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The Oil Palm The Oil Palm

The Myths & Facts of the EU Parliament Development Committee’s Report on Palm Oil

This week the European Parliament’s Development Committee (DEVE) voted on a draft report: “Transparent and accountable management of natural resources in developing countries: the case of forests.”

The report is aimed at eventually imposing a ban on Palm Oil imports into Europe used in the food supply chain.

The report is riddled with errors, omissions and misinformation.  It’s necessary to identify and correct these errors, one by one, to highlight the totality of their misinformation.

MYTH 1: Agriculture is Responsible for 80 per cent of Deforestation Worldwide.

FACT: The report attributes 80 per cent of global deforestation to agriculture.  The EU’s own research states it is closer to 55 per cent. This is similar to the European Parliament’s previous claim that Palm Oil was responsible for 40 per cent of global deforestation has no basis in fact.

MYTH 2: Deforestation Emissions Contribute to around 20 per cent of Total Emissions.

FACT: The ’20 per cent’ attribution of greenhouse gas emissions to deforestation was constructed in the early 2000s and based on very loose methodologies. It was often quoted by NGOs. Better data and better methodologies have emerged since then, as has a better understanding of the carbon cycle for forests. These days the estimate is between 10 and 12 per cent according to the Union of Concerned Scientists, IPCC Assessment Report and the EU’s own Joint Research Centre.

MYTH 3: ‘Forest Risk Commodities’ is a Widely Accepted Term.

FACT: It’s a term made up by European NGOs. The draft report refers to ‘Forest Risk Commodities’ at various points. Forest risk commodities was coined by the Global Canopy Project, a UK-based NGO. The term has no standing in international agreements or in international law. It is defined by GCP as follows:

“Globally traded goods and raw materials that originate from tropical forest ecosystems, either directly from within forest areas, or from areas previously under forest cover, whose extraction or production contributes significantly to global tropical deforestation and degradation.”

But the term is not officially defined anywhere in European Union communications. In an earlier critique we have pointed out its fundamental flaws.

Some key flaws are:

  • The “forest risk” commodities identified – palm oil, soybean, beef and timber – do not cause deforestation. In Asia and Africa, for example, the major driver of deforestation is local and subsistence agriculture.;
  • When first developed in 2013, the concept made a series of assumptions about the commodities associated with deforestation that no longer hold up now that more advanced data is available;
  • Similarly, the overly-simplistic and catch-all term ‘Forest Risk Commodities’ completely sidelines that fact that deforestation is a result of incredibly complex variables that are oftentimes dependent on local context.

Global Canopy’s decision to focus on ‘tropical forest ecosystems’ is prejudicial. People that live in tropical areas, especially around the equator, tend to produce Palm Oil.  They also tend to be poorer. Not to mention, Global Canopy is funded in large part by aid agencies such as the United Kingdom’s Department for International Development (DFID), and the German and Norwegian Governments. An organisation developed by and funded by Europeans’ aid money is being used to lobby the European Union on how to shape deforestation policy in an anti-development direction. This is a clear conflict of interest.

MYTH 4: Only a European Palm Oil Certification Scheme Can Solve the Problem.

FACT: The report singles out Palm Oil voluntary certification systems for allowing “deforestation, forest degradation, illegitimate appropriation of land and other human rights violations” to take place.

That’s just plain false.  First, as the EU has pointed out, Palm Oil’s deforestation footprint is significantly lower than that of beef, soybean and maize. Singling out palm oil has no basis in evidence.

Land rights and human rights violation do not happen because of Palm Oil. Tightening up palm certification will not provide solutions for these problems because neither Palm Oil nor Palm Oil certification is their cause.

Malaysia has strong laws and regulatory systems regulating the Palm Oil industry.  The Malaysian Sustainable Palm Oil (MSPO) standard has been launched on a voluntary basis, and will become mandatory by 2019.  Furthermore, much of the Malaysian Palm Oil private sector as well as many small farmers, including organized smallholder associations, have adopted the RSPO scheme (and other specialist schemes, such as the German ISCC).

The mere suggestion that a European Union-forced certification scheme targeting Palm Oil is necessary is patently absurd. Notwithstanding that such a scheme would bring about unequal treatment of Palm Oil, and violate the EU’s commitments to the WTO.

MYTH 5: The Flawed 33 Documents Cited by the DEVE Committee.

FACT: The authors show little regard for the EU’s trading partners in developing countries. At the beginning of the document, the authors cite 33 documents supporting their claims. Some of them – such as the Consumer Goods Forum – have no legal standing whatsoever; it is a voluntary agreement between corporations.

But there is only one set of documents that will provide guarantees for the EU’s developing country trading partners: the World Trade Organization Agreements.

The WTO Agreements are there to prevent the kinds of actions that the DEVE Committee is trying to implement, specifically unscientific and politically motivated barriers to trade.

There is one other document that isn’t referenced: the Agenda of the UN Commission on Sustainable Development from 2012, which was an internationally agreed communique on sustainable development. That document states that any sustainable development policies should:

  • “Not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade, avoid unilateral actions to deal with environmental challenges outside the jurisdiction of the importing country, and ensure that environmental measures addressing transboundary or global environmental problems, as far as possible, are based on an international consensus.”

Again, this fundamental document – which is a core text for anyone who really cares about alleviating poverty and creating wealth for the poor – is not referenced.

This report makes it clear there is little regard for sustainable development or international consensus.  Despite all its platitudes on international development, the DEVE Committee is clearly interested in only one thing: pushing a politically-motivated anti-Palm Oil agenda, and propping up uncompetitive EU oilseed industries.

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The Oil Palm The Oil Palm

WHY IS THE BBC IGNORING FACTS ABOUT ORANG-UTANS?

The BBC’s upcoming documentary on orang-utans entitled Red Ape is being heavily advertised and trailed in the UK media. One of the documentary contributors, Dr Ben Garrod, has written a highly emotional – but highly unscientific – blog about the BBC’s work on orang-utans.

Unfortunately, the blog contains basic factual errors that are disproven with even a basic understanding of the latest scientific and international research. Of many examples, four stand out that require fact-checking.

Claim by Dr Ben Garrod and BBC: “It says ‘Palm Oil’ on the ingredients then that’s a choice you can make, but often it slips under the consumer radar as ‘vegetable oil’.”

