EU & Biofuels: RED Is Not The Only Threat

The revision of the Renewable Energy Directive (RED) contains multiple threats to the future success of Malaysian Palm Oil biofuel exports to Europe. The Oil Palm has documented specific threats in the small-print and in the most recent amendments.

It feels almost like a case of déja-vu, this being the third iteration of the RED. Those who have seen all three must surely be asking each other: do you remember the first time? The first discussions on the amendments to the RED have taken place in the Industry, Research & Energy Committee. However, other controversies linked to the EU’s approach to biofuels have also surfaced this week, all of which could potentially impact Malaysian exports.

First, the European Commission confirmed its acquiescence to the Parliament’s goal of removing Palm Oil biofuels from Europe: this was set out in the Commission’s response to the European Parliament Palm Oil and Deforestation Report.

Second, the Commission released a study that it had commissioned on the impact of bio components in transport fuels. The study has been kept hidden for two years before finally being released. Why would the Commission put on hold a study that it asked for? Simple. The study provides data to support the benefits of biofuels and therefore contradicts the political objectives of the Commission and MEPs.

Third, technical changes to the EU’s biodiesel calculations came into force in early September, albeit without any razzmatazz. The Commission has the power, according to the RED, to amend such technicalities, which in this case refer to the GHG calculations of certain types of bioenergy. It is worth remembering that such technical changes will likely continue to be in the Commission’s gift after the new RED is finalized, returning like a bad cover version of the first Directive.

Finally, the recent decision by the World Trade Organisation (WTO) confirmed that the EU should make plans to re-open the biodiesel market to Argentinean exports. Argentina and Indonesia had challenged Europe’s anti-dumping duties on biodiesel back in 2013, to condemn a clear act of protectionism from the EU. The deadline of 24 September is approaching fast, and preparations are underway.

All of this external activity affects both current and future biofuel exports from Malaysia to the EU. Meanwhile, in the European Parliament, MEPs were debating the biggest factor: the RED itself.

The ITRE Committee members debated amendments submitted over the summer on the draft Report of MEP José Blanco López. MEPs were in general highly critical of the Commission, and it is clear there will be substantial disagreement on a number of issues. Opinion on whether or not to ban first-generation biofuels (including Palm Oil) is split and will be one of the most contentious points. MEPs will also likely get lost in the weeds of different GHG calculation numbers, once compromise amendments are agreed between the different political groups.

The focus of MEPs also fell onto the Commission’s process. The Regulatory Scrutiny Board, whose role is to ensure the EU makes evidence-based policy, twice rejected the Commission’s Impact Assessment. Why? The Board signalled clearly that the motives behind revising the RED were wrong. This has been supported by others with knowledge of the EU process.

MEP Christofer Fjellner confirmed those doubts about the impact assessment, in a speech in the European Parliament, while also emphasizing that the ‘post 2020 biofuels proposal from the Commission lacked scientific evidence’.

Simon Godwin, Head of the Impact Assessment Institute (IAI) also criticized the Impact Assessment, in a recently published study that describes how the EU process works. The study shows that the Commission proposal is flawed and ‘scientifically unfounded’. Mr. Godwin added that the proposal had ‘fundamental shortcomings’ and ignored the EU’s own ‘Better Regulation’ principle.

This shouldn’t come as a surprise to anyone who has followed the debate. The European Commission admitted this back in 2016, when a Director in DG Energy confirmed that Palm Oil policies were not based on facts but on emotions. That much has been clear for a long time: and it is not only biofuels policy where Palm Oil suffers from regulation that is not based on facts.

Some in Brussels are trying to put a positive spin on the situation. The EU Commission’s recent response to the EU Parliament’s Resolution on Palm Oil was well-crafted, attempting to claim that something changed. However, reading both what was written in the Commission’s response – and just as important what was not in the response­ – it is clear that efforts to impose European sustainability rules on Malaysian Palm Oil will continue. The fear is that RED is a forerunner for EU sustainability criteria on food, or restrictions on financing of Palm Oil companies. Whether these would be applied through EU legislation, or a bilateral approach (such as CEPA or FLEGT) is as yet unclear. What is clear is that Brussels’ long summer holiday is over, but for Palm Oil exporters the countdown now begins.

#Policy News