- Vincent LinggaThe Jakarta Post
Jakarta | Wed, April 12 2017 | 12:09 am
The European Union has since 2013 been slapping anti-dumping countervailing duties on Indonesian exports of palm oil-based biodiesel, despite a lower EU court ruling last year that annulled the duties.
Then early last week, the European Parliament voted overwhelmingly to totally ban biofuels made from palm oil by 2020 to prevent the EU target of sourcing 10 percent of its transport fuels from renewables from inadvertently contributing to deforestation.
While the motion is not yet legally binding, EU lawmakers are now drawing up amendments to EU legislation that would be legally enforceable if approved by the European Commission.
We see this move and its objective simply as an illusion. Certainly, the EU cannot take a farm commodity out of its economy and think that would solve its problems. The political move would instead only damage EU ties with Indonesia and Malaysia, which together supply more than 80 percent of the world’s palm oil, and many other smaller producing countries in Africa and Latin America.
Yet more worrisome, the palm oil issue could become a perpetual thorn in the side of Indonesia-EU relations at a time when they are negotiating a comprehensive economic partnership agreement.
The EU Parliament’s motion seems to have been prompted mostly by the strong lobbying of the EU vegetable oil (soybean, rapeseed and sunflower) industry, which naturally would never be able to compete with palm oil.
Palm oil, which now accounts for almost 50 percent of global vegetable oil consumption, has increasingly been leading the market as its yield per hectare is estimated by agronomists at nine times as high as soybean, five times as high as rapeseed and eight times as high as sunflower.
Palm oil is now the most widely used vegetable oil in the world. It is almost impossible for most consumers to go a day without using or eating something that contains palm oil. Some analysts in Europe have even predicted that palm oil will steadily grow to be a US$88 billion industry by 2022.
Palm oil has been developing as one of the biggest non-oil exports from Indonesia and a very important part of the economy, as 40 percent of the estimated 11 million ha of oil palm estates are owned by smallholders. Indonesia exported around 26 million tons last year, or almost half of the global palm oil trade.
In fact, data submitted to the EU Parliament showed that palm oil lately accounted for two-fifths of all global trade in vegetable oils, and the EU is the second largest consumer, with annual imports of 7 million tons. Almost half of these imports are used to make biofuels.
True, in the first decade after the beginning of the palm oil boom in Indonesia in the mid-1990s, oil palm estate development had caused deforestation and sometimes community
conflicts.
But due to strong pressure from international consumers with the full support of green NGOs and the increasing awareness on the part of the government of climate change impacts, the industry has been subjected to much tougher rules designed to make the commodity sustainable economically, socially and environmentally.
Palm oil producers are now overseen and ruled under the sustainability standards of the Indonesian Sustainable Palm Oil (ISPO) program, which is legally compulsory; and the international multi-stakeholder Roundtable on Sustainable Palm Oil (RSPO), a market-driven certification scheme.
A nationwide sustainability certification program has been implemented since the early 2000s under RSPO and ISPO principles and criteria by accredited certifying bodies supported by independent social and environmental auditors. In fact, oil palm cultivation is arguably the most transparent industry now, as its farm practices are periodically examined by auditors and constantly scrutinized by
green NGOs.
Chain Reaction Research (CRR), which is partly funded by the Norwegian Agency for Development Cooperation (Norad), concluded after a study last year of the 10 biggest oil companies listed in the Indonesia Stock Exchange (IDX) that major palm oil growers have increasingly found that what is bad for the environment is also bad for business.
The financial risk of losing buyers committed to sustainable supply chains has helped motivate four of the biggest planters to mend their ways, according CRR, which conducts sustainability risk assessment for financial analysts and investors in environmentally intensive commodities, especially palm oil, and pulp
and paper.
The survey shows the No Deforestation, No Peat, No Excessive Exploitation (NDPE) policies do have an effect on suppliers to strengthen their sustainability policies and practices.
Despite the progress, green NGOs have constantly attacked the sustainability campaign, either motivated by real concern about environmental damage or influenced by lobbyists funded by EU and United States vegetable oil producers who are afraid of the palm oil competitive advantage.
Certainly, the achievement of the sustainability campaign is still short of expectations as the program is an ongoing development process, especially as the industry also involves millions of smallholders with complex poverty problems. The problem has been made more complex by the huge gap in land titling in the country.
But a blanket ban, as the EU Parliament recommended, is destructive, only reflecting a stance of bad faith that tends to see a glass-half-empty situation instead of half full.
A constructive engagement modeled on the scheme EU and Indonesia have established under the EU Forest Law Enforcement, Governance and Trade (FLEGT) is much more productive for the global economy. This program audits the entire supply chain in Indonesia, up from the source of timber to downstream processing until the point of exports to ensure social and environmental sustainability.
