The Oil Palm

The Brussels Biofuels Debate, Part I: Palm Oil’s New Threat; The Revision of the Renewable Energy Directive and ILUC

The European Union is currently undergoing a revision of the Renewable Energy Directive (RED), which governs the EU’s biofuels policy. The debate in Brussels has been marked by intense debate over the most controversial proposal in the legislation: the introduction of an Indirect Land Use Change (ILUC) factor for biofuels. This new move is a transparent attempt by politicians in Europe to make it more difficult to export palm oil biodiesel to Europe: the French politician responsible for drafting the proposal has openly stated that palm oil is a target.

ILUC is based on the assumption that demand for biofuels in one part of the world leads to the displacement of food crops in other parts of the world; with the supposed ‘land use change’ resulting in CO2 emissions into the atmosphere. The result of this is that ILUC is based on guesswork.

This proposal has been met with a cavalcade of criticism and disapproval. Academic researchers, European Farmers organizations, biofuels producers, and research centers, including the Kiel Institute for the World Economy, have all highlighted the inherent uncertainty of ILUC. These groups, and many more, argue that ILUC is not based on sciences and constitutes an unscientific approach to policymaking, and it should be rejected. However, their plea has fallen on deaf ears as the European Commission and Members of the European Parliament (MEPs) push ahead with this proposal to introduce ILUC emission factors on different crops, including palm oil.

Because they discriminate between domestic and foreign feedstock, experts estimate that the European Commission’s proposed introduction of ILUC factors also constitutes a violation of international trade laws. The World Trade Organisation (WTO) forbids the use of arbitrary ‘sustainability criteria’ and other non-tariff barriers to restrict market access to foreign competitors.Fredrik Erixon, the Director of the European Centre for International Political Economy (ECIPE), explains that market restriction under ILUC ‘would not hold up in a WTO dispute-settlement case’.

The danger of ILUC lies wider that just the current revision of the Renewable Energy Directive. While today ILUC factors are being proposed for biofuels,tomorrow they could form part of new legislation on food and or other goods. Using the pretext of its broader GHG emissions reduction targets, the EU has shown that it is willing to adopt GHG emissions reduction policies that have implications far beyond its own borders. From the proposed Airline Emissions Tax to European Commission’s report on Sustainable Food Consumption and Production; it is clear that the EU’s ongoing attempts at ‘greening’ the economy may spill over from biofuels to food and services. The EU is attempting to force their own regulation on to third countries, even when that regulation has been shown to be unscientific and poorly thought-through.

The revision of RED, and the ILUC proposal, pose a real threat to market access for palm based biofuels. These actions should also be seen in the context of a broader range of EU policies that will seek to discriminate against the import of foreign goods; irrespectively of whether their end use is for food or fuel. The palm oil industry must remain steadfast in its opposition to the European Commission’s proposal as the adoption of ILUC factors on biofuels will mark a dangerous precedent for the introduction of similar discriminatory measures – not founded on science – in other areas of EU legislation.