Authors: Jacqueline Vel, Deasy Simandjuntak, Loes van Rooijen, Jan Michiel Otto, Adriaan Bedner, Henky Widjaja, Gerard Persoon, Suraya Afiff, Gerry van Klinken, Henk Schulte Nordholt, Juliana Tjeuw, Maja Slingerland, Pujo Semedi, Gunawan, John McCarthy, Sony Suharsono, Denyse Snelder, René Orij, Marleen Dieleman.
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How did jatropha♦ go from being a top policy priority to experiencing ‘an extraordinary collapse’? Within a decade, the widely promoted ‘miracle crop’ and renewable energy source that proponents claimed would address global concerns regarding climate change, fossil fuel prices and rural poverty proved unsuccessful, leaving failed harvests and abandoned investments.♦ Research in Indonesia shows that decision makers adopted optimistic projections derived from lab research as a basis for policy making, public budget allocations and private sector investments. Influential policy entrepreneurs and their narratives, rather than scientific evidence, informed budget allocation. Reflecting on this experience, this article concludes that future policies can be improved by anticipating problems in four distinct decision-making arenas and addressing difficulties in the commoditization process.♦
In less than a decade, a very promising renewable energy source went from being a top policy priority to experiencing ‘an extraordinary collapse’(1). How could that happen, and what can policy makers learn from this short history? Prior to 2007, Jatropha curcas Linn. was promoted as a miracle crop capable of producing biofuel from marginal and degraded lands. Growing jatropha represented a response to both the alarmingly high price of oil and the emerging demand for biofuels that would not harm food security. Jatropha became an icon for a hopeful technocratic narrative seeking to simultaneously address global concerns about climate change, fossil fuel depletion and rural poverty.♦ In 2008, a worldwide survey found 242 jatropha plantations on approximately 900,000 hectares and projected Indonesia as the largest producer in 2015 with 5.2 million hectares (2). Many researchers who focused their analysis on agronomic claims about the crop (3) or on social and environmental impacts in production areas argued that the story was too good to be true. After 2011, ‘an extraordinary collapse’ was reported from China, India, East Africa and Mozambique (1,4). ♦ When the results from actual cultivation of the crop failed to fulfill these optimistic expectations, it was assumed that improvement in policies and regulations governing biofuel production would be the best means to improve performance (5).
Our analysis of the rise and fall of jatropha in Indonesia warns against adopting overly optimistic narratives concerning new technologies as bases for policy making, public budget allocations and investment. An investigation of jatropha’s introduction and commoditization as a biofuel crop in Indonesia reveals that despite the enactment of national jatropha biofuel production policies and intense promotion through awareness creation and the extension of subsidies, jatropha cultivation was only concentrated in short-term “projects” designed to correspond with government and donor agencies’ funding periods. Fieldwork also indicates that researchers, government officials, NGOs and broker companies, rather than farmers or plantation companies, have been the main actors in such projects.♦
Previous research on agrarian change, state-society relations and local politics in Indonesia portrays societal change and policy implementation as product of interactions between influential actors who gain mutual benefits within their networks (6). ♦ Such an approach challenges the assumption that policies are implemented in accordance with their normative content ♦ and instead acknowledges that the interests of a network of powerful policy entrepreneurs influence the policy process. ♦ Our research also describes how the multi-level governance processes that link global energy and climate change discourses to grounded activities in production areas ♦ are diverted from their objectives by such policy entrepreneurs at the intermediate levels at which global and local actors interact.
Jatropha in Indonesia ♦
Jatropha development in Indonesia started in 1994. ♦ At this time, researchers at Bandung Institute of Technology attempted to turn the wild plant, commonly used at least since 1907 (7) for making torches and medicine, into a commodity for industrial processing and commercial production. In collaboration with process technicians from the Netherlands (Groningen), the researchers extracted jatropha oil and used it in stationary engines. ♦ Their initial success stimulated implementation (8) by their alumni network in domestic energy companies, which began exploring the possibility of cultivating jatropha as an alternative energy source. However, the pioneer companies’ experiments in the late 1990s found that jatropha production for plant oil or biodiesel was not commercially viable due to prevailing consumer price subsidies on fossil fuels, a lack of good planting material and the absence of processing facilities or an effective supply chain for the biofuel crop.
