Indonesia's CPO Exchange and ISCC: Unlocking New Opportunities for Producers and Exporters
Muhammad Imam Taufik • December 9, 2023
Indonesia is the world's top producer and exporter of crude palm oil (CPO), a versatile and widely used vegetable oil that has various applications in food, cosmetics, and biofuel. Indonesia's CPO export is a vital sector for the country's economy, as it contributes to the foreign exchange earnings, employment, and rural development. However, Indonesia's CPO export also faces some challenges, such as fluctuating prices, environmental issues, trade barriers, and competition from other vegetable oils. In order to overcome these challenges and enhance its competitiveness and sustainability in the global market, Indonesia has recently launched its own CPO futures exchange, and also encourages its CPO producers and exporters to adopt ISCC certification, a globally recognized and respected scheme that demonstrates the sustainability, traceability, and compliance of CPO production and supply chain. In this article, we will analyze how Indonesia's CPO exchange and ISCC certification can create new opportunities for CPO producers and exporters.
The Trends of Indonesia's CPO Export
The data shows that Indonesia's CPO export volume and value have experienced some fluctuations in the past six years. The export volume reached its highest level in 2019, with 29.5 million tons, while the export value reached its highest level in 2021, with 28.6 billion USD. The export volume and value in 2021 increased by 13.4% and 55.1%, respectively, compared to 2020, mainly due to the high demand for CPO from China, India, and the European Union, as well as the recovery of the global economy from the COVID-19 pandemic. The average export price of CPO in 2021 was also the highest in the past six years, at 1,059 USD per ton, reflecting the tight supply and strong demand in the global market.
The data also shows that Indonesia's CPO export volume and value are projected to decline slightly in 2023, with 19.6 million tons and 17.3 billion USD, respectively. This is a moderate drop of 25.3% and 39.4%, respectively, compared to 2022. The main reasons for this decline are the lower production of CPO in Indonesia due to the natural cycle of oil palm trees, the need for replanting, the labor shortage, and the impact of the La Nina weather phenomenon. Moreover, the demand for CPO from the main importing countries, such as China, India, and the European Union, is also projected to decrease due to the preference for other vegetable oils, the adoption of stricter environmental standards, and the emergence of new trade barriers. The average export price of CPO in 2023 is projected to be 885 USD per ton, which is still higher than the average price in 2018, 2019, and 2020, reflecting the resilience and adaptability of the CPO market.
The data also shows that Indonesia's CPO export destination countries have changed over time, with some countries increasing their imports and some countries decreasing their imports. The top four destination countries for Indonesia's CPO export in the period of January to September 2023 were India, China, Pakistan, and the United States, with export volumes of 3,957 tons, 3,100 tons, 2,022 tons, and 1,164 tons, respectively, and export values of 3,342 million USD, 2,677 million USD, 1,773 million USD, and 1,022 million USD, respectively. These four countries accounted for about 47% of the total export volume and 49% of the total export value of Indonesia's CPO in the same period.
The Benefits of Indonesia's CPO Exchange for CPO Producers and Exporters
Indonesia has officially launched its own CPO futures exchange on October 13, 2023, with the aim of establishing a fair, transparent, and clear benchmark price for CPO that reflects the supply and demand conditions in the domestic and international markets. The CPO exchange is operated by the Indonesia Commodity and Derivatives Exchange (ICDX), which is supervised by the Futures Exchange Supervisory Board (Bappebti). The CPO exchange is designed to place buyers and sellers on an equal footing, allowing for effective price negotiations. Ultimately, it will lead to the establishment of a reference price for CPO that can be used by the CPO industry players and stakeholders, such as producers, exporters, importers, traders, consumers, investors, regulators, and civil society.
