Thursday, October 19, 2006

Biofuels in S.E. Asia--"Technology Gone Mad"

Singapore's air quality has taken a hit as forest fires in neighboring Indonesia. The Pollutant Standards Index (PSI) hit the "unhealthy" 100-plus range for the first time this year in the last two weeks, hitting as high as 150. This is not the first time that Indonesian forest fires have made its impact felt across borders. In 1997, Indonesian fires caused the PSI in Singapore to hit a record 226. The haze, as it is euphemistically termed, has has directly had direct economic consequences for the tiny island-state, costing Singapore in 1997 an estimated US$300 million (including lost tourism revenues and respiratory health costs) and US$50 million since September of this year. Its bitter pill for Singapore, which has tough environmental standards and prides itself as being "clean and green," to swallow.

The traditionally-cited causes of the Indonesian forest fires have been the poor logging practices driven by shifting cultivators, and in the case of 1997, especially dry weather brought on by the El Nino climatic phenomenon. The deep irony is that the slash-and-burn logging that has created the fires in 2006 is a product of the frenzied drive to cultivate biodiesel crops such as oil palm (see article).

Sustained high oil prices have pushed biofuel investments over the tipping point, not just in the U.S. but also in China and Southeast Asia. Investors have been throwing heaps of cash into the ethanol/biofuels sectors, underlined by a couple of high profile IPOs (Aventine and VeraSun) in the US stockmarkets. GreenCarCongress has been tracking the swell of news of the big investments that the likes of Malaysia and Indonesia--the worlds largest producers of palm oil--are making biofuels, particularly as derived from oil palm. The international NGO Friends of the Earth (FOE) has been very vocal about the unsustainability of such oil palm plantations (See the FOE report- "Oil for Ape scandal").

As excerpted from the article:

"Why are we burning our forests to plant something that we have been told will be clean, environmentally friendly fuel?" asks S.M. Idris, chairman of environmental lobby group Sahabat Alam Malaysia. "This is technology gone mad."

Hong Kong Redux
The timing of the Singapore haze is ironic because of recent press coverage of deteriorating air quality in Hong Kong, a victim of manufacturing-intensive industrial pollution from neighboring Guangdong province. The Wall Street Journal (Oct. 18, reproduced here, and related blog posting on The China Expat here) reports that status of Hong Kong's preeminence as Asia's financial capital is at risk, as evidenced by the relocation of various hedge funds relocate to Singapore because of the bad Hong Kong air.

It is at one level tragic that these hedge funds have traded one bad for another. It underscores why law alone, because of its existence is boxed in by geopolitical boundaries, can never be a complete solution. And perhaps it will impress upon the high financiers, like those in Singapore and Hong Kong, to consider the ecological and social implications of their investment allocations.


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