Fact: This is incorrect. European Union law (EU Regulation 1169/2011) requires all vegetable oils to be specifically labelled: the term ‘vegetable oil’ alone is no longer allowed, by law. Palm oil – and all other vegetable oils – are individually labelled. Dr Garrod is scaremongering and misinforming the public.

Claim by Dr Ben Garrod and BBC: “We need to ensure that no more tropical forest habitat is razed to the ground to make way for endless fields of this almost uninhabitable monoculture”

Fact: Tropical forest is not being ‘razed to the ground’ in Malaysia. That is an established scientific fact, backed up by the official United Nations’ flagship Global Forest Resources Assessment study. The U.N. confirms that Malaysia’s forest cover is actually increasing. Over 54% of Malaysia’s land is protected as forest area.  Maybe Dar Garrod forgot to check out his backyard: there is not much forest left in the UK – 11% as a matter of fact.

This is not happening by accident: the Malaysian Government committed to forest protection at the Rio Earth Summit, and is delivering on that promise. Malaysian companies are focused on increasing yield and improving productivity. Burning of forest is illegal in Malaysia and is punished under strict laws.

Claim by Dr Ben Garrod and BBC: “The truth is that every year, there is less and less forest in South East Asia. The truth is that Palm Oil production can claim a lot of responsibility”.

Fact: This is wholly inaccurate and misleading. Malaysia’s forest area is increasing – as confirmed by the benchmark U.N. assessment.

Moreover, on a global level, palm oil is a tiny contributor to deforestation. The European Commission undertook a comprehensive research study that identified the largest drivers of deforestation: these are beef and livestock; soy cultivation; maize; and other oil crops. Palm oil is linked to only 2.5% of deforestation – beef is ten times larger, soy is more than double, and maize is also significantly larger.

The facts are clear: identifying palm oil as a major cause of deforestation is scientifically inaccurate. Dr Garrod is scaremongering, and misleading the public.

Claim by Dr Ben Garrod and BBC: “The truth is that orang-utans are on a knife-edge right now, staring into the precipice of extinction. Their numbers are dropping, their homes disappearing”.

Fact: This is a gross-oversimplification. First – orang-utan in Malaysia are not on the precipice of extinction: the latest NGO research and scientific population studies make this clear. Any claim of ‘precipice’ or ‘extinction’ is pure scaremongering.

Second, in areas such as Sabah, Malaysia, orang-utan numbers are stable, and some populations are growing. Why? Because Malaysia has made the orang-utan a protected species and enforces this law with tough penalties.

Palm oil and orang-utan co-exist successfully in Sabah, Malaysia. Since 1999 protected forest area has doubled in Sabah – and orang-utan numbers are stable. Over the same time period, the palm oil sector has expanded and has created prosperity for local people.

Dr Garrod’s insinuation that palm oil equals to orang-utan loss is provably untrue. The data are extremely clear. Dr Garrod is simply scaremongering, and misleading the public.

Here’s the facts:

  1. There are more orang-utan than previously thought.

Population estimates for the Sumatran orang-utan have more than doubled. In 2016 results of a population survey indicated that there are more than 14,600 Sumatran orang-utans in the wild. The previous estimate from 2008 had put the figure at 6,600. Environmentalists, however, did not take the news as positive. The response? “But with more orang-utans, there were also more to be lost.”

2. Any population decline can’t be attributed to palm oil alone.

In Malaysia, a large percentage of oil palm plantations are on Peninsular Malaysia.  Guess what BBC and Dr Gerrod: no orang-utan have ever lived in that region, so the palm oil from those areas clearly has zero impact on orang-utan.

A report published earlier this year states 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 is a massive (and inaccurate) scare campaign, pushed by groups such as Greenpeace, who want to effectively ban palm oil use in Western countries.

3. Not all populations are under threat.

In Sabah, Malaysia, a number of orang-utan populations are stable. Some research has found that populations in some communities are increasing. More than that, these populations are in areas that are supported by palm oil plantation companies.  What does this mean? It means that if governments, companies and communities have the resources to conserve nature, they will. Lifting communities out of poverty is critical to conservation: palm oil is the greatest driver of poverty alleviation across South-East Asia.

4. Conservation strategies do work, and they can co-exist with palm oil.

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 orang-utan’s protected habitats by 75%; according to a study released earlier this year, estimated orang-utan deaths in Sabah have been relatively small compared with other areas. Sabah arguably has the strongest research and conservation programs for orang-utans. It has worked with other research institutions and NGOs.

Here’s a question on the mind of The Oil Palm: Will the U.K. Government stand with a minority of British activists and protectionist forces ahead of the vote to ban Palm Oil in RED or will she realize that hiding behind Brussels is over now that the UK has to chart her own path globally, and especially in South East Asia, following the Brexit vote?

Let’s see.

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The Oil Palm The Oil Palm

Radio Télévision Suisse is like Swiss Cheese: Full of Holes

Radio Télévision Suisse (RTS) is spreading lots of Fake News these days about Malaysia and Malaysian Palm Oil.  Their reporting is a lot like their famous cheese: full of holes!

Led by the famous Swiss YouTuber, “Le Grand JD” (we’ve never heard of him) and “journalist” Bernard Genier, they “investigate” alleged risk to tropical forest and indigenous people in Borneo – more precisely in Sarawak, Malaysia – from oil palm plantations.

It is part of a campaign to see the European Union ban palm oil biofuels under the revision of the Renewable Energy Directive currently being debated in Brussels.  Six Swiss Cantons – Geneva, Vaud, Thurgau, Bern, Jura and Fribourg – oppose Palm Oil because they are strongholds for rapeseed farmers.  RTS has fallen for their protectionist trap.

Despite making wild claims that ‘forests are disappearing’, the Swiss seem to spend most of their time trekking through vast, dense jungle in Sarawak providing clear evidence that, well, there is lots of forest in Sarawak!

The errors in this film are so egregious, that they require a point-by-point correction.

 

Error #1: ‘Borneo is the worst case of deforestation on the planet, leading to the disappearance of pristine forest’ (01m14).

Fact: In 2012, the EU published comprehensive research that showed that Palm Oil is a very small contributor to global deforestation. Beef and livestock are around ten times larger; soy is more than double; and maize is also larger. Any claim that palm oil is somehow a major cause of deforestation is demonstrably untrue and inaccurate.