Government actors stepped in in 2003, attracted by positive global biofuel discourse and anticipating blending regulation and production subsidies. A key figure was the director of a historically prominent state-owned agricultural enterprise that had dominated the production of commercial crops such as sugar, tobacco and teak wood. ♦ Initially using jatropha oil to reduce the cost of sugar production, this director later published books on the crop’s potential (9) which placed his enterprise at the center of the national jatropha project. Eventually, he became influential in the creation of national energy policy that appointed jatropha as a major source of biodiesel and included mandatory biofuel blending targets. ♦
Green capital’s “hype”
The optimistic perceptions of jatropha’s potential spread globally by 2004, encouraged by plant science researchers extrapolating from a variety of trial test results to predict yields. In turn, process technology researchers used these extrapolations to create a narrative that made jatropha appear to be an attractive and environmentally friendly bioenergy crop for agro-ecological zones where the production of oil palm would not be possible or profitable (10).♦ The jatropha “hype” was financialized (11) when the refinery manufacturer D1 Oils raised £11.5 million from their initial public offering in London Stock Exchange in October 2004, reaching a market capitalization of £72 million in September 2005 (12). ♦ The company claimed to have access to millions of hectares of land for potential jatropha cultivation in Africa and Asia. However, the remote locations of these marginal lands made the company’s claims difficult to verify. ♦
The extremely positive response of the market to these optimistic scenarios earned jatropha the nickname of ‘green gold’ (13). In Indonesia, promoted by government officials, the promotion of jatropha reached farmers across the vast archipelago. ♦ Subsequently, some farmers immediately began cultivating it, using seeds of wild jatropha from their gardens or those distributed during the Ministry of Agriculture’s 2005-2006 national jatropha program. Nevertheless, while the national government provided budget support for its cultivation, research and credit subsidies, there was no ‘project’ for creating a well-functioning marketing channel. When farmers could not sell the jatropha fruit they harvested, cultivation eventually halted. Despite this disappointing experience, optimism about jatropha remained so strong that many farmers kept the crop ‘hibernating’ in their fields in the hope that someday the demand for jatropha would rise. ♦
Hope, opportunity and rent-seeking
D1 Oils’ dramatic collapse in the stock market after mid 2007 (Figure 1) did not reduce the interest in investing in jatropha projects in Indonesia. However, the definition of ‘projects’ here is crucial: it is a translation of the Indonesian concept of proyek, a delineated set of activities during a fixed and limited period of time for which there is a budget, usually provided by the government. ♦ Proyek is commonly associated with opportunities to benefit from mark-ups or with plain corruption. In the case of jatropha, the last opportunity to make use of large state subsidies was in 2007, when an Indonesian national agribusiness conglomerate owned by the Coordinating Minister of Economic Affairs established a company to manage the largest-ever domestic jatropha investment in Indonesia (around US $ 11 million). This company established jatropha nurseries in 15 districts in South Sulawesi and recruited 8000 ‘out-growers’ in 17,040 hectares. Nevertheless, although run with large capital input by a major company, the project never went beyond the nursery stage. A patronage network of politicians, government officials and businessmen had recruited farmers by collecting copies of their land titles or identity cards to make the company’s access to land and labor appear secure. ♦ In return for acting as gatekeepers to land and labor, specific ‘local elites’ obtained jobs or money. Most of the investment was spent on company personnel costs, buying properties and a package credit program for farmers, which failed because farmers were reluctant to repay credit. The company was officially closed down in 2011 after being idle since 2009. The network effectively absorbed the subsidized investment money without leaving a trace in the field.
However, this closure was not the end of the story. In 2009, claims that the press-cake residue of jatropha oil extraction could be made into high-value cattle feed revived the optimistic narrative. Jatropha would thus be food and fuel, while the remaining waste could be used as organic fertilizer (15). Broker companies began to use the updated narrative, depicting business schemes in which they would act as a ‘managing company’ linking green investment to land and labor (16). A new pattern emerged, involving local project developers offering (foreign) investors their services to provide access to production areas in return for a lavish salary for a year or two. The risks of speculative investment were passed on to green funds and retail investors, who tend to concentrate on future markets and not on actual production (17). Typically, within a year or two, the jatropha project would be declared a failure – blaming local conditions and population – and the project developer would disappear, leaving shareholders with worthless shares and increasing farmers’ and local governments’ cynicism regarding agribusiness investors (18). There is even a local term for this phenomenon: ‘PT Akan’, companies with (only) nice promises but no implementation. ♦ In less than a decade, jatropha was transformed from a promising and commercially viable biofuel crop into a green-policy parasite, living on subsidies and green investments. ♦ ♦
Policy arenas for future innovations
What started globally as an optimistic techno-fix (19) for mitigating climate change and providing alternatives for fossil fuel was transformed into activities with a variety of objectives. In Indonesia, this transition was prompted by poor coordination at multiple levels of jurisdiction in which crucial decisions regarding the commoditization of jatropha were made.
Moving towards improved science, technology, energy and rural development policies requires differentiating the various arenas for policy formulation and implementation, identifying key actors and interests and understanding the layers and phases of the commoditization process. Thus far, Indonesia’s jatropha case demonstrates the need to improve policy-making in at least four governance arenas.