The CPO exchange can bring various benefits for Indonesia's CPO producers and exporters, such as:
- Increasing price transparency and stability: The CPO exchange can increase the price transparency and stability of CPO, as it provides a platform for the CPO industry players to discover and monitor the market prices of CPO in real time, based on the actual transactions and contracts. The CPO exchange can also reduce the price volatility and uncertainty of CPO, as it allows the CPO industry players to hedge and manage their price risks, by using the futures contracts and options contracts that are available on the exchange. The CPO exchange can also reduce the price manipulation and distortion of CPO, as it involves an independent and credible third-party verification and settlement system, as well as a strict and transparent regulation and supervision system.
- Improving market access and competitiveness: The CPO exchange can improve the market access and competitiveness of Indonesia's CPO producers and exporters, as it enables them to reach and connect with more potential buyers and sellers, both domestically and internationally, through the exchange platform. The CPO exchange can also enhance the market value and attractiveness of Indonesia's CPO, as it provides a reliable and reputable reference price for CPO that can be used by the CPO industry players and stakeholders, as well as by the media and the public. The CPO exchange can also increase the market efficiency and convenience of Indonesia's CPO, as it offers a standardized and simplified trading mechanism and procedure for CPO, as well as a fast and secure payment and delivery system for CPO.
- Supporting industry development and innovation: The CPO exchange can support the industry development and innovation of Indonesia's CPO, as it creates a conducive and competitive market environment for CPO, that encourages the CPO industry players to improve their quality and productivity, as well as to diversify their products and services. The CPO exchange can also foster the industry collaboration and cooperation of Indonesia's CPO, as it facilitates the communication and interaction among the CPO industry players and stakeholders, as well as the exchange of information and knowledge among them. The CPO exchange can also stimulate the industry research and education of Indonesia's CPO, as it generates and disseminates valuable market data and analysis for CPO, as well as provides training and capacity building for CPO.
The Benefits of ISCC Certification for CPO Producers and Exporters
ISCC certification is a way to demonstrate that your CPO production and supply chain are sustainable, traceable, and compliant with the relevant regulations and standards. ISCC certification is recognized by the European Commission as fulfilling the sustainability criteria of the Renewable Energy Directive (RED) and the Fuel Quality Directive (FQD), which require biofuels and bioliquids to meet the requirements of greenhouse gas emission reduction, biodiversity protection, and social and labor rights. ISCC certification is also respected by the global market as a credible and reputable scheme that involves an independent third-party audit and verification. ISCC certification is provided by QSI, a certification body that offers ISCC certification services in a timely and cost-effective manner.
ISCC certification can bring various benefits for Indonesia's CPO producers and exporters, such as:
- Accessing the European market: The European market is one of the most important and lucrative markets for Indonesia's CPO export, as it accounted for about 15% of the total export volume and 18% of the total export value in 2021. However, the European market is also one of the most challenging and demanding markets, as it requires biofuels and bioliquids to meet the sustainability criteria of the Renewable Energy Directive (RED) and the Fuel Quality Directive (FQD). These criteria include the reduction of greenhouse gas emissions, the protection of biodiversity, and the respect of social and labor rights. ISCC certification is one of the schemes that are recognized by the European Commission as fulfilling these criteria, and therefore, it can help Indonesia's CPO exporters to access the European market and avoid the risk of being excluded or penalized.
- Reducing greenhouse gas emissions and improving environmental performance: The CPO industry in Indonesia has been making efforts to reduce its negative impacts on the environment, such as deforestation, biodiversity loss, greenhouse gas emissions, and land conflicts. These efforts have been recognized and appreciated by some consumers, NGOs, and governments, especially in the European Union, which is planning to phase out the use of CPO for biofuel by 2030. To support these efforts, Indonesia needs to improve its environmental governance and certification system, as well as to promote the production and consumption of sustainable palm oil, both domestically and internationally. ISCC certification can support Indonesia to achieve this goal, as it requires the measurement and reduction of GHG emissions along the supply chain, as well as the compliance with the principles of good agricultural practices, environmental protection, and social responsibility.
- Enhancing reputation and credibility: The CPO industry in Indonesia has been improving its reputation and credibility in the global market, as it has been addressing the allegations and accusations of being unsustainable and unethical.
