESS PRODUCE Actions to adapt the palm oil industry to the Alternative Development new demands Promoting the development Nº. of socialization 1 annual Mechanisms (ADM) of the market. of green financial products workshops on green MINAM Permanentworkshop GOREU for the palm oil sector financing Green Protocol Lack of green financial Socialize the sustainable Nº of socialization 2 socialization MINAGRI JUNPALMA products for the palm oil palm model with the Permanentevents events per year sector financial sector in the region GOREU ABC/CF Asset managers, Development of investment impact investment models in line with forest N° of investment 1 business model funds, social ABC 2 years conservation and GHG models developed developed lenders, public reduction agreements banking MINAGRI 54. Environmental Management and Adaptation Program (PAMA in Spanish) BOTTLENECKS ACTIVITIES INDICATOR GOAL RESPONSIBLE PARTNERS ESTIMATED ENTITIES TIME FRAME Develop alliances between IIAP the Regional Technical Committees, universities Centros de investigación 3 approved and research centers Nº of approved Regional Technical Universidades partnerships or 5 years for the development alliances Committee CITE alliances Research, development and improvement of CONCYTEC and innovation services processes and products for for the sector limited sustainable development Junpalma AGRO-INDUSTRY and dispersed Create a database with GOREU AND BUSINESS GOREUinformation on technology Nº of databases Regional Technical 1 database and innovation for the palm created Mesa Técnica 1 year Committee oil sector Regional Actions to adapt the palm oil industry to the new demands of the market. Study of the Junpalma Developing a feasibility potential/ 1 study of the Companies Lack of knowledge of study about carbon markets potential/ ABC carbon markets for constraints of the Investment funds 1 year palm oil (real potential, advantages carbon market constraints of the MINAM – DGFA and limitations) carbon market IIAP (scenarios) MINAGRI - DGAAA Lack of knowledge about Developing a feasibility Extraction plants the environmental costs study and cost-benefit Feasibility 1 Feasibility / benefits of certification study for certification Junpalma Sol de Palma 6 - 12 months for the sustainability study studyschemes for sustainable of palm oil palm oil International cooperation 94 BOTTLENECKS ACTIVITIES INDICATOR GOAL RESPONSIBLE PARTNERS ESTIMATED ENTITIES TIME FRAME 7 internships Internships with N° of exchanges with producer Solidarity Sol de Palma cooperatives of small of successful organizations with JUNPALMA ABC 1 year producers who develop experiences between Lack of knowledge experience of organic production producers MINAGRI - DGA PPS Project (PNUD) about the contribution organic production of organic palm oil AGRO-INDUSTRY production to reduce GHG emissions Producer and AND BUSINESS N° of pilots Development of pilots extractor Solidarityimplemented for the 1 pilot implemented for the organizations Sol de Palma 2 -3 years organic production implemented organic production system GOREU system Certifying companies MINAGRI - DGA Actions to adapt the palm oil industry to the new demands of the market. GOREU International cooperation Carry out an analytical Lack of studies on the study about the PetroPerú Universities environmental impact of N° of studies 1 study carried out 1 year environmental impact of biodiesel in Peru JUNPALMA Research centers biodiesel MINEM - DGH PPS BOTTLENECKS ACTIVITIES INDICATOR GOAL RESPONSIBLE ENTITIES PARTNERS ESTIMATED TIME FRAME Public-Private Lack of incentives to Partnership (within plant in degraded areas Design and implement the framework MINAGRI (DIGESPAC, (former pastureland) of the Coalition palm oil projects for new N° of hectares AgroIdeas, SERFOR, INIA, respecting the legal 1,000 ha for Sustainable 5 years status of the land and plantations in degraded recovered Production) SENASA, MINAM its technical conditions areas GOREU ABC (capacity for greater use) SUSTAINABLE Companies PRODUCTION Actions to improve production and increase GOREU ABC productivity through Developing a study of 1 study about business incentives for Multi-stakeholder Platform a forest-conservation N° of studies business Regional & 1 yearforest conservation and incentives National Technical ProCompite and emission-reduction GHG reduction Absence of incentives to Committee AGROIDEAS approach develop palm business models that promote forest conservation and a reduction in GHG Creation of measures 25% of producers GOREU Financial institutions emissions % of producers to encourage forest benefit from that benefit from Regional and Competitive public funds 5 years conservation and GHG incentives incentives National Technical International cooperation reduction annually Committee organizations BOTTLENECKS ACTIVITIES INDICATOR GOAL RESPONSIBLE PARTNERS ESTIMATED TIME ENTITIES FRAME Agriculture supply companies SUSTAINABLE International Cooperation PRODUCTION 25 % of producers DRAUPromoting support Local Governments % of producers fertilize under programs for coordinated Producers fertilizing under coordinated INIA fertilizer management and organization 5 years Actions to improve coordinated annual practices that allow for DEVIDAmanagement model management AgroRural production and increase sustainable intensification. ABCmodel MINAGRI productivity through IIAP a forest-conservation SENASA and emission-reduction Low crop productivity and profitability approach Supply services International Cooperation Awareness of the proper Local Governments N° of training 2 annual training use of fertilizers to achieve DRAU INIA 5 years sessions sessions sustainable production DEVIDA ABC SENASA BOTTLENECKS ACTIVITIES INDICATOR GOAL RESPONSIBLE PARTNERS ESTIMATED TIME ENTITIES FRAME MINAGRI (AgroPerú) MINAM GOREU Green Funds Design