Why September is a Crucial Month for Palm Oil in Brussels

The European Parliament’s recent hostile Resolution on Palm Oil and Deforestation was voted through in April 2017. The Oil Palm has previously highlighted the multiple errors and falsehoods in that Resolution.

However, the Resolution was not legally-binding. For all the controversy and media coverage, nothing in the Resolution had immediate legal effect.

In the coming months, Members of the European Parliament (MEPs) will be debating and voting on a Directive that does have a real-world and immediate impact on Palm Oil. The Renewable Energy Directive (RED) has legal standing, and the MEPs – the same people who overwhelmingly voted in favour of the negative Palm Oil Resolution – have the power to restrict or ban Palm Oil biofuels: potentially removing at a stroke Palm Oil’s hard-earned market success in Europe. Companies across Malaysia, and elsewhere – as well as millions of small farmers – could see a major market undermined or disappear. Any changes made will be implemented in EU law from 2020.

What, then, are the proposed changes that would impact Palm Oil?

First, an amendment proposed by the Council of the EU:

“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”.

If implemented as written, this 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. The French Environment Minister has already stated his wish to totally remove Palm Oil biofuels from France. The RED votes in September and October are the key to how he could realize that vision. Other EU countries, notably Belgium and Italy, have demonstrated already a political predisposition to attack Palm Oil. Palm Oil biofuel exports to these countries could therefore be drastically reduced, or stopped altogether.

Other amendments being considered include –

  • Katerina Konecna MEP, author of the Resolution on Palm Oil, has tabled an amendment calling for Palm Oil biofuels to be totally banned from the EU, post-2020.
  • MEP Merja Kyllonen, a Finnish far-left MEP, submitted amendments for the ban on Palm Oil biofuels to be implemented at a later date: namely from 2021.
  • MEP Gilles Pargneaux, a French Socialist, has also proposed amendments to remove Palm Oil biofuels from the EU, post-2020.
  •  MEP Pargneaux has also tabled amendments to further discriminate against Palm Oil in the GHG emissions calculations, post-2020. Such a situation would ensure that, even if Palm Oil were not banned, the new EU biofuel regime would be heavily weighted against Palm Oil and in favour of EU feedstocks such as rapeseed.
  • MEP Albert Dess (Germany, centre-right), MEP Fulvio Martusciello (Italy, centre-right) and MEP Michel Dantin (France, centre-right) have tabled amendments removing Palm Oil advanced biomass and biofuels from the EU’s formal counting. This would discriminate against advanced Palm Oil biomass feedstocks, effectively removing them from consideration for EU buyers.

These are only a selection of the most egregious amendments. Dozens of others impacting Palm Oil have also been tabled. The timeline is short; decisions will be made imminently.

These amendments, along with hundreds of others, were debated in the Parliament’s Industry, Research and Energy Committee (ITRE) on 4th September and the debate in the Environment Committee (ENVI) and other opinion giving Committees will follow soon.

The Committees will vote quickly – only a few weeks later. It is expected that ITRE will vote on 28th November. In other words, in a matter of weeks from today, MEPs could decide the fate of Palm Oil biofuel exports to Europe post-2020. A final vote of all MEPs – heavily influenced by the Committee votes – could take place as soon as the week starting 11th December 2017.

The Parliament does not act alone. The Council of the EU (made up of all EU Governments) will also finalise its recommendation during September and October. Negotiations between the Council, Parliament, and the EU Commission will establish a final Directive, probably before the summer of 2018.

It is worth recalling that proposals not specific to Palm Oil – such as the potential introduction of Indirect Land-Use Change (ILUC) factors in the RED – could also significantly impact the Malaysian industry. ILUC factors would represent another, unscientific, opportunity for protectionist EU politicians to discriminate against Palm Oil imports.

Why is the EU so protectionist about biofuels?

Put simply, the interests of both well-funded environmental campaign groups and uncompetitive European vegetable oil producers are aligned. Environmental arguments are used as a justification for imposing a trade barrier. This has been the case since the first incarnation of the RED in 2009. The EU’s classification of Palm Oil as causing more GHG emissions than European oilseeds has been criticised by scientists for almost a decade.

Malaysian Palm Oil, despite the attempts to hobble it under RED, remains remarkably popular as a biofuel in the EU. The German-led International Sustainability and Carbon Certification (ISCC) has been accepted as a gold-standard certification for Palm Oil biofuels, as has RSPO-RED. Once again, uncompetitive European rapeseed farmers find themselves unable to compete with Palm Oil in the marketplace, and so turn to politicians to rig the system in their favour, and against Palm Oil.

Like all anti-Palm Oil campaigns, the RED has acted like a ratchet – constantly squeezing and tightening restrictions, and attempting to impose new barriers with every new iteration. So it will be now, in the forthcoming votes. This time, if they succeed, it will not be just the sound and fury (as with the EU Parliament Resolution earlier this year); it could be the end of Palm Oil biofuels in Europe.

#Policy News