The EU Fine Print That Could Ban Palm Oil Biofuels

So much of what the European Union does, affects Malaysian Palm Oil. Trade negotiations; environmental rules; customs procedures; the list goes on. The devil, though, is often found in the details of the EU’s smallprint.

The EU is currently reviewing the Renewable Energy Directive (RED), the legislation that governs, among other areas, the import, support and use of Palm Oil-based biofuels in the European Union. Previous incarnations of the RED have witnessed attempts by the normal coterie of anti-Palm Oil activists – primarily Green NGOs and protectionist oilseeds – to restrict Palm Oil biofuels’ export to the EU. Most of these previous efforts have failed. This time may be different.

To understand why, we must look to an event that occurred in Paris, last week. The new French Environment Minister, Nicolas Hulot, outlined a proposed plan to prevent Palm Oil biofuels from entering France. Minister Hulot said:

“We will close a window that was giving the possibility to incorporate palm oil in biofuels…

“The climate plan foresees an end to this imported deforestation, that is to say, products that contribute to the destruction of the three major tropical forest basins of the world, Amazonia, Southeast Asia and Congo Basin, especially for the production of unsustainable palm oil or soybean”.

First, it’s important to note that under current RED rules, France cannot unilaterally ban the import of Palm Oil-based biofuels. Palm Oil is certified as a sustainable biofuel under EU-approved schemes, including the German-based ISCC and the multi-stakeholder RSPO-RED. The EU runs this show, not France.

However, now the RED rules are being revised, the Council of the EU – of which the French Government is a powerful member – is at the forefront of writing the new rules, and this is the “window” the Minister was referencing. The Council’s most recent proposal for the RED revision includes the following under new Article 7:

“Member States may … distinguish between different types of biofuels, bioliquids, and biomass fuels produced from food and feed crops, for instance by setting a lower limit for the contribution from food or feed crop based biofuels produced from oil crops, taking into account indirect land use change”.

The EU Commission also supports this change.

What, then, would this mean in practice, and how would it affect Malaysian Palm Oil exports to Europe?

If implemented as written, it means that each individual EU Government would have the ability to pick and choose limits for different types of biofuels, including imports. Although in principle this rule covers all possible feedstocks, in reality there are only two that will be targeted and affected: Palm Oil and soybean. The proposed RED text appears to give a free pass to any EU Government that wants to restrict (or, possibly, even ban altogether) Palm Oil imports for biofuels. This rule would take effect from 2020 – less than three years away.

The danger for Malaysian Palm Oil exporters is clear: some EU countries, notably France, Belgium and Italy, have demonstrated already a political predisposition to attack Palm Oil. This RED proposal gives an opportunity to those Governments to please the domestic siren voices – radical Greens, protectionist oilseed industries, anti-trade campaigners – and actually implement restrictions. EU law would no longer protect Palm Oil. Palm Oil biofuel exports to these countries could therefore be drastically reduced, or stopped altogether.

The Minister’s speech in France provides a graphic illustration of this reality. The French company Avril is Europe’s largest biodiesel producer (using rapeseed), and is an avowed public opponent of Palm Oil. Minister Hulot’s speech is the mirror-image of Avril’s campaign against Palm Oil. Protectionist oilseed industries are driving European policy against Palm Oil.

This scenario, of course, is looking to the future if the proposed RED rules were to be introduced. The legislative process is a long way from completion, and all three EU institutions – the Parliament, Council and Commission – could listen to a concerted campaign by producing countries, if one were to materialize.

Back in the present-day, it’s important to return to the French Minister’s speech. This speech was made in the context of the RED discussion. Minister Hulot likely knows that current EU RED rules prevent him from implementing a wholesale ban. He also likely knows that the situation could change, and his speech is a signal that France will be supporting that change fervently. Others are likely to join: Norway has recently also promoted the banning of Palm Oil biofuel imports.

Minister Hulot’s declaration chimes with a broader narrative that has taken hold in the EU in recent months. Leading Palm Oil producers have repeatedly been told that the EU considers Palm Oil a “driver of deforestation” – this phrase runs through, and lies behind, recent European initiatives, including the drive to push for a FLEGT-style arrangement for Palm Oil, the EU Parliament’s anti-Palm Oil Resolution, and the recent report from the French Sustainability Criteria Commission.

The RED debate is linked to this narrative: it does not take place in isolation. The EU’s revision of the rule on biofuels runs concurrent to the “driver of deforestation” narrative, and is shaped by it. The comments from Minister Hulot and others are not incidental: they are pointed, and aimed to shape where the RED is going.

It is sometimes easy to dismiss the speeches of ambitious (and newly-arrived) European politicians as simply words, designed to provoke media reaction. In this instance, there is hard action underway behind the words, it is action vocally supported by the long-time opponents of Palm Oil, and it is action with a very serious intent.

#Policy News