and implement N° of hectares with GOLO 55s SUSTAINABLE Low yields due to GOREU (Fondesam)projects to renovate of new 5 years old age of plantations Producer PRODUCTION plantations Impact Investors palm oil organizations International Cooperation ABC Actions to improve production and increase productivity through a forest-conservation and emission-reduction approach Producer MINAGRI N° of bio-businesses organizations MINAM (DGEFA) Design and implementation 5 bio-business and ecotourism GOREU MINCETUR/PROMPERU 5 years of bio-business projects projects projects implemented GOLOs Sector privado Lack of ABC diversification in production Producer MINAGRI organizations MINAM (DGEFA) Design and implementation N° of ecotourism 5 ecotourism MINCETUR/PROMPERU 5 years of ecotourism projects projects implemented projects GOREU Private sector GOLOs ABC 55. Local Governments (GOLO in Spanish) BOTTLENECKS ACTIVITIES INDICATOR GOAL RESPONSIBLE PARTNERS ESTIMATED TIME ENTITIES FRAME MINAGRI (PNIA, AgroRural) Developing a study of INIA PRODUCE SUSTAINABLE demand for organic Nº of studies 1 study Cooperatives Agricultural supply PRODUCTION fertilizers Extraction plants companies (See list of actors) IIAP Actions to improve International Cooperation production and increase MINAGRI productivity through INIA (PNIA, AgroRural) Definition of technological N° of packages a forest-conservation Lack of organic 1 per production PRODUCEpackages adapted to the validated for the Cooperatives 2 - 3 years and emission-reduction fertilizer in arearegion region Agricultural supply approach the region Extraction plants companies IIAP International cooperation and Establish fertilizer factories N° of factories 1 per extractor Extraction plants NGO (PNUD, USAID, BID) in extraction plants started (total 16) Community- based DEVIDA organizations Financial institutions 5 years Village leaders Ministerio de Vivienda Establish organic fertilizer N° of modules Regional and local (Ministry of Housing) 1 per farm production in farms started government MINAGRI BOTTLENECKS ACTIVITIES INDICATOR GOAL RESPONSIBLE ESTIMATED TIME ENTITIES PARTNERS FRAME O Indigenous organizations Information campaign in Information campaign in ORAU - FENACOCA UNIA indigenous communities indigenous communities about how to develop % of indigenous 100% of CCNN about how to develop UNU communities communities UNIA Permanent of business models that of business models informed informed JUPALMA contribute to forest that contribute to forest GRPI SUSTAINABLE conservation Chamber of Agriculture conservation ORAU - TDC PRODUCTION Actions to improve production and increase Chamber of productivity through Chamber of CommerceWeakness of associations Organizational training for Agriculture a forest-conservation to implement actions to association leaders about N° of leaders trained Universities20 per year JUNPALMA Permanent and emission-reduction conserve forests and the forest conservation and per year ESAN DRAULocal government approach reduce GHG emissions GHG reduction - DPCA GOREU BOTTLENECKS ACTIVITIES INDICATOR GOAL RESPONSIBLE PARTNERS ESTIMATED TIME ENTITIES FRAME ENVIRONMENT Negative environmental Carry out a study into the impacts associated with environmental impacts of palm Nº de estudios 1 study Junpalma ABC 1 year AND SECTORIAL palm oil production oil production COORDINATION Actions to strengthen the value chain and its actors’ MINAGRI commitment to Promoting conservation Agreements on 1 agreement agreements in palm oil commitments made signed with MINAM ABC conserve forests plantations by associations JUNPALMA JUNPALMA and reduce GHG emissions Promoting agreements GOREU - Regional COCEPU Lack of support for 1,000 producers between associations for Commitment Working Group SERFOR conservation and sign conservation forest conservation and agreements signed ASPASH Permanent reforestation programs agreements for reforestation of native by producers Regional Technical Universities with native species their farmsspecies Committee NGO, ABC Carry out reforestation Municipalities projects on palm oil GOREU REFINCA Permanent, N° reforested DEVIDA plantations using native 500 hectares Piloted within hectares in priority SERFOR AgroIdeas species in a participatory reforested per year INIA the SAB areas way in the different areas of JUNPALMA International cooperation business model the region ORAU NGO, ABC BOTTLENECKS ACTIVITIES INDICATOR GOAL RESPONSIBLE PARTNERS ESTIMATED TIME ENTITIES FRAME GOREU JUNPALMA ENVIRONMENT Lack of coordination N° of forest 1 monitoring in the value chain for Development of forest ABC AND SECTORIAL monitoring and verification monitoring systems system Regional Working 1 year forest monitoring and Groupsystems implemented implemented SERFOR MINAM COORDINATION verification systems (DGOTA, GeoBosques) Actions to strengthen the value chain and its actors’ commitment to NGO conserve forests Developing a communication JUNPALMA and reduce GHG Lack of a communication and public relations strategy 1 communication Private companies N° of communication emissions strategy for chain actors GOREU to disseminate actions that strategy (green MINAGRI 1 year contribute to the conservation strategies developedon environmental issues palm oil plan) Regional Working of forests in the palm sector GOREUCommittee San Martin and Loreto 8. 