The Oil Palm The Oil Palm

The EC’s Proposals on Deforestation: The Good Ideas

In the next of our series on the EU’s plans to reduce global deforestation, we assess the policy proposals put forward in the recent COWI Report commissioned by the EU. Which proposals can be considered good?

There are 15 measures proposed. The COWI Report splits them up into supply-side and demand-side measures.

The ‘bad’ measures, which we will look at in the next blog, are largely demand-side measures. Why are such demand-side measures generally negative? Asking people not to consume something or keeping it off a market necessarily entails stating that it is defective, inferior or harmful. Palm oil is none of these things.

In this blog, we first examine the measures outlined in the COWI Report that qualify as ‘good’ in our estimation, of which there are three. Two of these are supply-side measures.

Best Practice Support to Smallholders via Technical Assistance

The aim of this proposal is, as it suggests, to support smallholders with better farming and environmental management and, importantly, it aims to improve yields. Why is this good? First, it actually recognises that smallholders and local communities are a key part of any approach to preventing deforestation.

Second, it is a straightforward intervention that will produce social, economic and environmental benefits.

Third, it’s an intervention that has few political ramifications. It doesn’t call for high-level political involvement or vast and complicated problematic solutions – such as land reform or cooperation from exporting authorities. In short, it uses existing knowledge and applies it at the local level.

Partnership agreements for forest risk commodities

Partnership agreements for ‘forest risk commodities’ work as follows: two governments, say Malaysia and the European Union, develop or agree on sustainability standards for the exporting country and the importing country. The result is that any products exported from the producer country are certified sustainable, and any products on the import market fall under the same certification. The upside to a partnership agreement is that both countries have to agree on the standards that get implemented: it’s a negotiation, not an edict. Such an agreement should cement a national standard such as the Malaysian Sustainable Palm Oil (MSPO), for example.

The downside is that if the process is handled poorly, the agreement could become too unwieldly. If too many EU-side interest groups get hold of the process, any number of additional factors — land tenure, gender, economic and social inclusion – could become part of the discussion, getting further away from the policy’s objective: controlling forest loss.

The downside can be seen in the current crop of partnership agreements (VPAs) for forest products. After more than a decade, and hundreds of millions of Euros, only one agreement has been brokered, and only just. These agreements were only supposed to tackle the seemingly narrow field of illegal timber products. So why has it taken so long? In developed countries, good legislative and regulatory frameworks mean that all aspects of legality (e.g. land tenure, taxation, licensing and permits) are covered. But in many developing country contexts this simply isn’t the case.  It’s not that anyone is breaking the law; it’s that the laws governing forests and forestry don’t exist, or implementing regulation is missing.

Now move that same idea over to the broader and less-defined area of palm oil sustainability. A country like Malaysia would not have a problem: forest laws and tenure systems are well defined; environmental regulatory frameworks are well-developed, implemented and enforced. Other countries, however, may struggle.

Public procurement for sustainably produced commodities

‘Green public procurement’ (GPP) has been applied by many governments around the world. One of the upsides of GPP is that it gives governments that say they support sustainable production, the opportunity to actually support it. This is particularly important in a market for certified products where the uptake of certified palm oil on the buyer side is small and growing only incrementally. The EU is the largest market for certified palm oil.

A GPP program for timber in the EU has been simple and effective. It has largely been information-based. It provides a list of standards or criteria for timber that can be considered ‘green’. GPP is not compulsory across the EU, its Member States or even local governments and individual departments. For example, the Department for the Environment in the U.K. (DEFRA) may seek green procurement; the Italian navy, however, might not.

As procurement is based on cost as well as outcome, the weighting of green procurement in government tenders may be different.

Palm oil and its products are not currently a significant part of government procurement. If they were, anti-palm oil campaigners would have had a field day already.

Government procurement is a sensitive area for trade as it is, and governments often feel greater pressure to source from their own country more than anything else. The WTO Government Procurement Agreement (GPA) gives a good indication of how sensitive it is. The GPA covers commitments by countries to make certain goods and services procurement processes open to all countries. The EU has listed a range of products from paper to cars; food is nowhere to be seen.

Why are these proposals good?

The common element among these proposals is that with the possible exception of the partnership agreement, they don’t try to do too much. They are within the realms of direct influence by the government; or in the case of farmer assistance, they are just trying to improve existing behaviour, not change it completely.  Most importantly, however, they do not denigrate palm oil or try to place some sort of trade measure. They generally accept the truth about palm oil: it is a competitive product that provides strong social and economic outcomes for those that produce it.