 

Error #2: ‘There is no biodiversity left’ (02m31)

Fact: This is false. Ten per cent of Sarawak’s landmass territory is designated as either under the status of national park or wildlife sanctuaries, broken down as follows:

  • 593,284 hectares of protected areas
  • 25 national parks covering 385,056 hectares
  • 8 nature reserves covering 1,767 hectares
  • 5 wildlife sanctuaries extending over 206,460 hectares

Sarawak boasts a remarkable diversity of wildlife including the hornbill; langurs and monkeys; clouded leopards; crocodiles and one of the world’s largest population of orang-utans. In fact, the total size of Sarawak’s national parks and wildlife sanctuaries is bigger than the total forest area in the U.K.

 

Error #3: ‘Currently, in Borneo and Sarawak, there is only about 5% of pristine forest left’ (03m58)

Fact: In Sarawak, 6 million ha of forest is considered permanent reserved forest. This forest area is approximately one and a half times the size of Switzerland. Sarawak (and Malaysia as a whole) set strong standards at the 1992 Earth Summit in Rio de Janeiro with a commitment that forest area will not fall below 50%. Sarawak, and Malaysia, are meeting that commitment today.

The FAO states that Switzerland’s forest area is around 30 per cent of its total land area. Switzerland’s primary forest – so-called ‘pristine’ forest – is just 3.2 per cent of its total land area. Malaysia’s pristine forest area is 23 per cent. Almost a 20% difference!!

 

Error #4: ‘The forest is disappearing, piece by piece’ (11m30)

Fact: Malaysia is a strong advocate of the environment and natural habitat. Malaysia continues to maintain 54.9% of its land area under forest cover, which exceeds Malaysia’s commitment of 50% at the Rio Earth Summit in 1992. This is far higher than forest cover in Switzerland of only 31.7%.

It should also be noted that at one point Switzerland’s forest cover was as low as 10 per cent. Why? Because Switzerland cuts its forests for log exports to other countries. It was only once the country gained enough wealth that Switzerland began to reverse its forest decline.  Key word: “wealth.”

 

Error #5: ‘Indigenous lands are at risk from palm oil companies’ (20m00)

Fact: In addition to the recognition of indigenous peoples, Sarawak constitutional law recognizes certain land and resource rights under Native Customary Rights (NCR). These include the rights to native land, which recognizes the rights of indigenous peoples to their traditional land.

 

Error #6: ‘Many NGOs, including The Bruno Manser foundation, are making campaigns to fight for the rights of the Penan’s land’ (13m11)

Fact: The Bruno Manser campaign are an opportunistic and misleading NGO that seeks to exploit the Penan for their personal agenda.  The establishment of NCR requires the establishment of these rights through evidence of settlement, e.g. cultivation of plants or husbandry of animals. In the view of nomadic Penan, NCR should extend to all lands through which they undertake hunting and gathering activities. This presents a significant administrative problem for Sarawak in terms of determining fixed boundaries for any NCR claims.

 

Error #7: ‘In the next 10 years, Borneo’s tropical forest would have disappeared’ (21m50)

Fact: This claim has zero credibility. 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 will have disappeared by 2010. Another claim was made in 2007 that the same forests would be gone by 2018. Clearly, neither have happened.

 

Error #8: ‘Eco-Responsible/Sustainability doesn’t exist when it comes to Palm Oil’ (23m02)

Fact: Malaysia is a world-leader in sustainably produced Palm Oil, and the country’s national standard, Malaysian Sustainable Palm Oil (MSPO), will come into full force in 2019. MSPO is additive to existing Malaysian law, and addresses  environmental, social and economic aspects of Palm Oil production, cultivation and processing methods, as well as forest and wildlife protection.

 

Error #9: ‘Today, modern Palm Oil means less pristine forest’ (23m12)

Fact: 5.81 million hectares are planted with oil palm in Malaysia, which accounts for 17% of Malaysia’s land area (out of a total of 23.8% of agricultural land area in Malaysia). This equates to only 0.11% of the total global agricultural area. New area planted with oil palm in Malaysia has remained flat in recent years. Meanwhile, Malaysia’s forest area is increasing, confirmed by the latest official United Nations FAO Global Forests Resource Assessment report. The FAO states that Switzerland’s forest area is around 30 per cent of its total land area. Switzerland’s primary forest – so-called ‘pristine’ forest – is just 3.2 per cent of its total land area. Malaysia’s pristine forest area is 23 per cent. Almost a 20% difference!!

 

Error #10: ‘Orangutans are on the brink of extinction’ (24m01)

Fact: False! A recent report says that conversion of forests to plantations – for pulp and paper, farming and oil palm – 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 in the media by Green groups.

The International Union for the Conservation of Nature (IUCN) estimates that in 2008 the population of Bornean orang-utans was 104,000.  In 2010, over 59% of Borneo forests were classified by IUCN as “suitable habitat” for orang-utan.

The IUCN provides no data to support any theory of orang-utans going extinct – proving that ‘LeGrandJD’ has no evidence for his wild claims about the orang-utan.

The IUCN states that orang-utans are critically endangered. However, government and the palm oil industry in Malaysia have undertaken considerable efforts to set aside greater conservation areas and put resources into conservation programs.

The IUCN also notes that Switzerland is hardly a model for species conservation – particularly for one of the world’s wealthiest countries.

More than 250 species have become extinct in Switzerland. Sad! The IUCN notes more than 500 critically endangered species in Switzerland. Sad! One NGO estimates there are around 50 of these species that are endemic to Switzerland. Sad!

Swiss ‘journalists’ should consider what is happening in their own back yard before lecturing developing countries on wildlife management.

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The Oil Palm The Oil Palm

EFSA Latest: Experts Speak Out Over European Science Alarmism

Members of the European Food Safety Authority (EFSA) met recently in Parma to discuss, among other items, EFSA’s recommendations for potential restrictions on 3-MCPD, a contaminant generated during processing of vegetable oils. The meeting was an important moment for Malaysian Palm Oil exporters, following over 12 months of negative media coverage in the wake of EFSA’s original report. The meeting focused on technical discussions around the impact of 3-MCPD, and provided little new information. EFSA confirmed that its revised report, including recommendations for EU regulatory actions, should be ready in November.

In 2016, EFSA released a report calling for possible EU limits on Palm Oil, due to the reported presence of “process contaminants”, including 3-MCPD, in vegetable oils. The reason the report is now under revision by EFSA, is due to significant European and international criticism of the findings. Before such criticisms were apparent, the original report made quite an impact.

Most notably, the report led to a significant amount of negative international media coverage for Palm Oil, which received a level of criticism that did not match the report’s findings.