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Methodology for GHG emissions cost analysis For purposes of data collection, a set of tools developed by the Alliance of Bioversity International and CIAT was implemented in order to estimate costs and emissions from oil palm production in the region, based on typical farm methodologies developed by Feuz & Skold (1990) and Agri Benchmark (2019). Geographical information and statistics on production, yield and available area were used to define typical farms. In addition, there was consultation with local experts, which allowed the identification of the types of distinctive productive systems in the region, which will represent a considerable proportion of oil palm production. Once the typologies had been defined, producers with characteristics that matched those corresponding to each typology were recruited, according to the following variables: performance, location, production area, level of technology and production system. Each group included 4 to 6 producers of dif ferent genders, who participated in facilitated group workshops. Teaching materials and visual aids were used over a period of 6 to 8 hours, during which the general characteristics of a typical farm were defined through dialogue and consensus. Characteristics included; available workforce, fixed assets and typical infrastructure, the use of land prior to cultivation and activities to change land use, the dif ferent stages of cultivation, activities developed from the change of land use to the productive stage, the frequencies and requirements of workforce, supplies, machinery during the dif ferent production stages, the origins and destinations of supplies and products, the levels of productivity and variations in time, the sales prices of the dif ferent products obtained and all the processes related to the transportation of supplies and products, in addition to other environmental and macroeconomic variables. The information was systematized using tools developed in Microsof t Excel, under a format developed by the Alliance of Bioversity International and CIAT. The format allows consistency and comparability of results among productive systems and other industries. The parameters, inputs and results were reviewed and validated with local experts. These were adjusted through consultations with participating producers, to review inconsistencies or validation of information. The methodologies, tools and final results were socialized and made available to participating producers and local stakeholders. 104 © Mokhamad Edliadi/CIFOR 105 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS 9.2. Analysis of the sensitivity of ANALYSIS OF NET PROFIT SENSITIVITY - TYPE 2 production costs by typology PRODUCTION / 17 18 19 20 21 22 23 PRICE 70 -1010.1 -873.6 -737.0 -600.5 -463.9 -327.4 -190.8 ANALYSIS OF NET PROFIT SENSITIVITY - TYPE 1 75 -729.6 -576.6 -423.5 -270.5 -117.4 35.6 188.7 80 -449.1 -279.6 -110.0 59.5 229.1 398.6 568.2 PRODUCTION / 8.0 9.0 10.0 11.0 12.0 13.0 14.0 15.0 85 -168.6 17.4 203.5 389.5 575.6 761.6 947.7 PRICE 90 111.9 314.4 517.0 719.5 922.1 1124.6 1327.2 70.0 -1203.9 -1067.3 -930.8 -794.2 -657.7 -521.1 -384.6 -248.0 95 392.4 611.4 830.5 1049.5 1268.6 1487.6 1706.7 75.0 -1071.9 -918.8 -765.8 -612.7 -459.7 -306.6 -153.6 -0.5 100 672.9 908.4 1144.0 1379.5 1615.1 1850.6 2086.2 80.0 -939.9 -770.3 -600.8 -431.2 -261.7 -92.1 77.4 247.0 105 953.4 1205.4 1457.5 1709.5 1961.6 2213.6 2465.7 85.0 -807.9 -621.8 -435.8 -249.7 -63.7 122.4 308.4 494.5 110 1233.9 1502.4 1771.0 2039.5 2308.1 2576.6 2845.2 90.0 -675.9 -473.3 -270.8 -68.2 134.3 336.9 539.4 742.0 95.0 -543.9 -324.8 -105.8 113.3 332.3 551.4 770.4 989.5 100.0 -411.9 -176.3 59.2 294.8 530.3 765.9 1001.4 1237.0 105.0 -279.9 -27.8 224.2 476.3 728.3 980.4 1232.4 1484.5 110.0 -147.9 120.7 389.2 657.8 926.3 1194.9 1463.4 1732.0 ANALYSIS OF THE SENSITIVITY OF THE AREA NEEDED TO GENERATE 2 MMW (MONTHLY MINIMUM WAGE) (HA) - TYPE 2 PRODUCTION / 17 18 19 20 21 22 23 PRICE 70 424.0 115.3 66.7 46.9 36.2 ANALYSIS OF THE SENSITIVITY OF THE AREA NEEDED TO GENERATE 2 MMW (MONTHLY MINIMUM WAGE) (HA) - TYPE 1 75 436.4 107.0 61.0 42.6 32.8 26.6 22.4 80 67.3 44.1 32.8 26.1 21.7 18.6 16.2 30.0 8 9 10 11 12 13 14 15 85 36.5 27.8 22.5 18.9 16.2 14.3 12.7 70 1225 135 72 49 37 75 608 112 62 42 32 26 90 25.0 20.3 17.1 14.7 13.0 11.6 10.5 80 1004 111 59 40 30 24 20 95 19.0 16.0 13.8 12.1 10.8 9.7 8.9 85 131 61 40 29 23 19 17 100 15.4 13.2 11.5 10.3 9.2 8.4 7.7 90 209 70 42 30 23 19 16 14 105 12.9 11.2 9.9 8.9 8.1 7.4 6.8 95 93 48 32 24 19 16 14 12 110 11.1 9.8 8.7 7.9 7.2 6.6 6.1 100 60 36 26 20 17 14 12 11 105 44 29 22 17 14 12 11 10 110 35 24 19 15 13 11 10 9 106 107 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS ANALYSIS OF NET PROFIT SENSITIVITY - TYPE 3 9.3. Comparative analysis of certification schemes: PRODUCTION / socio-environmental components 21 22 23 24 25 26 27 28 PRICE 70 -1304 -1172 -1041 -910 -778 -647 -516 -384 A comparative analysis was conducted to provide information on the characteristics and dif ferences of the most 75 -957 -809 -661 -514 -366 -218 -70 78 outstanding certification schemes in the palm oil sector. The following international certification schemes were 80 -611 -446 -282 -118 47 211 375 540 considered which have sustainability components and organic production schemes: 85 -264 -83 98 278 459 640 821 1002 90 82 280 477 674 872 1069 1266 1464 y RSPO (Roundtable on Sustainable Palm Oil) 95 429 643 857 1070 1284 1498 1712 1926 y RA (Rainforest Alliance) 100 775 1006 1236 1466 1697 1927 2157 2388 y FFL (Free for Life) 105 1122 1369 1616 1862 2109 2356 2603 2850 y ISCC (International Sustainability and Carbon Certification) 110 1468 1732 1995 2258 2522 2785 3048 3312 y USDA Organic ANALYSIS OF THE SENSITIVITY OF THE AREA NEEDED TO GENERATE 2 MMW (MONTHLY MINIMUM WAGE) (HA) - TYPE 3 A review of the principles and criteria of each scheme56 was carried out for the analysis, and a qualitative assessment was assigned according to the content and level of requirement for each criterion and principle. PRODUCTION / 21 22 23 24 25 26 27 28 The analysis focused on evaluating two components: 1. Environmental and 2. Worker’s conditions and welfare. PRICE Each component was divided into topics and according to the level of detail with which each scheme addresses 70 265.5 101.4 62.7 45.4 