The Oil Palm The Oil Palm

Tackling the Tackler: Norway’s Climate Stance

Norway, a global afterthought since hosting the Winter Olympic Games in 1994, is at it again.

The Norwegian environmental collaborators have kicked off their latest black campaign against Malaysian national interests, and it is aimed at hurting Malaysia’s 650,000 small farmers.

Norges Bank Investment Management (NBIM) stated in February that it has started an ethical dialogue with three Malaysian banks over their financing of palm oil operations.

NBIM is the entity responsible for the investments of Norway’s Government Pension Fund Global (GPFG); it is the largest sovereign wealth fund and the world’s largest equity investor.

The move by NBIM to open this dialogue – and indeed some of its previous divestment actions against palm oil companies – has excited anti-palm oil and environmental activists.

The hypocrisy of the situation is breathtaking.

NBIM’s issue with palm oil is, according to its own reports, the contribution of deforestation to climate emissions.  Yet NBIM has completely ignored the fact that palm oil’s contribution to global deforestation is tiny compared with other agricultural sources. A reminder from EU research on deforestation: Of all global deforestation, 24 per cent is from livestock (i.e. beef), 5.4 per cent is from soy, 3.3 per cent is from maize, and 2.5 per cent is from oil palm.

By contrast, NBIM has overlooked these other commodities that are proven to be vastly more significant in terms of global deforestation. The anti-palm oil bias is clear.

Other commodities, however, are not NBIM’s most prominent oversight. There is a much larger elephant in the room that Norway thinks it is possible to ignore: Norway’s current and historical economic dependence upon environmentally-destructive fossil fuel, i.e. oil, revenues.

It is estimated that since the 1970s, the total contribution of Statoil, the Norwegian state-owned oil company, to Norway’s economy has been around USD1.7 trillion. It has made Norway one of the wealthiest countries on the planet relative to its size; it has essentially made Norway’s sovereign wealth fund into what it is today.

Currently the Government of Norway still holds 67 per cent – two thirds – of Statoil’s stock. It continues to be the largest shareholder and continues to benefit from the company’s oil revenues.

According to its critics, Norway – through Statoil – is a major contributor to climate change.

One NGO estimates that Statoil has been responsible for around 0.5 per cent of global fossil fuel emissions over the past 30 years. For one company, that is an extremely large contribution. It is being sued in the state of California for its contribution to environmental damage caused by the rise of sea levels.

Despite this track record of government-endorsed fossil fuel extraction, Norway apparently now has appointed itself as the moral arbiter for everyone else. The problem is that its morals are wholly biased against the developing world. Rich-world polluters are not treated with the contempt that Norway has shown for Asian small farmers of oil palm. Norway’s pension fund is not, for example, divesting its holdings in companies such as Royal Dutch Shell. It is not calling on the Government of Norway to sell out of Statoil.

And it’s not just NBIM that’s selling out developing countries. The Parliament has also piled in. In the middle of last year, Norwegian parliamentarians called for a ban on palm-based biofuels for their renewable fuel mandate, which they had raised to 20 per cent. This would provide a boost to Norway’s own fledgling biofuels sector. If Norway – and Norwegians – are so concerned about sustainability, they should consider weaning themselves off oil and start spreading benefits globally, and not only limited to inefficient Norwegian biofuel producers.

Consider the other points of hypocrisy in its action against palm oil and the palm oil supply chain, where Norway ignores the broader economic and social benefits of palm oil.

  • Palm oil provides food, but also biodiesel that is renewable. Statoil’s oil provides neither.
  • Palm oil provides jobs and supports independent livelihoods in rural areas in emerging and developing economies, pioneering poverty reduction and social development. Statoil’s oil provides neither.
  • Palm oil gives small landholders the ability to independently improve their living standards and diversify crops, broadening their income base. Statoil’s oil does neither.
  • Oil palm plantations can be established with relatively small amounts of capital, giving small landowners an achievable base for intergenerational investment. Statoil’s drilling operations require significant amounts of capital.
  • Oil palm smallholder schemes have brought millions of people out of poverty. Statoil’s operations have simply bolstered the wealth of an already rich economy.

There is a patronising element of Western guilt in Norway’s actions. The country’s apparent ‘conscience’ on palm oil prompted it to throw billions of dollars at failed aid programs that attempted to compensate developing countries for not cultivating oil palms.

