The Oil Palm The Oil Palm

Facts vs the European Parliament: COWI experts rebuke MEPs’ attacks on Palm Oil

In our ongoing look at the recent Report by COWI on deforestation proposals – a Report requested and funded by the EU Commission – we now look at how the Report uses data to analyse the default EU orthodoxy on Palm Oil – specifically the April MEP Resolution on Palm Oil & Deforestation.

The European Parliament’s Resolution raised the ire of the world’s Palm Oil exporting nations, mostly because the official EU document made statements that are factually incorrect – as any expert would know. The COWI Report, written by European experts, confirms these errors.

The EU Parliament Resolution also put forward a number of recommendations that were completely impractical. These included the idea of differential tariffs for ‘sustainable’ palm oil (as defined by EU-funded NGOs), and the idea of placing higher taxes on products containing palm oil.

Although it has many faults, as outlined in earlier blogs in this series, the COWI Report’s analysis of the MEP proposals is well-founded and sharp. It serves as a strong, fact-based antidote to many of the MEP proposals. This blog outlines some of the more outlandish proposals by MEPs, and COWI’s assessment of those proposals.

  1. Minimum sustainability criteria for all Palm Oil entering the EU.

This is an idea that is at the heart of the MEP Resolution, and has been floating around among European environmental campaigners for around a decade. According to EU logic, the sustainability criteria could be used to either prevent palm oil from entering the EU, or as the basis for a differential tariff for sustainable products.

The COWI Report pours cold water on this idea:

“Introducing a principle of differentiating between products on the basis of their means of production is highly controversial … WTO rules does not allow for relating the lower duty to an individual label, e.g. RSPO, but would require the establishment of objective criteria – which would need thorough discussions among the whole membership to reach agreement.”

In other words – the MEP proposals would be illegal under WTO. Unless the EU was prepared to recognise other palm oil standards such as the Malaysian Government’s MSPO scheme.

  1. Introduction of ‘due diligence’ procedures for importers of Palm Oil and other commodities.

As we have noted previously, the EU Timber Regulation requires importers of timber products to take steps to ensure that the timber products being imported have been harvested legally. MEPs are effectively proposing that a similar regulation be placed on palm oil that might also incorporate sustainability concerns.

COWI is dismissive:

“introducing an equivalent regulation [for palm oil] would face formidable challenges. These include the much wider range and quantity of products the regulation would apply to, the larger number of producers and the likelihood of resistance from both producer countries exporting to the EU and domestic producers … the legality taken into account would be also related to the previous use of the land (which would also need to set a forest cover cut-off date) and not to the production of the crop itself …”

That’s as close as a group of academics will ever get to saying that an idea is ridiculous and unworkable. MEPs, take note, for once.

  1. Introduction of increased transparency in the funding of private financial institutions and public financial bodies.

This is one of the most egregious proposals in the EU Parliament Resolution. Attempting to stifle investment in developing countries’ agriculture is highly regressive.  It harkens back to Europe’s colonial days. COWI hints at how complicated it is. When it comes to finance, COWI doesn’t call for mandatory increased transparency, it calls for what is effectively a voluntary system of reporting. This reporting system would not require disclosure of individual investments or even the performance of these investments in environmental terms; instead, it would entail reporting on the vetting procedures themselves and their occurrence. In other words, it’s transparency around the procedures introduced by the bank. COWI notes that this is an indirect contribution, “by creating public and peer pressure on investors to proof investments, not avoid deforestation in itself.”

Why this approach? There’s a recognition by COWI (and, really, by anyone who lives outside of Europe) that capital is mobile, and that there are myriad global alternatives to London, Paris and Frankfurt financial institutions and investors. Similarly, the practicalities of preventing a bank that is nominally based in the EU are significant. Would a Singapore-based arm of a European bank have to abide by EU rules on palm oil reporting? If not, what would stop a bank putting a loan on the books of the Singaporean affiliate rather than the one based in Frankfurt?

COWI illustrates that the EU Parliament proposal on financial disclosure is not only bad in principle, but also unworkable in practice.

  1. The Commission should introduce a binding definition of ‘deforestation free’

COWI – quite rightly – doesn’t even consider this a proposal; it considers it to be a significant methodological problem.

It sums it up as follows:

“The difficulties in deciding whether a particular product (as opposed to a corporate supply chain) was not associated with deforestation, and the confusion likely to be caused by the overlap with certification schemes, make this an approach unlikely to be feasible.”

The reasons COWI lists for this are numerous. First and foremost is the idea of a deforestation baseline. Different certification schemes, for example, have different baselines for deforestation. The FSC (Forest Stewardship Council) has a natural forest-to-plantation baseline of 1994; the RSPO’s cut-off for conversion of forests is November 2005.

These dates are purely arbitrary. For example, under RSPO, palm oil from land cleared in October 2005 is ok; two months later it isn’t.

How would the European Commission decide something similar? A retrospective date would be absurd, but no doubt palatable to MEPs.  It’s also a rabbit-hole. Is deforestation from 100 years ago equal to deforestation now? In which case, would commodities from swathes of land from the US, Canada and Australia therefore not be considered deforestation-free?

What the COWI report does is put into clear relief how absurd the antics of the European Parliament are – and that the MEP Resolution is simply not a serious piece of work.

The question now is – will MEPs listen, and adopt a more reality-based view of palm oil? This is highly unlikely: if past form is a guide, they will continue to ignore the experts, the facts and the data and simply plough on regardless.