If you want to learn more about how ISCC certifications can help your business, please give us a call or visit our website!
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International aviation plays a crucial role in our interconnected world, but it comes at a significant environmental cost. The industry is responsible for approximately 900 million metric tons of CO2, accounting for about 2.5% of global carbon dioxide emissions, a figure that is projected to grow significantly in the coming decades. Recognizing this pressing challenge, the International Civil Aviation Organization (ICAO) established the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) in 2016. How CORSIA Works CORSIA operates on a straightforward principle: airlines are required to offset their carbon emissions by investing in approved carbon reduction projects. These projects can range from renewable energy initiatives to reforestation efforts, all aimed at reducing or removing greenhouse gases from the atmosphere. The offsetting mechanism ensures that the aviation industry's growth does not come at the expense of the environment. The Three Phases of CORSIA Implementation Pilot Phase (2021-2023) The Pilot Phase of CORSIA, spanning from 2021 to 2023, was designed to serve as a testing ground for the scheme. During this phase, participation was voluntary, allowing states to opt-in and gather valuable data on carbon emissions from international flights. This phase played a crucial role in setting the baseline for future offsetting requirements by providing insights into emission levels and the effectiveness of the program. First Phase (2024-2026) Starting on January 1, 2024, CORSIA entered its First Phase. This phase marked the expansion of the scheme, with more states choosing to participate voluntarily. The baseline for offsetting requirements during this phase is set at 85% of 2019 emissions. This means that airlines need to offset any emissions above this baseline by investing in carbon reduction projects or purchasing carbon credits. The First Phase is essential in bridging the gap between the initial testing period and the full implementation of the scheme. Second Phase (2027-2035) The Second Phase of CORSIA, commencing in 2027, is a significant milestone as participation becomes mandatory for all ICAO Contracting States. The inclusion criteria are based on 2018 Revenue Tonne Kilometer (RTK) data, ensuring that countries with higher levels of international aviation activity contribute proportionally to emission reduction efforts. This phase aims to achieve more ambitious emissions reduction targets and reinforces the global commitment to combat climate change. The Importance of ISCC CORSIA The International Sustainability and Carbon Certification (ISCC) plays a critical role in supporting CORSIA. ISCC CORSIA certification ensures that the carbon credits used to offset emissions meet stringent sustainability criteria. Here's how ISCC CORSIA makes a difference: Credibility and Trust : By adhering to rigorous standards, ISCC CORSIA provides assurance that the carbon offsets are genuine, verifiable, and contribute to real emissions reductions. This credibility is vital for gaining the trust of stakeholders, including airlines, governments, and consumers. Sustainability : ISCC CORSIA promotes sustainable practices across the supply chain. This includes ensuring that biofuels and other renewable resources used in aviation are produced in an environmentally responsible manner, thereby supporting the broader goals of sustainability and carbon neutrality. Transparency and Accountability : The certification process involves detailed documentation and auditing, enhancing transparency and accountability. This helps prevent fraudulent activities and ensures that the carbon credits are traceable and legitimate. Global Collaboration : ISCC CORSIA fosters international cooperation by establishing a common framework for sustainability certification. This enables countries and airlines to work together towards a shared goal of reducing aviation's carbon footprint. The Impact on the Aviation Industry CORSIA's implementation has brought about several significant changes in the aviation industry: Increased Accountability : Airlines are now more accountable for their carbon emissions, promoting transparency and encouraging sustainable practices. Innovation in Carbon Reduction : The need to offset emissions has spurred innovation in carbon reduction technologies and practices within the aviation sector. Economic Opportunities : The demand for carbon credits and investment in carbon reduction projects has created economic opportunities in various sectors, including renewable energy and sustainable agriculture. CORSIA is a landmark initiative in the aviation industry's journey towards sustainability. By addressing carbon emissions through a phased approach, it lays the groundwork for long-term environmental stewardship. The support of ISCC CORSIA is indispensable in this effort, providing the necessary certification and credibility to ensure that carbon offsetting is both effective and trustworthy. For more information about the ISCC CORSIA, please visit our website or contact us today!
