The Oil Palm

Europe Puts ILUC on Hold; New Research Boosts Palm Biodiesel Greenhouse Savings Rating

It appears that the European Commission will officially delay the introduction of an ILUC factor until 2016, according to a report by Reuters. Minutes from a meeting between Energy Commissioner Gunther Oettinger and Commissioner for Climate Change, Connie Hedegaard, quote the officials saying that, “scientific uncertainties still exist with regard to the exact level of such factors.”

This is good news for Malaysian palm oil producers and producers of other biofuel feedstocks who have challenged the validity of so-called indirect land use change and questioned the intentions behind the introduction of additional technical standards to Europe’s biofuels policy. This decision by the Commission follows the publication of numerous reports, such as that by the Copenhagen Economics, that have concluded ILUC is uncertain and would have unintended consequences on the ability of Member States to achieve their greenhouse gas (GHG) reduction targets.

However, challenges remain for the palm oil industry and other producers of biofuels. Despite making the correct decision to delay the introduction of ILUC standards, the Commission intends to raise the GHG savings threshold for biofuels to be accepted as sustainable and, importantly, count towards Member State national targets. Currently biofuels must reduce GHG emissions by 35% compared to their fossil fuel equivalent. The leaked document suggests this will be raised to 45% or 50%. This misguided measure will exacerbate the dispute with the EU’s trading partners over what many perceive as the Directive’s discriminatory approach to foreign biofuels.

Efforts to introduce crop-specific ILUC standards and to increase GHG savings thresholds are based on the false premise that biofuels production in developing countries, such as Malaysia, is inherently inferior to production in the West, and that emissions from the process are greater.

New research on the Commission’s methodology just released by German economist Dr Gernot Pehnelt, demonstrates that the underlying standard in the Directive, the default values, are not credible and represent discrimination against foreign feedstocks. Dr Pehnelt’s research concluded that a more accurate default value for palm oil is between 37% and 44%, and as high as 52% for palm oil used in electricity generation, and did not take into account the methane capture process. This far exceeds the 19% default value given to palm oil in the Directive. He went on further to state that the EU “added a sort of artificial factor” for the processing of biofuels abroad.

The Malaysian palm oil industry have sought to communicate to the Commission the inaccuracy of the default values and the discriminatory nature of the Directive. These views have been echoed by other biofuel producing countries. Hopefully this new research will encourage continued dialogue with the Commission, and a change in the values for Malaysian palm biofuel.