First, the scientific research arena in which budgets for new technologies are allocated would benefit from an ex-ante critical review on the validity of societal arguments in technology research proposals.♦ This review will curtail the production of overly optimistic narratives. In science-policy communication, potential or theoretical results achieved under optimal lab conditions must be clearly distinguished from data gained from the field.♦ Second, the national policy-making arena, where elite networks and their interests influence the legal drafting process, can be improved in two ways: first, performing ‘due diligence’ research before elevating a technological invention to national policy will increase the effectiveness of national budget allocations; second, improving accountability mechanisms will deter subsidy harvesters who have no intention of producing biofuel. Third, in the international policy arena, simplifying and harmonizing the sustainability criteria for biofuel importation and production would increase national and local governments’ ability and willingness to implement them. With regard to local government, there should also be a strengthening of policy implementation in districts with ‘marginal land’. ♦ Our research indicates that the capacity of those districts’ government apparatus and the information at their disposal are likewise ‘marginal’. There is a lack of expertise in assessing plantation business proposals, developing district spatial planning, drafting sound regulations and implementing procedures in accordance with national law and regulations.
Finally, the history of jatropha in Indonesia is affected by the international venture capital market.♦ The nexus between local project developers and international ‘high risk – high profit’ (or loss) capital is destructive to agricultural development. National regulations are urgently needed to prohibit such speculative investment.
References and Notes:
- P. Kant, S. Wu, The extraordinary collapse of jatropha as a global biofuel. Environmental Science and Technology 45, 7114-7115 (2011).
- GEXSI, Global market study on Jatropha. Final report prepared for the World Wide Fund for Nature (WWF) (London, UK / Berlin, Germany: Global Exchange for Social Investment GEXSI, 2008).
- R.E.E. Jongschaap, W.J. Corré, P.S. Bindraban, W.A. Brandenburg, Claims and Facts on Jatropha curcas L: Global Jatropha Curcas evaluation, breeding and propagation programme (Wageningen: WUR- PRI, 2007). http://edepot.wur.nl/41683.
- Z. Ebrahim, P. Baker, Jatropha – An Update, Part 4: Jatropha in East Africa. CABI UK (2012). http://biofuelexperts.ning.com/documents.
- L. German, G. C. Schoneveld, P. Pacheco, Local social and environmental impacts of biofuels: global comparative assessment and implications for governance. Ecology and Society 16, 4, 29 (2011). http://dx.doi.org/10.5751/ES-04516-160429.
- G. van Klinken, J. Barker, Eds., State of Authority: the State in Society in Indonesia (Ithaca: Cornell Southeast Asia Program Publications, 2009).
- J. Kloppenburg-Versteegh , Wenken en Raadgevingen betreffende het gebruik van Indische planten, vruchten etc. (Katwijk aan Zee: Service Katwijk, 1978).
- S. Amir, I. Nurlaila, S. Yuliar, Cultivating energy, reducing poverty: biofuel development in an Indonesian village. Perspectives on Global Development and Technology 7, 2, 113-132 (2009).
- R. Prihandana, Menuju Desa Mandiri Energi (Jakarta: Proklamasi Publishing House, 2006).
- T. Sima Gunawan, “Robert Manurung: inventor of renewable green fuel” (Jakarta Post, 6 Aug. 2006). http://www.accessmylibrary.com/article-1G1-142234143/fruity-oil-forgotten-alternative.html.
- J. Fairhead, M. Leach, I. Scoones, Green grabbing: a new appropriation of nature? Journal of Peasant Studies, 39, 2, 237-261 (2012).
- “Jatropha a disappointment, D1 Oils admits” (Agrimoney.com, 29 Sept. 2011). http://www.agrimoney.com/news/news.php?id=3659.
- R. Renner, Green gold in a shrub: entrepreneurs target the jatropha plant as the next big biofuel. Scientific American (20 May 2007). http://www.scientificamerican.com/article.cfm?id=green-gold-in-a-shrub.
- H. Makkar, paper presented at International Conference on Jatropha Curcas in Groningen (2010). http://www.icjc.nl/main/wp-content/uploads/2010/06/JatrophaConf2010.pdf.
- PT Waterland’s website. http://www.waterlandasiabio.com/rd/index.php.
- D. Shepard, Situating private equity capital in the land grab debate. Journal of Peasant Studies 39, 3-4, 703-729 (2012).
- J. McCarthy, J. Vel, S. Afiff, Trajectories of land acquisition and enclosure: development schemes, virtual land grabs and green acquisitions in Indonesia’s outer islands. Journal of Peasant Studies 39, 2, 521–49 (2012).
- A. Wesselink, K. Buchanan, Y. Georgiadou, E. Turnhout, Technical knowledge, discursive spaces and politics at the science–policy interface. Environmental Science and Policy (2013). http://dx.doi.org/10.1016/j.envsci.2012.12.008.
Acknowledgments: This article is a product of collaboration between the researchers of the program ‘JARAK♦: the commoditization of an alternative biofuel crop in Indonesia’ as part of the program ‘Agriculture beyond Food’ funded by the Royal Netherlands Academy of Sciences (KNAW), the Netherlands Organization for Scientific Research (NWO), and the Royal Netherlands Institute of Southeast Asian and Caribbean Studies (KITLV). We would like to thank Promode Kant for his valuable comments.