The Oil Palm

The Next Palm Oil Challenge in France

Every year since 2012, Socialist Party politicians in France often supported by the French Government have attempted to place a tax on Palm Oil products.

The most recent attempt was defeated in July 2016, thanks to a strong campaign from producing countries. However, French lawmakers have since announced that they will take two actions. First, they will re-examine taxation on all vegetable oils. Second, they will introduce a Sustainability Criteria Commission that will supposedly define criteria for the production of vegetable oil and other commodities.

This policy blog will focus on the Sustainability Criteria Commission, which should be of great interest to Palm Oil exporters across the globe. Why? Because Palm Oil producers have been down a similar path before.

When the European Union introduced the Renewable Energy Directive (RED) almost seven years ago, new sustainability criteria were associated with it. The justification being that this was required in order to prove that the biofuels were indeed environmentally beneficial.

But, as always, these processes are not independent. They are prone to politicisation and protectionism.

The RED scheme was a boon for biofuels producers – both European and non-European. However, better-value imports (notably Palm Oil) claimed a substantial share of this new market. European producers needed to find ways to keep imported biofuels out of the EU market.  They came up with multiple methods to fix the sustainability criteria so that it disadvantaged Palm Oil. These included gaming the ‘default values’ – which measure estimated GHG savings – in favour of domestic European oils, working with protectionist politicians to remove Palm Oil products from approved lists, and supporting introduction of Indirect Land Use Change (ILUC) criteria.

ILUC was a complex way of trying to exaggerate the emissions from biofuels based on numbers that were arbitrary and unprovable. In the end, it was rejected by the EU as simply unworkable.

The RED precedent is highly relevant, because the French Government’s planned new sustainability criteria for vegetable oils will allow the same protectionist, anti-Palm Oil traps to be set.

The sustainability criteria planned by France is much wider than just GHG emissions. It is likely to cover forest conversion, biodiversity, land use, social and political concerns, farming and conservation methods, supply chain traceability, as well as economic factors.

The Commission’s membership is also puzzling. The members have solid, and impressive expertise in French administration and politics, as well as long careers in related fields such as agriculture and environmental policy. However, there is a clear lack of expertise on economic development and broader sustainable development in the developing world. None of the members of the Commission have any significant expertise or experience in this area.

Given that the bulk of the world’s vegetable oil – Palm Oil and soybean oil – is produced in the Global South, shouldn’t that expertise be considered vital for determining the sustainability of those systems?

There is one fundamental reason why this needs to be the case: sustainability in the European context is often narrowly defined in environmental terms. The U.N. definition of sustainable development is clear that a broader understanding, including social and economic development, is required. The French Sustainability Criteria Commission currently is not set up to consider that broader definition.

This is not the only weakness of the Commission. The eventual recommendations will be turned into a de facto standard that can be used by France in its regulations and in restricting imports: this is apparently the purpose of the Commission. Given this, the Commission clearly also needs an expert on international standards and conformity. It does not currently have any.

That this technical expertise isn’t considered vital indicates that the process has already been politicised, and should be a major concern for Palm Oil producers. Compare the French process to RSPO, which is currently the largest international Palm Oil certification system.

The RSPO took years to develop. And it did so through a multi-stakeholder process that included producers, purchasers, processors and NGOs. RSPO isn’t perfect as a certification system, and it doesn’t follow best practice in terms of standards and conformity, but it does at the very least attempt to address the concerns of all major stakeholder groups through a structured process.

The French Sustainability Criteria Commission does not look like a serious attempt to deliver a credible sustainability recommendation. Methods for stakeholder input are yet to be made public. Valuable fields of expertise have been overlooked entirely.

Instead, the Sustainability Criteria Commission looks like a Potemkin process set up to justify a pre-determined outcome. The outcome being that Palm Oil imports to France will be restricted; and taxes on Palm Oil will rise. It will go through the motions – a trip to Malaysia and Indonesia is being planned, so that the Members can see the situation on the ground. No-one in those countries should be fooled. French Ministers have openly admitted they are seeking a new tax on Palm Oil: this Commission is simply the vehicle for them to deliver that goal.

But the impacts go beyond palm oil. This action should also be a broader concern for the EU’s trade directorate. Brussels gave France some warning over its last attempts to penalise palm oil. Will it do so again? It’s no secret that European trade policy is in disarray. The Commission has difficulty finalising trade agreements with Asian partners. Unilateral moves by member states will therefore make this even more difficult.  The EU is currently attempting to negotiate trade deals with Malaysia and Indonesia. France’s moves would undermine good-faith negotiation. It’s not just palm oil exporters that need to rein France in; Brussels needs to do the same thing.