them, as well as their stringency, which was classified as: High, Medium, Low and N.A. (not applicable), when 75 571.3 116.5 64.9 44.9 34.4 27.8 23.4 the certification scheme does not make specific reference to the topic evaluated. Here is a summary of the main 80 95.8 55.5 39.1 30.2 24.6 20.7 17.9 15.8 findings: 85 38.5 29.2 23.5 19.6 16.9 14.8 13.2 11.9 90 24.1 19.8 16.8 14.6 12.9 11.5 10.4 9.5 Environmental component 95 17.5 15.0 13.1 11.6 10.4 9.4 8.6 8.0 100 13.8 12.0 10.7 9.6 8.7 8.0 7.4 6.8 This component incorporates requirements regarding the ef ficient and sustainable use of natural resources and the implementation of good agricultural practices, which avoid and minimize the pollution of water sources, air, and 105 11.4 10.1 9.0 8.2 7.5 6.9 6.4 6.0 soil degradation, in addition to the requirements for registration, implementation, and monitoring these ef forts. It 110 9.7 8.7 7.8 7.2 6.6 6.1 5.7 5.3 also covers requirements related to the protection of biodiversity, the management of natural ecosystems, changes in land use, deforestation, and the responsible use of agrochemicals. In this regard, the component was categorized using the following subcategories: i. water; ii. soil; iii. energy, climate change and greenhouse gases (GHG); iv. liquid and solid waste management; v. ecosystems, biodiversity and wildlife; vi. packaging; and vii. agrochemicals and post-harvest products. The following is a summary of the main findings: 56. Roundtable on Sustainable Palm Oil: Principles and criteria for sustainable palm oil production; Rainforest Alliance, standard for sustainable ag- riculture for crop and livestock production by farms and producer groups; Fair For Life: Standard for fair trade certification and responsible supply 108 109 chains; ISCC 202 sustainability requirements and USDA Organic Standards 7 CFR 205. MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS 1. Water: the most demanding schemes regarding the use and care of water from RSPO, RA and ISCC. In Regarding solid waste, all schemes (except for USDA Organic), require the farm to have an integrated order to be certified under these schemes, farms and processing plants must have a water management solid waste management plan that allows for its classification, and a management process to be followed plan that is aimed at ef ficient and sustainable water use and that also guarantees water sources are not (recycling, composting, and disposal, among others).The RSPO states that no burning should be carried polluted with chemical residues or fertilizers. It should be noted that the ISCC scheme is more specific out for the disposal of solid waste. However, FFL, RA and ISCC allow it, as long as there are incinerators regarding these practices and their implementation. designed for the specific type of waste. They also need to be subject to the relevant legislation and have Although FFL does not refer to a water management plan, the principle is that there should be rational minimal impact on the environment and human health. In the case of USDA Organic, burning is only and minimum use using good practices, and that the sources and the quality of the water used should be allowed if the objective is to suppress the spread of disease or stimulate the germination of seeds, but identified. USDA Organic does not refer to a water management plan either. However, it points out that not for waste management. natural resources (water and soil) should be conserved and even improved but doesn’t explain specifically 5. Ecosistemas, biodiversidad y vida silvestre: this is one of the fundamental pillars of all the certification how this should be done. schemes (with the exception of USDA Organic), that require the farm to have a prior evaluation that 2. Soil: all the schemes have similar requirements and all state that farms must make use of good agricultural identifies; natural ecosystems, and rare, threatened or endangered species. They must be protected and practices that guarantee the quality of the soil, avoid its pollution, erosion and compaction. Similarly, there must be evidence that the agricultural operation does not harm of af fect them in a negative way. they agree that the fertility of the soil must be periodically monitored to identify fragile and problematic RA and ISCC go beyond the evaluation, as they require an environmental impact assessment to be carried soils and take protective or restorative measures if necessary. out prior to an initiative, to establish new areas for planting or expansion of the farm’s infrastructure. 3. Electrical power: RSPO and RA have the most comprehensive criteria; they require the farm to be certified, y Invasive species: the introduction of invasive species is strictly prohibited under the RA and FFL to have an energy ef ficiency plan that is regularly monitored and incorporates minimum consumption schemes, while for RSPO and ISCC it is permitted, only if they are already established in the region requirements (also referred to by FFL and ISCC). All the schemes require energy consumption to be or country, and if there is a management plan that incorporates monitoring of the species. USDA monitored and that dependence on non-renewable sources is reduced. In this last aspect, FFL could be Organic makes no mention of this aspect. considered more flexible than the other schemes, as this requirement is not mandatory, but rather a plus. y ●Propagation material: the use of genetically modified propagation material is strictly forbidden by USDA Organic is the only scheme that does not have guidelines that refer to the use of electrical energy. FFL, RA and USDA Organic, while ISCC permits its use, as long as traceability and proper labelling is Additionally, all the schemes (except USDA Organic), require ef forts be made to reduce GHG emissions, ensured. RSPO makes no