Norway’s government failed to appreciate that economic development isn’t simply about accepting welfare payments from a wealthy benefactor.

And this same level of patronising behaviour is apparent in its recent actions. Norway is questioning the conduct of banks in Malaysia for financing palm oil operations that will provide jobs and income for people across the ASEAN region. Apparently this is behaviour that should be sanctioned.

It is very easy for a wealthy country to judge the behaviour of its less well-off economic partners. But Norway has a small population, it is sparsely populated and very homogenous. The population of the entire country is less than that of Kuala Lumpur. It is around a quarter that of Greater Jakarta. It has never needed to make a transition to large-scale agriculture. And its energy needs are provided by oil.

In other words, Norway’s understanding of how the rest of the world lives is limited at best.  Norway seems to make the assumption that every other country can be Norway. But this simply isn’t possible. (Although – given that the Barents Sea is no longer full of gas, and oil prices are no longer anywhere near $100, it’s unlikely that other countries would even want to be Norway)

The critical point is that there is a different set of development priorities almost everywhere. The sooner Norway wakes up to this the better.

Sure, a dialogue is a good way to start a conversation on sustainability. But attempting to shame the palm oil sector, which has done so much good in the developing world, is hardly a way to generate goodwill. Especially when you are not willing to hold your own country to the same standards.

The Oil Palm The Oil Palm

Fact Checking the Fake News Media Hype on the Impending Extinction of Orang-utans

There has been widespread coverage in European media of a new “academic paper” by a German student that contains hyperbolic descriptions of the decline of orang-utan populations in Borneo. Media reports and NGOs have linked the research to oil palm cultivation and the use of palm oil in Western countries.

The timing of the report is deeply suspect. Palm oil producers have aggressively pushed back against Europe’s discriminatory attempt to ban palm biofuels.  Producer countries have also mounted a robust defense of national certifications schemes in the face of efforts by the European Commission to establish a regulatory regime that would advance additional trade discrimination measures.

As a result, Europe’s policymakers are on the defensive, and have begun to realise failed trade deals and possible retaliations for their exports to the region are a real possibility.  In fact, Trade Commissioner Cecilia Malmstrom will be addressing this new reality when she is in Singapore this week for talks with her ASEAN counterparts.

So it is little surprising this report with alarming headlines and little substance has been released – supported most likely by domestic European oilseed competitors – as it attempts to advance a false and misleading narrative about the impending extinction of the Borneo orang-utan to help support the bans on Palm Oil. We’ve come to expect nothing less from our opponents in Europe and the environmental minions who do their bidding.

Considering the millions that have been spent researching, studying and protecting the orang-utan, a reality fact-check is in order.

Myth. The population decline is due to palm oil.

Fact. The report says that conversion of forests to plantations – for pulp and paper, farming and palm oil – plays a very minor role in the decline of orang-utan populations. The report actually states that hunting is the leading and major driver of orang-utan population loss. The palm oil connection has been pushed by groups such as Greenpeace, who want to effectively ban palm oil use in Western countries.

Myth. All orang-utan populations are under threat.  

Fact. The research stated that in states such as Sabah, a number of the populations are stable, with other research suggesting that some populations are potentially increasing. This includes conservation areas and populations that are supported by palm oil companies. This points to the fact that better conservation management is actually working when appropriate resources are allocated to it.

Sabah, for example, has more than doubled its protected forest areas since 1999, from 839,385 ha to 1,906,896 ha. This has increased the area of orangutan’s protected habitats by 75%; it should be noted that according to the study, the estimated orangutan deaths in Sabah were relatively small. The researchers failed to note the policy measures undertaken by Sabah.

Myth. 150,000 orang-utans were lost in the past 16 years.

Fact. It is widely acknowledged that orangutan population estimates are not reliable and all population estimates are precisely that: estimates. The exception to this, according to the IUCN, is the state of Sabah, where comprehensive aerial surveys were completed. In other words, for an accurate ‘loss’ number to be determined, the original population has to be clearly understood. It needs to be recognised that the Voigt study is what is known as a study of metapopulations, i.e. an aggregation of data and factors contributing to population increases or declines, which are then modelled. There were no field counts or aerial surveys undertaken. Is this accurate? It is an approximation, not a census, and it needs to be understood as such.

The Sabah Wildlife Department has also pointed out that the study treats the distribution of nests and populations as homogenous, i.e. they are distributed evenly. This is simply not the case, and it severely distorts the study findings.