Then early last week, the European Parliament voted overwhelmingly to totally ban biofuels made from palm oil by 2020 to prevent the EU target of sourcing 10 percent of its transport fuels from renewables from inadvertently contributing to deforestation.
While the motion is not yet legally binding, EU lawmakers are now drawing up amendments to EU legislation that would be legally enforceable if approved by the European Commission.
We see this move and its objective simply as an illusion. Certainly, the EU cannot take a farm commodity out of its economy and think that would solve its problems. The political move would instead only damage EU ties with Indonesia and Malaysia, which together supply more than 80 percent of the world’s palm oil, and many other smaller producing countries in Africa and Latin America.
Yet more worrisome, the palm oil issue could become a perpetual thorn in the side of Indonesia-EU relations at a time when they are negotiating a comprehensive economic partnership agreement.
The EU Parliament’s motion seems to have been prompted mostly by the strong lobbying of the EU vegetable oil (soybean, rapeseed and sunflower) industry, which naturally would never be able to compete with palm oil.
Palm oil, which now accounts for almost 50 percent of global vegetable oil consumption, has increasingly been leading the market as its yield per hectare is estimated by agronomists at nine times as high as soybean, five times as high as rapeseed and eight times as high as sunflower.
Palm oil is now the most widely used vegetable oil in the world. It is almost impossible for most consumers to go a day without using or eating something that contains palm oil. Some analysts in Europe have even predicted that palm oil will steadily grow to be a US$88 billion industry by 2022.
Palm oil has been developing as one of the biggest non-oil exports from Indonesia and a very important part of the economy, as 40 percent of the estimated 11 million ha of oil palm estates are owned by smallholders. Indonesia exported around 26 million tons last year, or almost half of the global palm oil trade.
In fact, data submitted to the EU Parliament showed that palm oil lately accounted for two-fifths of all global trade in vegetable oils, and the EU is the second largest consumer, with annual imports of 7 million tons. Almost half of these imports are used to make biofuels.
True, in the first decade after the beginning of the palm oil boom in Indonesia in the mid-1990s, oil palm estate development had caused deforestation and sometimes community
conflicts.
But due to strong pressure from international consumers with the full support of green NGOs and the increasing awareness on the part of the government of climate change impacts, the industry has been subjected to much tougher rules designed to make the commodity sustainable economically, socially and environmentally.
Palm oil producers are now overseen and ruled under the sustainability standards of the Indonesian Sustainable Palm Oil (ISPO) program, which is legally compulsory; and the international multi-stakeholder Roundtable on Sustainable Palm Oil (RSPO), a market-driven certification scheme.
A nationwide sustainability certification program has been implemented since the early 2000s under RSPO and ISPO principles and criteria by accredited certifying bodies supported by independent social and environmental auditors. In fact, oil palm cultivation is arguably the most transparent industry now, as its farm practices are periodically examined by auditors and constantly scrutinized by
green NGOs.
Chain Reaction Research (CRR), which is partly funded by the Norwegian Agency for Development Cooperation (Norad), concluded after a study last year of the 10 biggest oil companies listed in the Indonesia Stock Exchange (IDX) that major palm oil growers have increasingly found that what is bad for the environment is also bad for business.
The financial risk of losing buyers committed to sustainable supply chains has helped motivate four of the biggest planters to mend their ways, according CRR, which conducts sustainability risk assessment for financial analysts and investors in environmentally intensive commodities, especially palm oil, and pulp
and paper.
The survey shows the No Deforestation, No Peat, No Excessive Exploitation (NDPE) policies do have an effect on suppliers to strengthen their sustainability policies and practices.
Despite the progress, green NGOs have constantly attacked the sustainability campaign, either motivated by real concern about environmental damage or influenced by lobbyists funded by EU and United States vegetable oil producers who are afraid of the palm oil competitive advantage.
Certainly, the achievement of the sustainability campaign is still short of expectations as the program is an ongoing development process, especially as the industry also involves millions of smallholders with complex poverty problems. The problem has been made more complex by the huge gap in land titling in the country.
But a blanket ban, as the EU Parliament recommended, is destructive, only reflecting a stance of bad faith that tends to see a glass-half-empty situation instead of half full.
A constructive engagement modeled on the scheme EU and Indonesia have established under the EU Forest Law Enforcement, Governance and Trade (FLEGT) is much more productive for the global economy. This program audits the entire supply chain in Indonesia, up from the source of timber to downstream processing until the point of exports to ensure social and environmental sustainability.