mention of this. in this sense the RSPO requirements are the most specific. y ●Deforestation and ecosystem degradation: the schemes address this point in dif ferent ways. All 4. Waste management: the management of crop residues should be aligned with good agricultural and establish dif ferent reference dates for land use change, which determines whether or not the unit to environmental practices and should not represent a risk to human health or ecosystems. The RA and be certified can access the scheme, according to how much damage or destruction is caused by the ISCC schemes demand that wastewater should not be discharged into aquatic ecosystems or very sandy agricultural activity. soils. Similarly, RSPO states that water sources and wetlands should be protected from liquid waste According to FFL, owners of land deforested by agriculture (primary and secondary forests) that is more through appropriate management and disposal of hazardous chemicals, but does not specify how this than 10 years old at the time of applying for certification, can only gain access to certification if ef forts have should be carried out. The FFL scheme is more flexible about discharging wastewater into water bodies. been made to repair the damage caused, and measures have been taken so that there is no recurrence. It is permitted as long as it does not contribute to the degradation of their physical or biochemical In contrast, RA grants a shorter grace period (5 years before the initial application for certification) and composition. requires that no forests have been destroyed af ter 1 January 2014. It should be noted that this last scheme To be certified with RA and ISCC, the farm must have the necessary infrastructure to collect and treat refers to forests in general, without being specifying primary or secondary. wastewater. In FFL’s case, there must be a transition plan for construction of the infrastructure. The USDA RSPO has as a restriction on the damage made to primary forests from 2005. Apparently, this ban does Organic scheme is less demanding in this respect, as its requirements are general and refer to having not include secondary forests. ISCC covers not only primary forests, but also includes; sparsely wooded clear and defined limits and buf fer zones, as well as a ban on the use of septic sludge. areas, grasslands, wetlands and other areas designated by law or authorities for the protection of rare, threatened or endangered species or ecosystems. Under this scheme, changing the status of such ecosystems af ter 1 January 2008 is prohibited. 110 111 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Other areas of environmental interest that the schemes seek to protect are peatlands, high conservation Based on this analysis, RSPO, RA and ISCC are the strictest schemes, as they cover the dif ferent issues with greater value areas (HCVs) and high carbon stock areas (HCSs). It should be noted that USDA Organic scheme’s stringency and specificity. Although the mission of the FFL scheme is to enforce fair trade principles, it also has an requirements do not establish explicit rules regarding deforestation and destruction of ecosystems. important environmental component. y Burning: Burning to prepare land for planting or replanting is strictly prohibited under all schemes. The USDA Organic scheme is not as explicit in several areas of the environmental components including energy However, FFL could be considered more flexible in this respect as the method can be considered as consumption, liquid and solid waste management, deforestation and ecosystem conservation. Additionally, this long as it is small and controlled. On the other hand, RA and ISCC schemes establish that producers scheme does not consider the working conditions and worker welfare component, as do the other schemes, which should only resort to burning for pest control. are also governed by International Labor Organization (ILO) conventions and recommendations. 6. Agrochemicals and post-harvest products: Each scheme has a list of agrochemicals that are prohibited for use in oil palm production. FFL and RA have their own lists, while the RSPO and ISCC require compliance with both the Rotterdam Convention and the Stockholm Convention (ISCC). USDA Organic restricts the use of synthetic substances, non-agricultural substances and non-organic agricultural substances, Welfare and working conditions component among others. All permitted products must be on the National List of Synthetic Substances Used for the Production of Organic Crops in the United States. This scheme stipulates that from the date of the This concerns an employer’s obligations towards its employees and addresses the following criteria: application for certification, no prohibited substances have been used within the last 3 years. y The prohibition of abusive behavior by the employer (forced labor, debt bondage, discrimination, human Each farm must have detailed records of the supplies used. These substances must be stored safely in traf ficking, and sexual abuse, among others) accordance with approved best practices. RSPO and ISCC state that containers must be reused, recycled or disposed of in an environmentally responsible manner, while FFL and RA stipulate that agrochemical y The worker’s right to receive clear information regarding his or her working conditions (position to be held, containers must be returned to the supplier. USDA Organic prohibits the use of packaging, containers activities to be performed, salary, nature of payment and frequency of payment) and/or containers that store synthetic fungicides, preservatives or fumigants in the preparation of an agricultural product. y Freedom of association RSPO, RA and ISCC schemes require that communities surrounding the property must be notified if y Limits on working hours (per day or