Myth: 6,100 orangutans were killed in Sabah.  

Fact. Sabah arguably has the strongest research and conservation programs for orangutans. It has worked with other research institutions and NGOs. The Sabah Wildlife Department (SWD) has refuted the study and its findings. It has also noted that it was not consulted at all for the study. They reasonably ask the question: why not?

One point that SWD makes is there is great variation in nest numbers across the same area, depending on logging activity. SWD researchers noted that population numbers nearly doubled between 2007 and 2008 in a survey area; the reason for this variation was the end of logging activity. This variable needs to be considered when assessing populations; it appears not to have been taken into account by the researchers.

Myth. Banning palm oil or using certified oil will ‘solve’ this problem.

Fact. As both The Oil Palm and many researchers have pointed out over the past few years, the leading cause of orang-utan deaths across Borneo is poaching for bushmeat.  As unpalatable as this may be for Western consumers, this is a simple fact. The use of palm oil that is RSPO certified or used in Western products will make little difference to orang-utan poaching rates, though it will give some palm oil companies an incentive to contribute resources to conservation programs – as noted by Voigt. The small impact is underlined by the fact that Western countries consume a small percentage of global palm oil, and these markets are the only ones where a debate about certification or banning is taking place. What will solve this problem is a serious examination of why local populations in Borneo – particularly Kalimantan – undertake poaching in the first place.

Myth. Borneo’s forests are about to disappear, taking orangutans with them.

Fact. Over the past 20 years, conservation advocates have made a series of extreme claims about rainforests in Borneo. In 2001, it was claimed all lowland forests in Borneo would disappear by 2010. Another claim was made in 2007 that the same forests would be gone by 2018. Clearly neither have happened. Any projections around orang-utan population based on total forest area need to be taken with a grain of salt.

The Oil Palm The Oil Palm

Is The UK Serious About ASEAN Trade Links?

The Malaysian Government is looking for allies against the EU Parliament’s plan to ban Palm Oil biofuels: will the UK support its South-East Asian friends?

On Wednesday 17th January, the EU Parliament voted through its position on the Renewable Energy Directive (RED). This included a provision to ban all Palm Oil biofuels in Europe, after 2021. Other oilseeds are allowed to continue operating: the ban is only aimed at Palm Oil, which (coincidentally, or not) is the only feedstock originating from the developing world.

The vote to ban Palm Oil was not unanimous. MEPs from the UK’s governing Conservative Party were among those supported Malaysia. MEP Daniel Dalton, Chief Whip of the UK Conservatives, released a statement arguing that:

“we could not support an arbitrary ban on palm oil, which will have an inflationary effect on food prices and cause significant economic damage to developing countries.”

Conservative MEP Daniel Hannan, in a speech in the EU Parliament, criticised other MEPs for voting to ban Palm Oil:

“the reality is that this is a vote driven by the interests of rapeseed producers here in Europe, specifically the biofuels industry at home”

This is the reality. Some MEPs have claimed that Palm Oil should be banned for environmental reasons, but these do not stack up against the facts. A few bulletpoints is all that is needed to expose these claims as baseless:

  • Malaysia protects over 50 per cent of land as forest area, as confirmed by the United Nations. This is more than almost every EU country. The claim that Malaysian Palm Oil causes deforestation is demonstrably untrue.
  • Palm Oil is 4 times more efficient that rapeseed – that means for every litre of rapeseed oil, four times more land must be cleared, compared to Palm Oil. The environmental benefits of Palm Oil biofuels are clear.
  • Malaysian Palm Oil biofuel exports are already certified as sustainable under the RED: by leading EU certification bodies, such as the ISCC (based in Germany) and the RSPO-RED (based in Switzerland). MEP claims that Palm Oil biofuel is not sustainable are untrue, as proven by the experts.

Conservative MEPs are correct: this is about protectionism, pure and simple.

650,000 Malaysian small farmers, and 3.2 million Malaysians in total, who depend on Palm Oil, will be grateful for the principled stance taken by these MEPs.

The UK MEPs also acted in their country’s economic interests. The UK Government has been vocal about its ambition to build new global trade links with Asia, after its exit from the European Union. Dr Liam Fox, the UK’s Secretary of State for International Trade, has visited the region to scope out potential trade deals. The actions of MEPs in Brussels, voting to support and maintain open trade in Palm Oil biofuels, is a positive step and illustrates Britain’s commitment to support and partner with Malaysia and her neighbours.

