EU Sets Limits on Palm Oil in Biofuels as Trade War Looms

by Ewa Krukowska (Bloomberg Quint) The European Union set new criteria for the use of palm oil in biofuels in a balancing act to try to avert a trade war with producers in Asia while appeasing climate protagonists at home. The measure approved by the European Commission on Wednesday spells out the type of biofuels from palm oil that may be counted toward the EU’s renewable-energy goals and introduces a certification system. It was required by a broader law agreed on by the 28-nation bloc last year, when the European Parliament pushed for restrictions on the use of palm oil on concerns its production caused deforestation and aggravated climate change. Indonesia and Malaysia, which together account for 85 percent of global supply, have warned that they are ready to retaliate against “discriminatory” measures to curb palm oil shipments. Palm oil prices have dropped 15 percent since the start of 2018 amid the EU environmental campaign, extending losses on Wednesday.

Under the measure adopted by the commission on Wednesday, palm oil is classified as “unsustainable” yet some exemptions are offered to placate producer countries, such as the possibility to count under the EU green goals palm oil coming from small farms. The EU decided to set the size limit at 2 hectares, the lower end of the 2-5 hectares range it considered when drafting the regulation.

The law also called on the EU regulatory arm to develop a certification system for biofuels linked to their impact on so-called indirect land-use change, known as ILUC, where crop-based biofuels displace food production or lead to deforestation, indirectly boosting greenhouse-gas emissions. “With today’s decision the member states will still be able to use and import fuels in the category of high ILUC-risk biofuels, but they will not be able to include these volumes when calculating the extent to which they have fulfilled their renewable targets,” the commission said on Wednesday.

The Council of Palm Oil Producing Countries, whose members Indonesia, Malaysia and Colombia produce about 90 percent of global supply, announced they will jointly challenge the bill through bilateral consultations, as well as through the World Trade Organization. The council said the law uses a “scientifically flawed” concept that targets palm oil and “makes no attempt to include broader environmental concerns” linked to other vegetable oils.

The new regulation is now set for a two-month scrutiny period when the bloc’s member states and the European Parliament can express objections. If none is received, the measure will be published in the EU official journal and become a law. READ MORE

Excerpt from EurActiv: “Soy oil is the new palm oil. The Commission’s own estimates show that at least 8% of global soybean expansion caused direct deforestation since 2008. This is in complete contradiction with the EU’s commitment to halt deforestation by 2020,” Green MEP Bas Eickhout said.

Environmentalists also said the executive had improved the initial proposals presented last month, making stricter some palm oil exemptions for smallholders and unused land.

But Transport and Environment (T&E) cautioned that “there is no such thing as green palm oil or soy biodiesel”.

“This campaign is not over and we’ll be taking the fight to those governments and oil companies that want to keep forcing drivers to pay for fake ‘green’ fuels”, T&E’s Laura Buffet said. READ MORE

Excerpts from Forbes: However the Commission’s analysis concluded that soy is far less harmful. While 45% of the expansion of palm oil production since 2008 led to destruction of forests, wetlands or peatlands, this was true for only 8% of soybeans and 1% of sunflowers and rapeseed.

The Commission’s decision is going to get significant pushback from the governments of Indonesia and Malaysia. The former has threatened a World Trade Organization challenge, and the latter has threatened to restrict European imports if palm oil is banned.

Environmental and anti-hunger groups say they will fight to get rid of these exemptions and expand the ban to other crop-based fuels.

The conclusions on palm oil could, in theory, be changed by the next European Commission taking office in Autumn. The composition of this Commission will depend on the European election taking place in May. READ MORE

Excerpt from Malay Mail: The European Union’s (EU) decision to phase out palm oil from being used in biofuel within the bloc is putting the Asean-EU free trade agreement (FTA) negotiations in jeopardy.

The Ministry of International Trade and Industry’s deputy secretary general (trade) Datuk Seri Norazman Ayob said the palm oil issue was a great concern to Malaysia as it was the country’s biggest commodity export.

“If there is no green light on palm oil, it will be more challenging for the FTA to be concluded,” he told reporters after the Malaysia Investment Performance Report release here today.

He said Malaysia and Indonesia had also lodged complaints with the World Trade Organisation regarding the discriminatory treatment of palm oil by the EU. READ MORE