week), overtime, breaks and food agrochemicals were used that may represent a risk. RSPO states that neighbors must be warned 48 hours before use, ISCC only refers to the population that must be notified (population within 500 meters of the y Safety at work farm), while FFL and USDA Organic do not mention this in their requirements. y Occupational accidents and diseases All schemes, except for USDA Organic, require an integrated pest management (IPM) plan, trained staf f and regular implementation. They also require a record with detailed information regarding pests and y Rights of pregnant workers the methods and materials used to control them. y Minimum age for employment RSPO and RA provide specifications regarding the use of fire for phytosanitary purposes. They only allow it if there are no other ef fective methods, or if it causes less environmental impact than alternative processes. These criteria were divided into six topics: i. general workers’ rights; ii. hourly labor intensity; iii. wages; iv. provision of housing for workers; v. occupational safety and health; and vi. working conditions for young workers. Since most Considerations regarding the environmental component of the certification schemes analyzed in this component are based on the conventions and recommendations of the ILO, it was found that their respective criteria vary very little from scheme to scheme and that they are subject If the farm does not meet all the criteria of the dif ferent certification schemes, partial compliance is allowed if a to the legislation of each country. It should be noted that USDA Organic does not include this component in its transition plan is in place aimed at full compliance. The criteria that constitute each scheme cover dif ferent levels of criteria. stringency and specificity. This disparity may make it dif ficult to align standards and generate discussions on their comparative convenience. 112 113 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS 9.4. Methodological tool: business canvas model, 9.5. Mapping of potential funders for to build a business model that contributes to a deforestation free value chain forest conservation (CFC) GENERAL INFORMATION 8. KEY 7. KEY 2. VALUE 4. CUSTOMER TYPE OF 1. CUSTOMERS INVESTOR MISSION / OBJECTIVES / DESIRED IMPACT PARTNERS ACTIVITIES PROPOSITION RELATIONS ORGANIZATION Root Capital seeks to improve the quality of life of rural producers by connecting them to the formal What key activities are Do you think that having a economy. They invest in the growth of agricultural companies that can be a generator of positive change in required to offer a product product that contributes to Root Capital Private their communities. These companies buy products such as coffee, cocoa or basic grains from thousands of that contributes to CFC? What CFC can help retain current small farmers. They also connect their members to markets and help improve their agricultural practices. is the feasibility (time) to customers? How? Are your customers interested implement these activities? in purchasing products that How can the relationship with Do you think that having a Does my product currently contribute to CFC? existing partners be improved Are there any activities that product that contributes to Althelia is an asset manager with an impact-oriented investment approach, aligning financial returns with a Althelia - Mirova Private in order to offer a product that should be commissioned for offer any deforestation free CFC can help acquire new measurable environmental and social impact. added value to my customers? If so, what kind of contributes to CFC? the partners? customers? How? requirements do your current If yes, how is this deforestation customers set to verify that The Grassroots Business Fund is a non-profit organization with its headquarters in Washington and offices What new partners are free added value measured or the product contributes to Grassroots in Kenya, Peru and India. Its mission is to build and support high-impact businesses that provide sustainable required to offer a product that 6. KEY RESOURCES verified? 3. SALES CHANNELS Private CFC? Business Fund economic opportunities to thousands of people at the base of the economic pyramid. They seek to invest in contributes to CFC? growing businesses. How could this deforestation Have you identified new Do current investors / funders free added value be improved potential customers that offer any benefits for products that contribute to CFC? What are the key resources in my product? Does the current system to consider CFC criteria for the The EcoEnterprise Fund provides growth capital and strategic guidance for innovative, impact-generating EcoEnterprises Private (human, physical, natural, How can these improvements transport and distribute of purchase of your products? companies to scale up and optimize their financial, environmental and social performance. Have potential new funders or financial, social and in the added value of my our product guarantee the If so, what kind of investors offered benefits for intellectual) required to offer product be measured or traceability of a product that requirements do potential products that contribute to CFC a product that contributes contributes to CFC? It offers credit and insurance for the agricultural sector, focusing on small producers. It provides financing for verified? new customers set to verify been identified? to CFC? working capital, crop maintenance, storage and commercialization of products, increasing productivity and that the product contributes Agrobanco PublicHow can our sales channels inserting small rural producers into the financial system. These credits can be offered on an individual or Can some key resources be be improved to ensure the to CFC? membership of an association basis. provided more efficiently