By contrast, other MEPs have voted to harm trade links with Malaysia. Malaysia’s Minister for International Trade, Dato’ Sri Mustapa Mohamed, has put the EU on notice that a WTO complaint will be forthcoming; and Minister of Plantations Industries and Commodities, Datuk Seri Mah Siew Keong, has stated clearly that retaliation will follow, from Malaysia, Indonesia and Thailand. The Minister noted to EU leaders that if the ban on Palm Oil is confirmed – “don’t expect us to continue buying European products”.

UK MEPs’ position to distance themselves from the EU’s Palm Oil ban may have given the UK a competitive advantage when it comes to future trade policy.

The next step in the process is the so-called ‘trilogue’ negotiations, between the Parliament, Council (made up of 28 EU Governments) and the EU Commission. The Parliament negotiators will press hard for a ban on Palm Oil. Surely, Malaysia can count on the UK Government to support Palm Oil within the Council?

That may not be the case. Not everyone in the UK Government is supportive of Palm Oil, and not everyone has received Minister Fox’s memo about the importance of trade links with Asia.

On December 18th, UK Energy Minister, Lord Henley, made a speech at a Council meeting in Brussels stating that the UK doesn’t want to use Palm Oil biofuels. Does this mean that Minister Henley, and the UK Energy Ministry (knows as BEIS), are planning to support the MEPs’ call for a ban on Palm Oil biofuels?

If so, this would clearly place Minister Henley at odds with the UK Government’s stated policy of improving trade links – and would place at risk Minister Fox’s trade goals in Asia. The retaliation and ill-feeling that would follow a vote to ban Palm Oil would have significant, and not short-term, negative effects on the UK’s trade relations with Indonesia, Malaysia and elsewhere.

The UK’s position on the RED will be an acid test of the Government’s seriousness about future trade links with Asian countries, and its commitment to support mutually-beneficial open trade. Palm Oil may seem like a minor issue in the Westminster tearooms, but in South-East Asia this RED vote is an existential threat, that will have life-and-death impacts.

The UK Government should take a lesson from their MEPs and support open trade with friends in Asia, and oppose vigorously any attempt to ban Palm Oil biofuels.

The Oil Palm The Oil Palm

COWI: Noting the Political Sensitivities

In our series of blogs on the COWI report assessing proposals to reduce deforestation, a clear underlying theme has been how the report ignores the political sensitivities that drive European policymaking. These politics are inextricably linked with how commodities are treated in Europe. In short, commodities from the developing world suffer and those from the rich world prosper under EU regulation. This has uncomfortable echoes of past colonial policies, designed to enrich Europeans whilst keeping the poor out.

The COWI report has a particular approach towards these political sensitivities. It simply avoids discussing them. The lengths to which the authors go to skirt around the topic is almost laughable.

A perfect example is to be found in omission: how certain commodities and certain countries are simply not mentioned.

The largest exporter of soybean is the United States. Yet when mentioning ‘main exporters’, the COWI report jumps straight to Brazil and Paraguay.

The largest exporter of bovine meat, i.e. beef, is the United States. Canada is not far behind. But, again, it is not mentioned. The focus – and the finger-pointing – is directed at the poor countries, not the rich.

This indicates two things. First, the European Commission is clearly reluctant to consider the United States as the source of a ‘forest risk commodity’, which is undoubtedly the result of political sensitivities. The Europeans have no such reticence when it comes to pinning negative labels on Brazil, Malaysia or other developing countries.

Second, this means by implication that the European Commission is not seeking to identify ‘forest risk commodities’ per se – beef is beef, wherever it comes from. No, the EC is seeking to identify forest risk countries.

This creates a big problem for the EC and the EU. Labelling a country as a ‘deforester’ has significantly more political sensitivity than blaming the deforestation on a product, no matter how misguided this might actually be. As a result, COWI’s report comes across as confused.

For example, all EU policy to date has focused on tropical forests, overlooking temperate forests as sources of deforestation. But COWI’s list of ‘forest risk countries’ based on their exports of forest risk commodities (such as beef), the countries that appear include Chile, Argentina and Australia, simply because they export beef and pulpwood. Chile and Argentina are completely devoid of tropical forests. Australia has a relatively small tropical forest area, most of which has been governed by particularly strict rules on land-clearing – even on existing farms – and forests aren’t cleared for beef grazing. But Australia becomes a forest risk country just because it exports beef.