This is particularly true of Malaysian Palm Oil. The EFSA Report’s primary goal was to ascertain the current levels of certain ‘contaminants’ that are generated during the processing of certain foods – including vegetable oils – and to advise whether the EU should regulate to bring down those levels.

The levels of such contaminants in Malaysian Palm Oil have indeed been reduced significantly over recent years, thanks to proactive action from industry. The EFSA report acknowledges this progress –

“While occurrence data from a relatively recent period were used, current industry action to mitigate the formation of 3- and 2-MCPD fatty acid esters and glycidol fatty acid esters during oil refining might have led to a recent reduction in their levels in certain oils, leading to an overestimate of the exposure”

The amount of contaminants in Palm Oil entering the European market has halved in recent years, a track record of self-regulation and progress unmatched by other oilseeds.

Malaysian Palm Oil producers can, and should, feel aggrieved that their proactive efforts to lead the world in reducing such contaminants have not been recognised. Instead, the Malaysian industry that has provided leadership and forward-thinking, is being criticised in European media. It is notable that neither EFSA, nor the EU Commission, has intervened to correct such inaccurate and damaging media reports.

At EFSA’s most recent meeting from 19th-21st September, it was stated explicitly that EFSA has not reviewed or considered the data relating to the industry’s impressive work. This progress will not therefore be taken into consideration in EFSA’s revised report. In other words – the sterling efforts by the Malaysian Government and Palm Oil producers, to reduce contaminants, will not be recognised by the EU authorities.

Criticism of the EFSA Report is not limited to the mis-categorisation of Malaysian Palm Oil.

The Joint Expert Committee on Food Additives (JECFA) of the United Nations Food and Agriculture Organisation/World Health Organisation reported that the conclusions of EFSA were not appropriate, and the European Commission Joint Research Centre (JRC) stated that the methodology used to calculate the EFSA Report ‘has a negative impact on method accuracy’.

The criticism from international organisations was also supplemented by scientific experts and commentators, including in Europe and the U.S.A.

A scientific paper by Drs. Clemens, Hayes, Sundram and Pressman highlighted inaccuracies in the EFSA report such as the quality of the data used, the absence of clinical tests on humans, as well as the complexities and variation in food harvesting, processing temperature, refining, preparation and patterns of consumption that can influence levels of contaminants.

French scientist Jean-François Platon recently noted that ‘Palm Oil should not be singled out – nor should any vegetable oil. These outcomes are not exclusive to Palm Oil, but occur in the refining of all vegetable oils, including rapeseed and sunflower. EFSA, in its conclusions, did not recommend any ban, or restriction, or reduction in the consumption of Palm Oil, and didn’t conclude Palm Oil was carcinogenic’.

Morten Elsoe, a Researcher in Lifestyle Diseases at Aarhus University Hospital, indicated that ‘EFSA did not recommend to stop consuming products containing Palm Oil and there was a need for further studies before they could establish any risk of cancer for people’.

Rob Lyons, of the Institute of Ideas in London, affirmed ‘What certainly does not need to happen is for governments to now intervene on the basis of the original EFSA report. The science has been questioned, and is being reviewed. Intervention now would be nonsensical’.

The pushback against the report forced EFSA to back-pedal.  EFSA’s Expert Committee CONTAM announced that it would ‘re-open its scientific opinion’ on Palm Oil, ‘to address the identified scientific divergence’. This is a signal of internal acceptance from EFSA that the original report was flawed and unsound. EFSA has a responsibility to accurately report the truth in its new report, and ensure that credit is given to those who are leading the way in reducing the contaminants already.

However, only 3-MCPD will be considered in EFSA’s revision. Other key issues will not be revised. The EU is moving full speed ahead with regulatory action on another set of contaminants – glycidyl esters (GE). On Monday 25 September, a behind-closed-doors vote was scheduled to set maximum GE levels for infant formula, follow-on formula and food for special medical purposes for infants and young children. It is expected that EU limits on GE will be fully implemented in early 2018, and fully enforced in mid-2019. Limits on 3-MCPD will not be far behind, if the recent EFSA meeting is a guide.

What, then, are the options for Palm Oil producers, if they wish to influence the process?

In Brussels – The European Parliament and Council will now have the next 3 months to consider the GE proposals, after which they will become EU law. In principle, both institutions are open to hearing the views of producers – though, given the European Parliament’s recent hyper-negative resolution on Palm Oil, it’s perhaps unlikely that they will be sympathetic.

In parallel, the Commission’s decision will be referred to the World Trade Organization (WTO). Under WTO rules, countries are required to notify the organization if they are to introduce a law or regulation that will impact another country’s trade. The notification happens through the Technical Barriers to Trade (TBT) Committee. The convention is that implementation of any new rule is frozen for 60 days while consultations occur and stakeholder inputs are accepted. The key objections will be raised by exporting countries in the TBT Committee itself. This represents a more viable potential opportunity for Palm Oil producing countries to examine and question any areas of concern.

But enterprises and economic operators within the EU that will be adversely affected by the rule can also bring up objections via the EU TBT Enquiry Point. This would obviously include major importers and users of palm oil – and any other vegetable oil – in the European Union. This would be a highly technical, and uncertain, process: but if done correctly it could offer an opportunity for Malaysia to raise a formal objection to the new EU limits.

The EU process is nearing its conclusion. It appears as though the final EU conclusions will impose limits on both GE and 3-MCPD, regardless that this may impact some palm oil producers. It also appears that the EU will not give any credit or recognition for the good work done by Malaysian producers in bringing down limits voluntarily in recent years. The revised EFSA report, when published, and any announcement of new limits will likely lead to a new round of anti-Palm Oil media in Europe. It is clear that neither the EU Commission, nor EFSA, feels any pressure or responsibility to assist Palm Oil producers.

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The Oil Palm The Oil Palm

The Facts About ‘Forest Risk Commodities’

 ‘Forest Risk Commodities’ (FRC), a key concept in the COWI Report, is poorly defined and is based on work previously undertaken by the Global Canopy Project. This concept has a history of use among advocacy groups opposed to Palm Oil.

The European Commission is currently attempting to construct a set of policies that will determine how the EU deals with its impact on global deforestation.

At the heart of the Commission strategy is a new report assembled by COWI, which attempts to weigh up the pros and cons of different policies.

Some of the work that has led up to the COWI report has been sound, particularly on the contribution of different commodities to deforestation.