by traceability of a product that partners? contributes to CFC? Financing mechanism promoted by the Ministry of Agriculture and Irrigation (MINAGRI), which offers non-refundable resources to support farmers in four ways: 1. adopting technology, 2. improving business Agroideas Public management, 3. supporting productive reconservation, and 4. encouraging the association of small and 10. COST STRUCTURE 5. SOURCES OF INCOME medium sized agricultural, livestock and/or forestry producers who are properly organized. Variation in cost structure to be able to offer a product that Can having a product that contributes to CFC help improve your income? contributes to CFC: 12Tree is a pioneer in the implementation of large-scale sustainable forestry and agroforestry projects for Can having a product that contributes to CFC help diversify your sources of income? • Additional costs institutional investors. Its long-term objective is to create new forestry and agroforestry areas in Central and Can a product that contributes to CFC be offered at a competitive price? South America, which generate sustainable returns for investors and provide ecological and social benefits • Cost reduction 12Tree Private at the local level. In order to mitigate risks, they support and control the implementation of resources in the operation. They buy land to start plantations or purchase established plantations, in order to establish anchor projects in the regions. Rabobank operates in Peru through the Rabobank Foundation. It focuses on financing agricultural cooperatives in “the missing middle” to improve the living conditions of small farmers. Through the Rabo Rabobank Private Rural Fund, credit is provided to cocoa cooperatives in Huánuco for working capital used for exports at a competitive rate. 114 115 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS GENERAL INFORMATION 9.6. List of successful business models TYPE OF INVESTOR MISSION / OBJECTIVES / DESIRED IMPACT ORGANIZATION that are deforestation free Investing to support small producers through access to financial services, and capacity building for Oikocredit Private NOMBRE UBICACIÓN CADENA CARACTERÍSTICAS cooperatives, producers, processors and distributors. • US$140 million in short-term loans from the USA were made to 115 coffee companies, covering more than 100,000 small farmers in five countries. The Fund &Green seeks to demonstrate that inclusive, sustainable and deforestation free financing can be commercially viable and replicable by strengthening the rural development paradigm that protects forests Channeling finance from the • Farmers adopted climate-smart practices regarding soil, Central America and promotes high productivity agriculture. It also aims to facilitate investment by conventional investors private sector down to small water and biodiversity.(Guatemala, Honduras, Mexico, Coffee through risk reduction. farmers through the Coffee Nicaragua, Peru) • US$ 9 million were paid in long-term renewable loans, Grower Resistance Initiative involving 1,300 smallholders. Target customers: • 3,500 hectares of land being renewed. &Green Fund Private Clientes objetivo 1. Companies in the value chain that source directly from farmers • General objective to conserve 570,000 ha of natural forest in 2. Medium- large plantations seeking long-term capital for growth Madre de Dios • The program is expected to prevent the emission of more than 3. Financial institutions that serve or can influence farmers 4.5 million t of CO eq by 2020. Impact investment to support 2 4. Service providers in value chains that can directly influence the behavior of producers. the agroforestry activities of Peru - Tambopata - • Recovery of 4,000 ha of degraded land in buffer zones, Cocoa small farmers in the Tambopata- Bahuaja REDD+ Project restoring them for sustainable cocoa production (1,250 ha Bahuaja REDD+ program reached by 2017). • It is anticipated that 1,100 small farmers will benefit from the certification program. They invest in large-scale projects that enable farmers to produce more and better through sustainable agricultural practices. They strengthen the link between family farms and corporate supply chains. Their Livelihood Funds investors commit to buying the goods produced by these projects for ten years. In addition, the projects Private • Financing and in-kind support to more than 9,000 small for Family Farming benefit society as a whole, through biodiversity conservation, water resource management, and CO2 capture. farmers cultivating 30,000 ha of cocoa plantations, since in L3F’s return on investment depends on the tangible social, economic and environmental results of the 2018. projects. • Farmers involved in the CAA practice improved their farm Combined finance for the zero Ghana Cocoa management strategies, resulting in yields double those of deforestation cocoa value chain non-CAA farmers. The purpose of Cooperativa Abaco is to provide and improve the welfare of its members, employees and • Successful UTZ and Rainforest Alliance certification for CAA Abaco Private communities with flexible and customized financial solutions, by working for the common good and focusing farmers between 2017 and 2018. on sustainable development. • Preventing of the loss and deterioration of hundreds of hectares of forest habitat per year Promoting business and consumer practices that contribute to the conservation of biodiversity, the The Nanga Lauk Community sustainable use of natural resources, and the mitigation of climate change and adaptation to its effects. • Supports the conservation of critically endangered species. Eco.business Private Forest and the Sustainable Eco.business invests in activities that conserve nature and promote biodiversity by generating both financial Indonesia Palm Secures the oldest parts of the rainforest.Commodity Conservation and environmental returns. Mechanism • Introduces new livelihood opportunities through forest-based products and supports ecotourism. 