Similarly, the way in which the report considers some ‘commodities’ to be risks – by virtue of their export – is simply wrong.

Take, for example, the way in which the report refers to ‘pulpwood’. Pulpwood is used to make pulp and paper. According to the COWI document, the major exporters of pulpwood are Vietnam, Chile and Australia. They are therefore the risk countries for deforestation and pulpwood. But anyone who has paid any attention to NGOs over the past decade will be well aware that it’s not pulpwood that causes controversy, it’s the pulp and paper that is made from the pulpwood at large integrated plantation-mill complexes. By this logic, the pulp and paper sectors in Brazil, Indonesia, Russia and Canada can’t be considered ‘forest risk countries’ because the ‘forest risk commodity’ they produce isn’t exported – it’s turned into something else and then exported.

The EU may attempt to skirt this problem, but their work around defining forest risk is contradictory. They want to make it about the commodity, but really it’s about the country. This is why ‘Brazilian beef’ is a problem for Europe, but US beef isn’t.

Palm oil, however, is an exception. There are only two major producers and exporters of palm oil, Malaysia and Indonesia. Neither figures highly on the list of the EU’s political sensitivities, so placing the blame on palm oil for everything from child labour to climate change is a no-brainer for European politicians. There is no political down-side to criticising palm oil; therefore, fewer international sensitivities.

Consider the storm that would ensue if the EU took the same aggressive approach towards American soybeans, or towards Canadian timber, that it has taken towards Malaysian Palm Oil. The political response from those countries would be overwhelming – as a result, the EU does not dare.

Perhaps the answer lies in the palm oil-producing countries making themselves more politically-powerful in Brussels, and elsewhere in Europe. The more pressure they can exert (like the Americans and Canadians), the less likely their commodities will be targeted. There is no shortage of leverage points – from defence sales to free trade agreements to the EU’s role in the world.

The ‘forest risk country’ approach is revealing, and reflects poorly on the EU. It is, obviously, intellectually incoherent to use geography rather than science to define the risks of deforestation. It is morally dubious to exclude some countries whose activities are similar to countries that are included. It is misleading to dress up politically-motivated calculations as environmental or scientific concerns. And it is the height of hypocrisy to define a previously-deforested area in a developed country as sustainable, but a recently-deforested area in a developing country as unsustainable. If that thought process was extrapolated to the economy as a whole it would simply embed existing monopolies and power structures (in favour of the rich, or the West) and consign everyone else to lower-class economic conditions. It is hard not to wonder if that is actually the goal of many inside the EU power structures. This is a case of the EU using environmental regulations as a tool for protecting industries in the rich world, by restricting development in Asia and Africa.

It is no wonder that the ‘forest risk’ concept is contradictory: it is contradictory because it is political bunk.

This, sadly, reeks of a paternalist neo-colonialism. As good as the COWI report is in certain parts, it simply cannot avoid suffering this unfortunate European disease.

The Oil Palm The Oil Palm

COWI’s Focus on Technical Assistance

The COWI report puts an emphasis on providing technical assistance to smallholders and farmers in developing countries in order to improve sustainability efforts and, where possible, reduce levels of deforestation and degradation.  This is arguably the strongest recommendation put forward by COWI.  But what should this kind of technical assistance actually look like?

There are several parts to this question.

The first is who should be paying for this from the donor side? Clearly the development assistance agencies of developed countries would be the sponsors. However, they shouldn’t be the responsible agencies. Why? Because climate policies drive decisions of these agencies. Rather, the programmes should go via multilateral organisations such as the Food and Agriculture Organisation, for which the remit is largely technical and the focus remains on alleviating poverty and growing wealth.

Secondly – which domestic agency should actually be delivering the assistance in the recipient countries? In all countries, it should be the agency that is responsible for delivering agricultural services for palm oil. In Malaysia, this is obviously the Malaysian Palm Oil Board and its related entities. It’s arguable that the MPOB is the world’s leading agency for palm oil research and services.

These departments deliver extension services to farmers and smallholders; agricultural extension is simply another name for disseminating technical and practical information to farmers.