However, there is one concept at the heart of the entire exercise that requires a critique: forest risk commodities (FRCs).

The idea of ‘Forest Risk Commodities’ was first defined in 2013 as part of work undertaken by the Global Canopy Programme (GCP).

It is defined as: “globally traded goods and raw materials that originate from tropical forest ecosystems, either directly from within forest areas, or from areas previously under forest cover, whose extraction or production contributes significantly to global tropical deforestation and degradation.”

The GCP is an NGO that undertakes work on deforestation in tropical countries. It is for the most part funded by aid agencies such as the U.K.’s Department for International Development (DFID).

Consider this: A concept on deforestation, developed by an organisation funded with European aid money, is now being used to lobby the various layers of the European Union on how to shape policy on deforestation.

When the idea of FRCs was developed, it concentrated solely on four commodities: palm oil, soybean, beef and timber. But there are a series of problems with the concept.

First, the commodities themselves do not actually cause the deforestation. For example, in Asia and Africa, the major driver of deforestation is local and subsistence agriculture. In these cases, the commodities are less relevant than the fact there is a local and/or subsistence population that is attempting simply to survive. The choice of commodity or cash crop in these cases – whether it is cocoa, coffee, palm oil or rubber – makes no difference. These populations would be clearing land in order to make a living.

Second, whether a commodity is a ‘deforestation risk’ has less to do with the commodity, and more to do with the way the land use and forest use is regulated and governed in a particular territory. Beef, for example, is considered a ‘forest risk commodity’ because of the correlation between forest clearance and cattle grazing in Brazil. However, no-one considers beef from the U.S., Australia or Western Europe to be a ‘forest risk commodity’. Similarly, soybean has come under fire because of deforestation in South America, but there is very little issue with soybeans from, say, Spain or Canada.

Third, the concept of ‘forest risk commodities’ when it was developed in 2013 made a series of assumptions about the commodities associated with deforestation that have simply not held up now that better data is available. Pigs and poultry, for example, are a greater contributor to deforestation than palm oil. Maize is also a bigger contributor. Yet these are never considered to be ‘forest risk commodities’. They clearly represent a risk to forests – and a greater risk than palm oil – but are not part of the broader calculation.

Fourth, and this is related to the previous two points, is that the idea of FRCs completely sidelines the fact that deforestation is the result of a complex series of variables that are often dependent on local context.  For example, Western Europe and the United States lost some 2 million ha of forest annually between 1850 and 1920 as it gave way to cropland. In these cases, poverty, demographics, technology, agricultural expansion, and land policies all contributed in some way to this forest loss. In both the U.S. and Western Europe, increased urbanization, higher living standards and better environmental management all contributed to the eventual slowing of forest loss.

That exact same pattern of decreased levels of forest loss as incomes rise has been seen over the past two decades in Malaysia, as living standards have risen and forest area has increased.

The idea of a ‘Forest Risk Commodity’ lays the blame for deforestation on a simple set of objects, driven by the misguided belief that halting the production of these commodities will magically solve this problem.

The reality is very different, and far more complex. Too often – as in the COWI report – well-paid analysts follow the ‘simpler’ explanation, even when it is inaccurate. As a result, policymakers are pressured to act on Palm Oil, even though the evidence does not support such action. For example, it is this type of faulty thinking that suggested paying impoverished local communities subsidies to leave forests standing was a simple way to end deforestation.

Our next blogs on the COWI report will examine an even thornier issue – the global debate around trade restrictions for commodities, and why Palm Oil is too often in the spotlight.

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The Oil Palm The Oil Palm

Where is The EU Headed on Palm Oil?

The European Commission has published a draft report assessing measures that the EU can take to combat global deforestation. The report, entitled ‘Feasibility study on options to step up EU Action against Deforestation’ was drafted by the Danish consultancy COWI.

This is the first of a series of blogs that will analyse the actions proposed within the COWI Report; and also examine the political motivations and the history behind the EU’s concern with global deforestation and its objections to Palm Oil.

In June of this year, the European Commission released a report that assessed how the European Union should best respond to global deforestation. No, not European deforestation, but deforestation in other parts of the world.

Similarly, the Commission also just released its response to the recent outlandish EU Parliamentary Resolution on palm oil. The Commission took issue with parts of the Resolution such as a Single Certification Scheme, but stayed silent on some of the egregious errors in the report. It was largely sympathetic to the perspective of Europe on sustainability and Palm Oil.

For those who are new to the global environmental debate, this may seem unusual. But this pattern of European antipathy towards forestry and agriculture in developing countries is nothing new.

As far back as 1989, European policymakers were examining ways in which development assistance (i.e. aid) and trade instruments could be used to assist in the conservation of tropical forests.

This was mandated by law in 1991, with direct European Commission budget items for the ‘promotion of tropical forests’ in 1993. This included funding for NGO activities.

Unsurprisingly European activists launched broadsides against the Malaysian timber industry at around that time.  NGOs and importers of tropical timber in the UK and Netherlands went so far to suggest tariffs and levies on imported tropical timber. Does this all sound familiar?

EU policymakers subsequently took aim at the Malaysian and Indonesian plywood industries and Indonesian pulp and paper. European pulp and paper producers in particular found themselves under significant pressure from low-cost Indonesian imports. The ‘promotion of tropical forests’ worked as a perfect cover for protectionism to prop up uncompetitive domestic European industries. Again, does this sound familiar?

Fast forward to the late-2000s and EU NGOs set their sights on agriculture, particularly palm oil. Why palm oil? The key political driver here was not actual forest loss, but the fortunes of European oilseed producers. Changes to European agricultural policy around this time encouraged the production of oilseeds, particularly for biodiesel. But subsequent imports of better-value and higher-quality palm oil for both food and biodiesel were putting a strain on EU oilseed farmers. Not only were they unable to take advantage of new demand, they were losing existing market share.

Again, tropical forests were the perfect justification for EU policymakers, industry and NGOs to target palm oil. Note that the angle taken by EU Parliamentarians is not to address the problem of deforestation or biodiversity loss, but to address palm oil itself.

Against this decades-long background came a large piece of research that was published by the EU in 2012.  It found that between 1990 and 2008:

In other words, Palm Oil is a very small contributor to global deforestation. Beef and livestock are around ten times larger; soy is more than double; and maize is also larger.

In addition, the study says that:

In other words, palm oil isn’t a big risk for global deforestation or even the EU’s contribution to deforestation.