116 117 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS NOMBRE UBICACIÓN CADENA CARACTERÍSTICAS NAME OF THE INSTITUTE / ORGANIZATION REPRESENTATIVE • Borrowers must adhere to sustainability management 11 Central Committee of Ucayali Oil Palm Producers Sergio Jiménez guidelines based on standard certification criteria. If a given certification standard requires the use of agroforestry Roya Renovation Nicaragua Coffee 12 Central Committee of Ucayali Oil Palm Producers – La Villa Bertha Paredes techniques, agroforestry would become an aspect of the project. The certification standards considered for the project 13 Central Committee of Ucayali Oil Palm Producers – Las Palmeras Nilo Junes Clemente include UTZ, Starbucks, Fair Trade and 4Cs. 14 Central Committee of Ucayali Oil Palm Producers – Maronal Celia Catpo López • Project activities comply with RSPO certification and the zero deforestation requirements. 15 Central Committee of Ucayali Oil Palm Producers Walter Figueroa Renovation of oil palm Indonesia Palm crops • The project prevents deforestation by increasing farmers 16 Central Committee of Ucayali Oil Palm Producers Max Gamarra productivity and the yield of existing farmlands, reducing the incentive to expand farming to new lands. 17 Central Committee of Ucayali Oil Palm Producers – San Martín Rubén Ñaupa • The main objective of the training is to get farmers to comply 18 Regional Tourism Directorate of Ucayali Willian Ramírez with certification schemes, so it includes topics about preserving biodiversity and planting shade trees. 19 Regional Agricultural Directorate of Ucayali Nick PretelSDM: Cargill Cocoa Ivory Coast Cocoa and Chocolate • The program’s certification objectives will reduce 20 Earth Innovation Institute Gustavo Suarez deforestation if compliance with a given standard requires a 21 Earth Innovation Institute Patricia Seijas commitment to reduce deforestation. 22 Earth Innovation Institute Iván Alcantara 23 Ecocert Peru Pierre Neyra 24 Equilibra Perú SAC Nick Villaorduña Hauxwell 25 Rabobank Foundation Jonathan López 9.7. List of actors in the palm oil 26 Regional Government of Ucayali - Regional Office for Economic Development Rafael De Los Rios value chain in the Ucayali region 27 Regional Government of Ucayali - Regional Office for Economic Development Vicente Núñez Ramírez 28 Regional Government of Ucayali – ProCompite Pedro Ruiz Vásquez 29 Regional Government of Ucayali – Regional Foreign Trade and Tourism Directorate William Ramírez NAME OF THE INSTITUTE / ORGANIZATION 30 ICRAF Marta Suber REPRESENTATIVE 1 Althelia Funds Manuel Velapatiño 31 Instituto de Investigaciones de la Amazonía Peruana Diego García 2 AgroIdeas Lex Villacorta 32 Industrias Oleaginosas Monte Alegre S.A Daniel Villacorta Jara 3 Alicorp Raquel Castro 33 Industrias Oleaginosas Monte Alegre S.A Norberto Angulo 4 National Forest and Wildlife Service Denis Armas 34 National Institute of Agricultural Innovation Irene Díaz 5 National Forest and Wildlife Service Luis Saavedra 35 National Institute of Agricultural Innovation Miguel Vásquez 6 Regional Environmental Authority of Ucayali Miguel Sánchez Toledo 36 National Institute of Agricultural Innovation Carlos Alvarado 7 ASCEPERU Segundo Luperdi Rojas 37 National Palm Oil Board of Peru Nestor Sanchez Falcon 8 Biodiesel Pucallpa S.A. Martin Zelada Calderon 38 National Palm Oil Board of Peru Gregorio Saénz 9 Engineering College of Peru Alexander Pérez Espejo 39 Ministry of the Environment - Directorate General for Climate Change and Desertification Patricia Patrón 10 Central Committee of Ucayali Oil Palm Producers Melida Macedo 40 Ministry of Environment – Directorate General for Land Management William Llactayo 118 119 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS NAME OF THE Figure 24. Francisco Pezo, Regional Governor of Ucayali, at the palm oil value chain multi-stakeholder platform together INSTITUTE / ORGANIZATION REPRESENTATIVE with the SAB project team (Pucallpa, November 2019) 41 Ministry of Agriculture and Irrigation Jaime Mansilla 42 Ministry of Agriculture and Irrigation José Barturen 43 Ministry of Agriculture and Irrigation Laura Avellaneda 44 Ministry of Agriculture and Irrigation Marco Montañez Artica 45 Ministry of Agriculture and Irrigation Marco Montañez Artica 46 Molinos & Cia S.A Diego Muñoz Guevara 47 Oleaginosas Amazónicas S.A. Mary Ramos Figueroa 48 Oleaginosas Amazónicas S.A. Nilo Maguiña Vásquez 49 Oleaginosas Amazónicas S.A. Oscar Neyra Saavedra 50 Oleaginosas Amazónicas S.A. Germán Tang 51 Oleaginosas Padre Abad S.A. Carlos Arrascue 52 Oleaginosas Padre Abad S.A. Judson Arévalo 53 Oleaginosas Padre Abad S.A. Neira Adriano Calixto 54 Regional Organization AIDESEP of Ucayali Cledy Cairuna García 55 ROSSEL Ermed Roel Silva Agip 56 Sierra y Selva Exportadora Kateryn Catire Diaz Source: SAB Project 57 Sol de Palma Lisandra Martínez 58 Sol de Palma María Luz Velarde 59 Solidaridad Lesly Vera 60 Sociedad Peruana de Ecodesarrollo Andres De La Cruz 61 Sociedad Peruana de Ecodesarrollo Gisela Arrascue 62 Universidad Nacional Intercultural de la Amazonia Aoife Bennet 120 121 MOVING TOWARDS A PALM OIL VALUE CHAIN THAT CONTRIBUTES TO THE CONSERVATION OF FORESTS AND A REDUCTION IN GREENHOUSE GAS EMISSIONS Alliance Bioversity International and the International Center for Tropical The Americas Hub www.bioversityinternational.org Agriculture (CIAT) are part of CGIAR, a global research partnership www.ciat.cgiar.org for a food-secure future. Km 17, Recta Cali–Palmira CP 763537 www.cgiar.org Bioversity International is the operating name of the International Apartado Aéreo 6713 Plant Genetic Resources Institute (IPGRI) Cali, Colombia Tel. (+57) 2 4450000