Thirdly – which countries should be the recipients of such assistance? It’s arguable that Malaysia isn’t in significant need of technical assistance; as stated above, the country’s palm oil agencies are the world’s best. However, simple capacity enhancements within the agency would be ideal, i.e. increasing their ability to implement their programmes. This could be something as simple as replanting programmes.

What would truly benefit Malaysia would be two things.

First, bringing its smallholder farmers into compliance with the Malaysian Sustainable Palm Oil standard.  This would not mean a significant amount of work in terms of bringing the farmers up to standard; Malaysia’s regulations for palm oil are based on agricultural best practices. Despite this, audit and certification is time-consuming.

Second, establishing a contact group or committee to ensure the recognition of MSPO by the EU’s authorities on sustainability.

This would serve two purposes. First, it would ensure that Malaysia’s small farmers aren’t cut off from European markets. Second, it would ensure that Europe’s supply of palm oil is sustainable.

The final question is precisely what sort of information farmers would be receiving as part of these extension services.

The target that all parties undoubtedly agree on is increasing yields from existing stock. For producers, this simply means higher revenues and higher profitability. For those on the other end of the transaction, it means – potentially – lower land use and therefore lower levels of deforestation and forest degradation.

Similarly, all parties would agree on minimising inputs. Again, for producers, this means lower costs, and in terms of environmental management it means lower externalities such as nutrient loads.

These solutions are win-win for both the environment and for producers.

Where producer countries and governments should be wary is when training and development assistance goes beyond smallholder training and steps into high-level land-use planning. This isn’t much of a problem in Malaysia, but would likely be so in other countries.

And the wariness isn’t so much to do with what the environmental and economic outcomes might be, but how and whether any assistance can adequately deal with the considerable complications of land use in developing countries.

Assumptions are often made by well-meaning Westerners that the things they take for granted – stable land tenure, functioning titling and cadastral systems – work equally well in developing countries. This is simply not the case. Arguably the best example related to palm oil in this vein is the often-touted idea that ‘land swaps’ for oil palm plantation developers can take place easily. This would involve a developer swapping forested land for degraded land. But this requires ensuring that there aren’t competing claims on the land, whether from various levels of government, communities and other commercial interests.

The worst outcome in these situations is that pursuing such unattainable grand plans would have a real opportunity cost. The time and resources of an assistance programme – which could produce positive outcomes on the ground via farmer training – would be wasted. Instead, the mantra should be: simple, achievable, and focused on the farmers.

The Oil Palm The Oil Palm

The Risks of (dis)information Campaigns

The European Commission recently proposed a number of policy measures aimed at tackling deforestation in developing countries. The EC commissioned a European consultancy, COWI, to assess the feasibility and effectiveness of these policies. One such policy was the idea of ‘awareness campaigns’. COWI considered this to be a feasible, low-risk strategy. In fact, the opposite is true.  These are simply disinformation campaigns funded by Europeans taxpayers for the benefit of more expensive, less competitive European oilseed products.  At the end of the day the result is clear: European consumers pay twice because their governments continue to enact policies that are both flawed and targeted to benefit the few.

The COWI report outlines what a campaign might look like. It states,

“The envisaged intervention should aim to increase awareness among consumers of the direct link between consumption of certain types of products and the risk of deforestation. It would pass the message that even small changes in purchasing behaviour to favour certified products can help halt deforestation and forest degradation, using case stories.”

The COWI report considers that a potential stumbling block in terms of feasibility is whether the messages would only reach those consumers who are already what it calls ‘deforestation-conscious’.

This is absurd. The risks are actually myriad.

First, there is a clear risk that any information campaign will only portray imported commodities such as palm oil in a negative light.

As has been stated previously in our blog series on the COWI report, the problem from the outset is that asking people to switch away from an existing product already implies that it is bad. The ‘awareness campaign’ is sending a strong negative signal through the simple fact of its existence.

This is the precise reason that ‘negative claims’ about product ingredients can’t be made in the EU without a body of significant evidence.

Second, there is the clear risk that any information campaign will not easily distinguish between products that are certified as sustainable, and those that are not.

This risk has become apparent for organisations such as RSPO, which have had to go to great lengths to distinguish themselves in the European market – at the expense of palm oil produced, for example, by small farmers in Malaysia.

The clearest example of this was the ‘Good Bad Palm Oil’ campaign that the organisation pushed approximately 12 months ago. The campaign tried to make some distinctions between certified and non-certified palm oil.