The follow-up to this 2012 report has come in the form of a new assessment looking at possible EU policy measures to address global deforestation.

Should oil palm growers be concerned? Yes.

Despite palm oil being a small contributor to both global deforestation and EU ‘imported deforestation’, palm oil is still on the table. Palm oil may be small compared with beef and soybean in terms of deforestation, but taking measures against palm oil is more politically feasible.

Why? The EU produces soybean and beef; it doesn’t produce palm oil. Palm oil only really comes from two countries, Malaysia and Indonesia. Both soybean and beef come from some of the EU’s largest trading partners, including the US, Brazil and Canada.

So, while the facts on deforestation may stack against beef and soy, the politics stack against palm oil. And politics, not facts, rule in the EU. This is the context in which the COWI Report must be read – and the context in which the EU’s entire approach to deforestation and commodities must be understood.

In our next blogs, we’ll look at the concepts and assessments in the COWI report.

Categories
The Oil Palm The Oil Palm

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.

Categories
The Oil Palm The Oil Palm

Palm Oil Leads Sustainability Certification

Other commodities should be put under the spotlight

IISD (the International Institute for Sustainable Development) has just published its second Sustainability Standards Initiative (SSI) report.

Its first SSI published in 2014 was controversial. Why? Because it was clear that palm oil was leading the way in terms of food commodity certification, yet IISD was highly critical of both palm oil and palm oil certification.

What was also clear in the 2014 report was a general ambivalence to the social and economic aspects of certification. There was acknowledgment that it is Western demands driving sustainability certification, and that this is imposing a higher cost on palm oil producers, with no corresponding financial return. However, there was no acknowledgement that this situation works against sustainability.

Not much has changed in the most recent report. The report covers the contribution of sustainability initiatives to biodiversity protection.

This presents a problem. Sustainability – and any associated certification – covers environmental, social and economic concerns. The latter are ignored in the latest SSI report. Even the emphasis on biodiversity protection is narrow; the environmental scope of sustainability certification is much broader than this and needs to be acknowledged as such.

The Western-funded report underlines the broader Western attitudes towards what certification should do, i.e. protect forests. IISD and its funders are apparently much less interested in whether certification contributes to poverty reduction than they are in protecting landscapes.

There’s also a reluctance to state that palm oil and palm oil certification aren’t the bête noire of the environment and are performing better than many other commodities and schemes.

Although the SSI has toned down its criticism of palm oil, there is very little recognition of the strides the palm oil industry has made and its superior position relative to other commodities.

Consider the following facts emerging from the SSI report.

Palm oil certification (under RSPO) covers 20 per cent of global production. Voluntary soybean certification covers 1 per cent of production. Voluntary maize certification covers less than 1 per cent of global production.  As a share of global production, palm outperforms coffee, tea and bananas. Major crops such as wheat barely figure; beef and livestock don’t even rate a mention.

The performance of the palm oil industry is highlighted further by the following factors: total global certified crop area, areas associated with deforestation, the criteria used in each scheme.

According to the SSI, the certified area for oil palm production is around 2.62 million ha. The certified area for soybean production is around 1.87 million ha. Maize clocks in at around 150,000 ha. In other words, palm’s certified area is around 50 per cent higher than soybean, and around 15 times higher than that of maize.

It has been noted well over the past two years that palm oil’s contribution to global deforestation is low. Deforestation from beef is around ten times that of palm oil; soybean is approximately double; maize is around 20 per cent higher.

The conclusion to be drawn here is that palm oil’s overall deforestation footprint is smaller, and its certification footprint is larger. Soybean is responsible for more forest loss than palm and its management of existing cropland is poorer. The same can be said for maize.

It should be noted that SSI’s assessment for palm oil doesn’t include government-mandated sustainability schemes such as MSPO.

In addition, the scope of certification schemes should be considered. Certification for maize production is under organic standards. Organic standards are not environmental or sustainability standards in the same vein as RSPO. Organic standards are generally concerned with minimising inputs rather than protecting, say, high conservation values. Compare this with RSPO, which incorporates forest protection, prohibitions on new plantings, and greenhouse gas emissions.

There are several other things that should be considered when examining the contribution of sustainability standards to biodiversity protection.

First, is the contribution towards smallholders and poverty reduction. Despite what some campaign groups might say, smallholders and the world’s poor do contribute to environmental degradation – this includes biodiversity loss. It is therefore vital that certification – and therefore better production techniques – are made available to the world’s smallholders, or there is at least some effort to include them. This is happening actively through RSPO, MSPO and other mandated schemes.

Second, IISD does not think it is appropriate to acknowledge that voluntary standards, as effective as they might be, are no substitute for strong legislative and regulatory frameworks in producer countries. Voluntary standards are always a more expensive option; if global demand for a commodity exists, there is always likely to be demand for a non-certified product.  This is borne out by the report’s repeated references to high levels of demand for non-certified palm and soybean in countries such as India and China, which constitute the majority of global demand.

The underlying solution is therefore better regulation. There is no recognition in the report that things such as better regulation of land-use planning, and stronger enforcement of biodiversity protection laws will likely have a much greater impact on biodiversity protection than, say, tightening up existing voluntary standards.  This is important when considering commodity exports from different jurisdictions. By way of example, there is considerable pressure for Brazilian beef producers to adopt sustainability standards, but no such pressure on British producers.

So what are IISD’s motives here?

The first appears to be to keep the certification debate focused on Western concerns about the environment, and push social and economic concerns to the periphery.  We can surmise that IISD likely did this report to help push the European agenda to regulate palm oil.

The second appears to be to maintain a negative attitude to commodity production, specifically palm oil, in developing countries.  There appears to be a reluctance to either laud or criticise any certification scheme or commodity. This is a shame. From IISD’s data, it’s patently obvious that palm oil leads the global agricultural community in certification; whereas competing oils (soybean) and other staples (maize, wheat) are laggards. An obvious conclusion and recommendation is that campaign groups put more of their energy into advocating for stronger sustainability standards of palm oil so greater uptake of other commodities can occur.

Categories
The Oil Palm The Oil Palm

Importance of G2G Recognition of Standards

Sustainability certification for commodities is growing. One think-tank estimates that there are around 400 sustainability initiatives for different commodities around the globe, ranging from cocoa to beef. Palm oil is no exception. Roundtable on Sustainable Palm Oil (RSPO) certification is one of the most widely known standards in the global marketplace, but there are no fewer than four sustainability standards for palm oil – more than any other oil crop.

