Much has been said about the “Impending Palm Oil Ban by the EU” and it is disheartening for me to see the way this whole episode has morphed into something bigger than it really is.
First of all, I see much confusion about what the issue really is. The crux of the issue is actually the use of palm oil as a biofuel in the European Union. The regional organization has proposed draft legislation which will effectively cause palm oil-based biofuel to be phased out of the EU renewable energy program. Now let us break this down.
Firstly, it is draft legislation. Meaning it is not law yet. The European Union still has to be subject to a vote at its parliament before it can be made into law sometime by April. So, anything can happen.
Secondly, this matter concerns only palm oil shipped to Europe as biodiesel. How much palm oil biodiesel does Europe use as biofuels? According to data from Oil World, the European Union imported 7.5 million tons of palm oil in 2017 and over half, say 3.75 million, is used as some sort of fuel.
Since it is now 2019, perhaps the EU has increased its appetite for palm oil-based biodiesel and could now be expected to import some four million tons. Quite a bit, right? Hmmmm… well yes if you said, Thailand, which produces about three million tons of palm oil a year.
But the fact is the world produces about 73 million tons of palm oil a year. No prizes for guessing that much of that is produced in Indonesia and Malaysia. So that’s potentially 5.6 percent of what the world produces in palm oil. What people also do not seem to realize, is that this is only about biofuels in the EU and not a ban on palm oil per se.
The third point is, that the matter is an issue of the EU renewable energy program. You see, the European Union wants to become more sustainable in its energy policy and has therefore targeted that by 2030, 14 percent of transportation fuel consumed in the European Union must come from renewable sources, including liquid biofuels and biogas.
Obviously, the Union has put in generous subsidies to make this a reality. Suffice to say palm oil-based biofuels now enjoy these subsidies. Actually, to be perfectly precise, it is the users of these biofuels who enjoy these subsidies. Transport companies, which have buses and trucks that transport people or produce all around Europe.
Now, here is where the people who have chosen to vilify palm oil-based biofuel have not been completely honest.
First of all, out of all the possible biofuel in the world… why did these transport companies choose palm oil-based Biofuel? We can say many things but let us be clear. The only correct answer is that it is the most economically efficient. If you want to sully the choice, then yes, you can say because palm oil is cheap.
It is cheap, then it must be no good… we have all heard that phrase before. But it is cheap because of how efficient palm oil is in growing renewable biofuels. Other crops use more than five to six times more land to produce the same amount of biofuel and almost double the number of inorganic fertilizers and pesticides in the process. You all know that the EU knows that, and my 6-year-old daughter does too.
What has really got me upset is that the real matter at hand is the politicians and technocrats in the European Union have misrepresented the whole issue of deforestation to make their case against palm oil for biofuels in their territory. The fact is, they want the subsidies for themselves. Not for their consumers, but for their own farmers who farm other forms of biofuels. The US Soybean farmers think they will benefit from this legislation.
But my gut feeling is that it will instead go to the Sun Flower and Rape Seed farmers in Europe because they vote for the politicians that tell their technocrats to create skewed formulations and designs of Indirect Land Use Conversions that exclude palm oil as an eligible biofuel for use in the European Union.
The truth of the matter is that I have nothing against subsidies to benefit the people or the electorate from where the revenues were collected. I also believe the smallholders who produce some 45 percent of the world’s palm oil also do not have a problem with that. In fact, palm oil smallholders receive little or no subsidy at all from their respective governments unlike farmers in the European Union.
I just wished the European Union would just have been upright and honest enough to say: excuse me, but I really want these subsidies to be paid to my farmers. Instead of spinning a story to say that oil palm is the main source of deforestation in the world and that the people who farm it do not care about the environment.
I sincerely hope they stop for a moment and confront the brutal fact: how much space does palm oil take on this precious earth compared to the other crops grown for biofuel? Oil palm accounts for the smallest percentage (5.5 percent) of all the cultivated land for oils and fats globally but produces the largest percentage (32 percent) of total output. How much forest cover does the two largest palm oil producers have in their country and how much does the European Union have?… I won’t google that last one for you… because I don’t want to spoil the surprise.
Did palm oil deforest, yes… but so did the rest and they continue to do so… while palm oil has almost stopped with both Malaysia and Indonesia has declared a moratorium on new palm oil concessions, and most palm oil businesses having halted new developments more than three years ago. Yes, we broke some eggs, but so did they… but we are also transforming now. Do they even realize that palm oil has the largest sustainability certification hectarage and volume compared to other edible oils?
To add insult to injury, the EU draft legislation proposes allowing certain exemptions to the palm oil biodiesel ban, those produced by small farmers. But if you read the fine print, it says the exemption only covers farmers with two hectares or less. Laughable…
The delegated regulation has set the threshold for smallholders to two hectares to ensure that their tenure and independence over land is secured. This finding is based on the FAO smallholder farmers’ data portrait – which provides a comprehensive, systematic and standardized overview of the profile of smallholder farmers across the world. Palm oil farms with 25 or 50 ha cannot be deemed “small” or family-run anymore; they would typically employ 5 to 10 professional full-time workers.
Definition of Smallholder
Smallholders are farmers who grow oil palm, alongside with subsistence crops, where the family provides the majority of labor and the farm provides the principal source of income, and the planted oil palm area is less than 50 hectares.
I really don’t see the point…
OK, back to the issue about the volume of palm oil used for biofuel in the European Union, which we estimated to be at four million tons. It is a non-event. How many people live in the European Union? 512 million… according to the internet. Well, if the Brits finally make up their mind about how they want to leave the EU, that would leave just 446 million. The Council of Palm Oil Producing Countries (CPOPC) has six members — Indonesia, Malaysia, Thailand, Columbia, Nigeria, and the Ivory Coast. About 630 million people live in these countries. If all of them adopted a universal biofuel policy using Palm Oil, four million tons is just a tiny fraction. Both Indonesia and Malaysia are already on that path.
So even if the European Union decides not to budge after the threats of taking the matter to the WTO or even if it escalates into a trade war with a boycott of EU products, the CPOPC, not just Indonesia, still can live without Europe’s demand for Biodiesel.
I just wished that there would be some honesty about the facts behind the issue of palm oil biofuels in the European Union and that the news provides more clarity and perspective on the matter.
*) Denys Munang is Executive Director at PT Eagle High Plantations Tbk