However – and this is no criticism of the campaign – there was and is clearly a problem with how palm oil is perceived in the European market. And these problems have been caused by players and voices that are outside of the control of the industry, i.e. those that fundamentally object to the use of palm oil.

No matter what the European Commission does, or how fair and balanced it says it will be, there is nothing that can stop anti-palm oil voices from continuing their attacks.

Third, there is the risk that any communication materials produced by an EC programme will be taken out of context by these opponents of palm oil, and used to further denigrate palm oil.

This has precedent: it has clearly been the case with work on illegal logging across the European Union. Information campaigns that were supported by aid agencies generated material that was further used by campaign groups to cast doubt on the legality of all imports of tropical timber.

Fourth, reports and information or awareness campaigns commissioned by the European Commission are always subject to disclaimers. A recent report by FERN, commissioned by UKAid, was highly questionable. It contained conjecture, as well as many statements that were simply unverifiable or arguably wrong.

The motivation for this report, it seemed, was to generate the political momentum for a FLEGT arrangement on palm oil. Yet, in doing so, it made claims against palm oil that were both reductionist and overblown.

Fifth, and related to the above point, the funding of such reports reveals a situation where the EC effectively pays activist groups to campaign against palm oil, to make unsubstantiated allegations against palm oil producing countries, and to lobby EU lawmakers for tighter restrictions on palm oil.

Consider the mirror situation. Imagine the political fallout if the Malaysian Government were to pay activists to campaign against European cars such as VW in Malaysia, claiming that they were damaging the environment, or that punitive restrictions should be placed on the cars across Asia. The EU (and Germany) would – with some justification – be furious. Yet, this is what the EU is doing to Malaysia’s #1 export commodity.

What if such funding or campaign were instead to claim that wine and brandy from France offended religious sensibilities across Malaysia and so should also be subject to review or restriction? Again, this would be met with disappointment, at best, in Brussels and Paris.

The way that COWI has assessed these information campaigns, it gives the distinct impression that they are benign. COWI’s assessors have clearly not read enough EC-commissioned reports. These information campaigns are not benign, they are not innocent or harmless, and in many cases they are not, actually, a constructive approach at all. It would be naïve to believe that an EU information campaign would be neutral or helpful to Malaysian Palm Oil. The opposite is true.

The ‘Amsterdam Declaration’, which was signed by EU member states, was effectively a missive against palm oil that has been used by NGO campaigns. Any information campaign by the EU would be used in the same manner, and could backfire against Malaysian businesses and small farmers.

If the Commission is to undertake an information campaign, it should think twice.  In recent weeks, the European Ambassadors have had to undertake the hour-long drive to Putrajaya to defend the policies of Brussels.  At the same time, the EU is attempting to make progress on its trade and defence deals in the ASEAN region, specifically a trade deal with Malaysia. It is particularly keen to open export markets for European companies. Further, if the EU sets out with its ‘disinformation’ campaigns about palm oil, Malaysia can and should reserve its right to launch ‘information campaigns’ about the alleged cancer-causing, climate destroying problems of German diesel cars, or the illicit nature of French alcohol products, for example.

Using EU money to pay activists to smear palm oil is not wise policy. Brussels should understand the gloves will come off.

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.

The Oil Palm The Oil Palm

ICYMI: Malaysia Condemns European Parliament’s Latest Vote to Ban Palm Oil Biofuels

Malaysia will take every necessary action to protect Palm Oil sector and small farmers

Following the vote in the ITRE Committee of the European Parliament, which moves Europe one step closer to banning Palm Oil biofuels, Malaysian Minister of Plantation Industries and Commodities, Datuk Seri Mah Siew Keong, issued a strongly worded statement stressing the Malaysian Government will take every necessary action required to protect the rights of Malaysia, the Palm Oil industry and its small farmers following this discriminatory and unjust action by the European Parliament.

The Minister stated:

“Any attempt to discriminate against, or exclude, Palm Oil biofuels will negatively impact European trade and cooperation in Malaysia, and the wider South East Asian region.”

“[The] Malaysian Government will be compelled to take every necessary action to protect the rights of 650,000 Malaysian Palm Oil small farmers, and to secure the future of the Palm Oil sector that has lifted millions of Malaysians out of poverty.”

Therefore, the Malaysian Government will respond strongly, should this provision be confirmed in the final Directive as protectionist discrimination against Malaysian Palm Oil exports will not be tolerated.