Systems such as RSPO started existence as voluntary standards; they are essentially business-to-business standards that were designed to assure palm oil purchasers that palm oil was produced sustainably.

RSPO was established in 2004 as European concerns around deforestation in Southeast Asia first emerged. However, the debate has become considerably more complicated since then. The most significant development has been lobbying by various NGOs and competing oil producers to have governments regulate the international trade of palm oil for sustainability reasons.

The most developed of these was a proposal by French legislators to place sustainability criteria on palm oil; palm oil that did not meet sustainability criteria would be subject to higher rates of taxation. This initial proposal was rejected by the French parliament, but lawmakers established a panel to determine these sustainability criteria.

Similarly, the EU is talking about a trade and environment agreement with palm oil exporting countries – a voluntary partnership agreement (VPA). This would be similar to agreements on forest products that place more stringent conditions on imports of timber that don’t meet certain environmental conditions.

The crux is what these sustainability criteria and environmental conditions will look like. Consider the following producers exporting to the EU: one with RSPO-certified operations; another with MSPO-certified operations; another with no certification from SE Asia; and another from Central America with no certification.

How should the ‘sustainability’ of each of these different exports be considered by governments when determining taxation policies or import conditions?

Some EU officials and member state lawmakers want to establish sustainability criteria to be the basis of such a determination.

The closest parallel here is the EU’s Renewable Energy Directive. The European Commission established a set of rules that determined which biofuels could be considered as counting towards a member state’s renewable energy target. The imposition of sustainability criteria prompted Argentina to launch a WTO action against the EU.

However, the key difference with palm oil is that the policy proposals specifically target palm oil, and no other oilcrops or commodities.

Given that the palm oil industry and governments of palm oil producing countries have established consensus-based standards for sustainable palm oil, it would make sense for governments to recognise these standards in policy. At the very least, it would avoid a potentially messy trade dispute with Malaysia and Indonesia at a time when the EU is attempting to forge closer trade relations in the ASEAN region.

So what would ‘recognition’ look like?

Under the RED, the legislation allows for recognition of voluntary and government schemes. For palm oil this includes the International Sustainability and Carbon Certification (ISCC) scheme and the RSPO RED scheme. Government schemes for palm oil (Malaysian Sustainable Palm Oil and Indonesian Sustainable Palm Oil) have not been recognised. One government-backed scheme, the Austrian Agricultural Certification Scheme, has been recognised.

However, there are key differences between what RED is attempting and the proposed sustainability measures for palm oil. RED is attempting to boost the use of renewable fuels over fossil fuels and reduce direct and indirect emissions, but the palm oil measures effectively seek to regulate the production of palm oil in other countries, notably Malaysia and Indonesia, and make it ‘sustainable’.  Sustainability under this broader definition would incorporate social, environmental and economic measures.

The first problem for European policymakers will be determining whether environmental, social and economic policies in other countries are ‘sustainable’ given their circumstances – and whether this is remotely appropriate.

The national standards that have been introduced – such as MSPO – are appropriate, particularly as they are in line with national development goals and are produced under a democratic system. They are also mandatory. This is significant given that European sustainable palm oil groups are calling for compliance with these schemes and recognising that there is room for multiple schemes. An endorsement of a national scheme that is mandatory is effectively an endorsement of exports from those countries.

Would traceability need to be a part of this? Not necessarily. If palm oil has been produced under a standard and that standard meets expectations, then traceability is just an additional cost. No one is calling for traceability for sunflower oil, for example, and nor are they demanding traceability for beef cattle.

The second problem for European policymakers, will be assessing whether enforcement and compliance of any laws and regulations is up to the task. Countries may have strict  laws on, say, fire management, but have no capacity to enforce them.

And this is precisely where both national and voluntary standards and certifications are useful.

Rather than attempting to build a new set of regulations from the ground up, the EU would be better off using what is in place. If it is seeking assurance on compliance, it can use certification processes. In other words, RSPO, ISCC and national standards such as MSPO are going to be as good a starting point as any.

So how would this work under a broader trade arrangement?

Under World Trade Organisation rules, countries are generally blocked from introducing technical regulations on imports that are too onerous (technical barriers to trade – TBT).  A sustainability regime may fall under these rules. But there are potentially better solutions. These could include using the Malaysia-EU FTA negotiations to set out a dispute resolution procedure for TBT, or a memorandum of understanding between the EU and Malaysia on the recognition of sustainability standards within any forthcoming legislation or regulation.

But it also needs to be remembered that FTAs are supposed to reduce trade barriers and make trade between countries easier, not more difficult.

Some observers are calling for a ‘comprehensive’ sustainable development chapter; there is clearly a misunderstanding here of what trade agreements can and should do. Trade agreements do not permit one country to regulate another country’s production methods or standards for a ‘sustainable’ result. Nor do they provide ‘aid’ that changes production methods, or mandate how one country should manage its natural resources. What they can and should do is regularly monitor the implementation of the agreement to ensure that ‘sustainable development’ isn’t going backwards.

By some accounts a palm oil chapter is being discussed in the MEUFTA. NGOs and sustainability groups should not consider this a bandwagon for their grievances, and nor should some groups see it as an opportunity for protectionism. It should be a precise and technical document that ensures trade of palm oil between Malaysia and the EU is easier, not more difficult – that is the solution that will work for both sides.

It’s arguably easier for governments to acknowledge each other’s standards. But recognition of sustainability standards doesn’t need to be difficult. The EU has already shown how easily it can be done.

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The Oil Palm The Oil Palm

French Sustainability Criteria Commission Report: What Does It Mean for Malaysian Palm Oil?

The new French Environment Minister, Nicolas Hulot, has stated publicly that he plans to examine ways to ban Palm Oil – specifically Palm Oil biofuels – from the French market. Malaysian Minister Datuk Seri Mah Siew Keong last week sent a clear message that if the EU continues to discriminate against Palm Oil, it would endanger the EU-Malaysia Free Trade Agreement.

Does Minister Hulot’s speech mark the beginning of a new French assault on Palm Oil? It is too early to know for sure – but it is essential for Palm Oil exporters to understand why and how such an assault may be happening.

The recently-published report from the French Government’s Sustainability Criteria Commission (SCC) must be read in this context. The Report is titled The Sustainability of Palm Oil and Other Vegetable Oils, and contains multiple recommendations for how the French should regulate Palm Oil imports. Let’s quickly recall the background: the SCC was set up in the aftermath of the defeat of the latest incarnation of the Palm Oil Tax, in May/June 2016.