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All the economic losses due to pollution caused by plastics are equally huge, the loss of billions of dollars each year owing to its effects on fisheries, tourism and the well being of people. In addition to this, the sickening image keeps the use and burning of plastics contributes and accentuates the emission of greenhouse gases. Taking into attention the size of these challenges, global production of plastics is likely to double by 2040 , if the current trends remain unabated. These multifarious issues are targeted by the three pillars of the Global Plastic Treaty through an all-inclusive legal approach, which are: Principle 1: Understanding Plastics as Carbon and Chemicals; Principle 2: Addressing the Harmful Health Effects from Chemicals in Plastics; Principle 3: Recognizing that Toxic Chemicals Make Plastics Incompatible with a Circular Economy. Key Aspects of the Global Plastics Treaty Lifecycle Approach : The Treaty seeks to reduce plastic pollution and plastic usage through measures such as eliminating the need for single use plastic, increasing the safe and viable options available, ensuring responsible production and consumption, modifying recycling approaches, and managing wastage of plastic by targeting pollution at every stage of plastic’s life cycle. Binding Targets : The Treaty suggests legally enforceable initiatives to reduce plastic usage which include specific targets for recycling as well as the percentage of plastic in consumer goods which has been recycled. Extended Producer Responsibility (EPR ): The Treaty supports abandoning End of Product Life policies owned by the producers as it introduces a new concept of Environmental Pollution Responsibility (EPR) that pushes the manufacturers, wholesalers, and retailers to be responsible in controlling wastes created after the sale of their products. Just Transition : The Treaty advocates a “Just Transition” for informal waste pickers with a focus on ending poverty through safeguarding the resource sector along with livelihoods for that sector in more economically developed industries. Global Cooperation : The Treaty underscores the need for developed countries to lend a helping hand in the reduction of plastic usage in developing countries by providing financial and technological support to achieve set goals. Environmental and Health Protection : Finally, the Treaty highlights the importance of being able to take legal action against irregularities in plastic supply chains as that will help in reducing the negative impact on health as well as the production of micro and nanoplastics that leak into water bodies. It also mentions the issue of impact of plastics in the climate change context and seeks to move towards a paradigm shift that would decrease the greenhouse gas emissions associated with the life cycle of plastics. Progress and Challenges This treaty has advanced towards its objectives since its inception. In 2013 negotiations started in a more organized fashion when an Intergovernmental Negotiating Committee (INC) was formed for the purpose of drafting the Treaty in 2024. During these negotiations, various stakeholders including industry, academia and civil society representatives have been engaged in discussions to ensure balance and inclusiveness. However, challenges remain. Enhanced expectations of the developed countries, related to funding, technology transfer and historical pollution responsibility have made negotiations intractable. Moreover, plastic-dependent industries have raised alarm bells on the negative economic ramifications that enacting strict regulations would have. Plastic Pollution Reduction Standard (PPRS) One of the key components which supports the Global Plastic Treaty is the Plastic Pollution Reduction Standard (PPRS) of PCX Solutions. The PPRS offers a distinct and attainable framework which provides guidelines for plastic offsetting programs. It defines controllable conditions which must be emphasized including stringent environmental and social impact policies, and the availability of a mechanism to monitor performance and provide accountability with full disclosure of all information. Furthermore, the PPRS-registered Projects can generate one plastic credit for every metric ton (MT) of post-consumer plastic waste that has documented collection and End-of-Waste processing. Credits can only be generated within the validated scope of the project as approved by its VVB. The Global Plastic Treaty is an important milestone in protecting the future. It seeks to combat plastic pollution in a unified manner while fostering cooperation among nations to safeguard the earth and protect its environment for future peoples. The success of this Treaty relies on the willingness of all affected countries to work together. 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