This debate now moves to the Commission, Parliament and Council.  This is a major test for European leaders, and their future relationship with Malaysia and the South East Asia region.

Read the Minister’s full statement online here.

Read Malaysian Prime Minister Najib Razak’s recent comments opposing Europe’s actions:

“Whoever boycotts oil palm products, they will face retaliation from us Malaysia and Indonesia … If they have unfair practice against us, we too can retaliate.”

The Oil Palm The Oil Palm

ICYMI: Post-Brexit, Malaysia Stands Ready to Work with the UK

Minister Datuk Seri Mah Siew Keong, Malaysian Minister of Plantation Industries and Commodities, has written an op-ed for the UK Daily Telegraph, setting out the Malaysian Government’s position on opportunities for the Palm Oil industry, and for UK-Malaysia cooperation more generally, once the UK leaves the European Union.

The Minister’s op-ed criticises the current protectionist approach to Palm Oil in Europe, and expresses the importance of a positive and open-trading approach in future.

The Minister writes:

 “The UK has always adopted an open trading approach: a continuation of this positive trend would be beneficial for both British exporters and Malaysian producers of commodities such as palm oil.

“Initially, the UK can assist Malaysia’s world-leading sustainability scheme – the Malaysian Sustainable Palm Oil standard (MSPO). Malaysia welcomes existing EU schemes such as the Roundtable on Sustainable Palm Oil (RSPO) as part of the marketplace. However, MSPO can also be an important part of the future market. If the UK is open to formally recognizing the MSPO scheme, this would be welcomed and celebrated across Malaysia.”

“Post-Brexit, Malaysia stands ready to work with the UK to secure improved market access for our commodity exports, and likewise to welcome UK exports into our market. Here’s to old friends, and new opportunities.”

Read the Minister’s full op-ed online here.

The Oil Palm The Oil Palm

ICYMI: Palm Oil & EU Trade – Malaysian Government Sets Out Its Position

The EU is facing questions this week about plans to ban Palm Oil biofuels, and other discriminatory restrictions placed on the Palm Oil sector.

Minister Datuk Seri Mah Siew Keong, Malaysian Minister of Plantation Industries and Commodities, sent a clear message in an opinion editorial published in Euractiv. Read the Minister’s full op-ed online here.

Also this week – EU Commissioner for Agriculture, Phil Hogan, was questioned by reporters in Brussels, asking if the EU risks a ‘trade war’ with Malaysia and Indonesia as a result of the ENVI Committee vote against Palm Oil biofuels. Video is here (from 08:30).

The Minister’s op-ed states clearly that the EU’s approach to Palm Oil is undermining trade and cooperation. The Minister writes:

“In Brussels, calling for a ban on palm oil may be seen as a quaint pet project of a few MEPs. In Malaysia, it is seen as an existential threat to families and livelihoods.

“The recent Environment Committee vote on the RED has confirmed suspicions. In addition to the ban on palm oil biofuels, MEPs chose to discriminate against advanced palm biomass on approved EU lists; and to game calculations of GHG emissions to favour European-grown oilseeds.

“This overall approach to palm oil is a strategic error: the short-term agenda of the vocal minority is being placed ahead of the long-term interest of the European Union in the South-East Asian region.

“EU leaders would do well to recall that trade is a two-way street. Palm oil exported from Malaysia today passes many high-value European exports travelling in the other direction. Aircraft and aircraft parts, electronics, foodstuffs, and professional services from across the EU are booming in Malaysia, creating jobs and enhancing growth for EU countries.”

Read the Minister’s full op-ed online here.

As a reminder, the EU’s current regulatory actions on Palm Oil include –

  1. The EU Parliament’s Environment Committee voted to exclude all Palm Oil biofuels from the EU’s renewable energy market as part of the EU’s legally-binding Renewable Energy Directive (RED).
  2. The ENVI Committee also voted under the RED Directive to exclude advanced Palm Oil biomass from the EU’s advanced renewable energy strategy.
  3. The EU Commission has proposed, as part of the RED, giving Member States power to restrict the use of oilseed crops as biofuels. The French Government has already announced its intention to ban Palm Oil biofuels – other countries may follow suit.
  4. The European Food Safety Authority (EFSA) has proposed new food regulations targeted at Palm Oil, which have now been voted on by the EU’s Standing Committee. These could come into place – as binding EU rules – in 2018.