The plan was that four hand-picked French experts would examine the alleged sustainability issues around Palm Oil, and report back. Those experts are –

  • Alain Berger, a French agriculture specialist and civil servant
  • Marie Hélène Aubert, a career politician with the French Green Party
  • Michel Regis Talon, a civil servant with a background in environment & agriculture
  • Jean-Jacques Bénézit, a government official focused on sustainable development

In particular, the SCC was designed to focus on whether France should impose sustainability criteria for Palm Oil imports, and whether any new taxes should be levied on Palm Oil.

The final SCC Report has now been published. It serves as a joint-report between the Ministry of Environment and the Ministry of Agriculture, and carries several recommendations that will potentially impact Palm Oil exports to France, and the EU more widely.

The headline recommendations are –

  1. The issue of whether or not Palm Oil receives preferable treatment (e.g. lower tariffs) should not be led by the French Government: there should be an investigation at EU level, instead.
  2. The French Palm Oil Tax should be dropped.
  3. The plan for French Sustainability Criteria should be dropped; instead the EU should again take the lead in studying the idea of a possible future EU Scheme.
  4. France should support current sustainability initiatives in the Palm Oil sector, notably RSPO.
  5. The EU should adopt a clear definition of HCS land.
  6. The EU should consider a FLEGT-style agreement for all commodities (including vegetable oils).
  7. France should redouble its actions to promote the sustainability of vegetable oils.
  8. France should consider changing the Customs Code to reduce the tax benefits offered to Palm Oil biofuels.

Two of these stand out: First, the recommendation on changing the Customs Code on biofuels. This is notable because new French Environment Minister Nicolas Hulot has stated publicly his desire to restrict Palm Oil biofuels – and the Council of the EU (of which the French Government is a member) has put forth proposals to allow such discrimination under the EU’s Renewable Energy Directive. It now seems that a concerted move is underway to allow France – and possibly other EU countries – to adopt measures that would restrict Palm Oil biofuel imports.

Secondly, the French Palm Oil Tax has been rejected in principle by the SCC. This is a vindication of the efforts of Malaysia to educate and convince French policymakers that the tax is unjust.

Additionally, the dangerous plan for a ‘French Sustainability Criteria for Palm Oil’ – put forth during the French debate on the Biodiversity Bill in 2016 – has also been rejected.

The Report’s full recommendations are well worth reading. Standout quotes include this on tax –

“Environmental taxation which would only affect palm oil does not appear to be possible. On the one hand, it could lead to a move to other oils with an equally negative environmental impact (copra, soya, etc.).

“On the other hand, it would pose a high risk of non-compatibility with WTO rules.”

… on sustainability criteria –

“… the introduction by France of a binding sustainability standard applied to imports of vegetable oils, particularly palm oil, is not a practical or feasible measure. But the feasibility of such a measure deserves to be studied at European level, within a broader framework.”

… and on a possible FLEGT-style deal at EU level –

[The SCC] recommends that the Government bring to the European Commission, together with other Member States, the elaboration of a new regulation which would make it possible to integrate criteria of social and environmental responsibility for imports of agricultural commodities (including vegetable oils), drawing on the experience gained through the FLEGT scheme and adapting customs tariffs accordingly (as bonuses or penalties).”

The final quote is revealing. While the SCC Report contains good news on rejecting the Palm Oil Tax and other issues – it does ask the EU to take measures that could negatively impact Malaysian Palm Oil exports.

What, then, does this mean for the Palm Oil industry?

  • Does this Report mean that the ‘Nutella Tax’ is dead?

Yes, for now. The SCC Report recommends no new taxes on Palm Oil in France. It is therefore likely that the new French Government will not immediately implement new taxes or sustainability criteria.

However, this Report is only advisory. Anti-Palm Oil MPs may still put forward a Palm Oil Tax when the French Budget is debated later in 2017.

  • Why is France deferring several issues to the EU?

The EU Commission has competence both on external trade policy, and the internal EU market. The French Government cannot unilaterally direct such policy, without recourse to Brussels.

Discriminatory taxes, tariffs, etc, would contravene the EU rules set out by the Commission. However, the French campaigners are powerful, and demand action against Palm Oil. The SCC Report is aware that these two positions are incompatible. Instead of taking such a difficult decision itself, it proposes that the French Government ignore the difficult decision, and pass the problem over to Brussels.

  • Is France planning a biofuel tax or restriction that would harm Palm Oil?

The Report suggests that measures could be taken to hit Palm Oil biofuels financially, as a way of disadvantaging Palm Oil compared to the present situation in France.

However, renewable energy policy is the competence of Brussels – not the French Government. Current EU rules – adopted in the Renewable Energy Directive (RED) – would not allow such explicit crop-based discrimination. The EU Council and Commission are now pushing for these rules to be changed: and for Governments to have the opportunity to discriminate between different biofuel feedstocks. Given that most of Palm Oil’s competitor oils are from the EU, realistically Palm Oil is the only target of this measure.

This will not only be limited to France. Other recent moves to restrict Palm Oil biofuels – such as by the Norwegian Parliament –  are probably linked to this move as well. Changing the RED rules in Brussels is the way for the French Government to achieve its objective of banning Palm Oil biofuels.

  • Does this impact MSPO at all?

The SCC Report recognizes MSPO’s progress – though it makes an error in stating that MSPO ‘is not mandatory’ (it is, as announced by Minister Datuk Seri Mah Siew Keong). The Report identifies that MSPO can assist with small farmer certification, noting that –

[MSPO has] a level of detail broadly analogous to that of RSPO … the certification requires independent auditing … has modules of traceability analogous to RSPO … the scheme covers sustainable social and economic development to a satisfactory standard.”

Finally, perhaps the most important question for palm oil producers: does this SCC Report mean that Palm Oil’s problems in France are over?

The short answer is no. The network of anti-Palm Oil activists in France has not gone away, and likely will seek to influence the EU’s FLEGT process and other Brussels-based activity.

It is also unknown how the new French Government will approach the many policy issues related to Palm Oil imports – many of the Ministers and MPs involved do not have a track record in public office, and so it is difficult to predict whether they will accept the recommendations of the SCC Report, or if they choose to pursue a different path. It is clear that in at least one area – restricting Palm Oil biofuels – the new French Government plans to be as hostile to Palm Oil as its predecessors, and perhaps even more so.