The European Union is showing
the first signs of a more
conciliatory approach towards palm oil producing countries. This reverse its
previous position of non-cooperation with Indonesia and Malaysia, the main
palm
oil producers. The EU ban on palm oil for biodiesel intensified and narrowed
a
polarized debate on its pros and cons. From now on, new roads towards a
strategic partnership can be carefully explored, starting from a better
understanding of the underlying realities.
STRONG PARTNERSHIPS
REQUIRED
The EU and ASEAN Joint Working
Group on Palm Oil recently
defined an ambitious agenda of research, dialogue and cooperation. That is
excellent news, because EU legislation is dead on arrival without strong
partnerships. There are a lot of issues to be discussed around finding
common
ground to foster an energetic partnership.
Let’s explore some critical
issues on the agenda as we move
away from disinformation, boycott strategies
and anti-palm oil marketing. In
brief, I will first evaluate the old debate on biofuel and explore the new
dialogue on legislation. Finally, I will share some thoughts on refocusing
on
the pressing issues of deforestation through an economic lens.
Let’s move away from
disinformation, boycotts and anti- palm
oil marketing.
BIOFUEL: ENDING THE WAR
For many years the ASEAN-EU
dialogue on palm oil was
dominated by a polarized debate on the use of palm oil for biofuel. The
European Commission ended the debate unilaterally in March 2019 by
announcing
it would phase out palm oil in biodiesel by 2030. This policy did not take
into
account the differences in productivity and carbon emissions between palm
oil
and vegetable oil alternatives from European sources. That verified
scientific
data is significantly in favor of palm oil.
At the same time,
recent market intelligence clearly shows that the transition to electric
power
in the transport sector is gaining momentum. The diesel engine will be
obsolete
by the end of the decade, regardless of the outcome of ongoing World Trade
Organisation (WTO) procedures that are still dealing with conflicts that
have
lost their meaning given the status of the energy transition.
Not only is the noisy and
dirty combustion engine fast
becoming a technology of the past, it is inextricably linked to the software
tampering scandal corrupting the integrity of EU regulations. Still, the
fact
that there is no future for biodiesel in Europe is not because of EU
parliament
resolutions, but because of the changing realities of the renewable energy
transition.
A similar process can be observed in countries like China and India, which
are
rapidly moving towards electric cars.
It is high time to bury the
hatchet.
MANDATORY DUE DILIGENCE IS
THE NEW ROUTE
The European market is already moving from voluntary standards to legislation, defining and enforcing sustainability by law. This process is being accelerated by the global climate ambitions that translated the Paris Climate Agreement into the European Green Deal, aiming to make the EU climate neutral by 2050. The Farm to Fork strategy at the heart of the Green Deal seeks to make food systems fair, healthy and environmentally friendly. This strategy combines both regulatory and voluntary initiatives, using the synergy between good governance and market-driven commitments.
Recent figures show that
Europe is a de facto RSPO dominated
market: More than 86% of palm oil imports are already RSPO-certified.
BEYOND THE EU
Asian palm oil exporters’
voluntary sustainable
certification under the RSPO scheme is no longer seen as a market barrier or
distortion. More than enough certified palm oil volumes can be shipped to
the
EU to meet demand. New mandatory sustainability requirements are not an
issue
for exporters, partly because sustainable volumes receive a market price
premium as an incentive. There is more hesitation in political circles. The
EU’s failure to recognise the importance of the national sustainability
standards in Malaysia and Indonesia (the MSPO and ISPO respectively) is a
serious worry for governments.
But there is a further
consideration. The EU’s ambition must
go beyond cleaning its own footprint of palm oil imports. Europe only
represents 6.4% of the global palm oil market. Making this relatively small
volume sustainable will not bring systemic change –including upscalable
innovative solutions and structural benefits for farmers – to the sector as
a
whole.
NATIONAL STANDARDS VERSUS
VOLUNTARY STANDARDS
Right now, there is an
opportunity to reconcile positions
and strengthen cooperation
worldwide. Politicians are
likely to agree that at the end of the day, only governments have the
mandate,
authority and responsibility to transform national agricultural and
industrial
sectors to ensure they meet ambitious sustainability standards in line with
international agreements. That’s why national standards are the vehicle of
choice for sector transformation that leaves no-one behind, raising the
floor
through legally binding minimum requirements. These should work side by side
with voluntary standards as a way for first movers to raise the bar,
continuously testing further improvements. In this optimal dynamic of
interactions, the power of markets and of good governance are constructively
combined.National standards are the preferred vehicle for sector
transformation.
The moment has come to fully acknowledge the relevance of the national sustainability standards for the palm oil transition in Indonesia and Malaysia. The amme for implementation and improvement of ISPO and MSPO, with a focus on smallholder inclusion, will open a new chapter beyond polarisation. Bricreation of a EuropeAid- funded producer support progrnging legislation to life requires collective action.
DOES PALM OIL REALLY DRIVE
DEFORESTATION?
Deforestation is a very
critical subject in the building of
a more common understanding. In the dominant discourse in the West, the
expansion of the palm oil sector is identified as the main driver of
large-scale deforestation: it is blamed for the destruction of one of the
last
remaining rainforest biomes, situated in the Southeast Asian archipelagos.
It
is crucial to look beyond this facile conclusion to create effective,
scalable
solutions that tackle the issue’s root causes.
The real driver of palm
oil-related deforestation is poverty
– on the production side, palm oil appears to offer improved prospects to
millions of farmers, while on the market side, there is strong demand from
low-income consumers for affordable cooking oil. These combined economic
forces
have driven the growth of the palm oil sector as an economically efficient
solution for decades. Forests are hard to maintain unless trees are worth
more
standing than cleared. Otherwise, there is always some crop or other that is
seen as a good reason to cut them down. Alternatives like cocoa, coffee,
tea,
rubber, timber or rice are less productive and will accelerate the expansion
of
agriculture at the cost of forest even faster. Millions of smallholder
farmers
will be negatively impacted. Competing land use against forest requires an
economic response; making maintaining forests an economically valuable
alternative. No palm oil substitute can solve this challenge. In reality,
there
will be an opposite effect.
HOW TO OFFSET THE
OPPORTUNITY COSTS
The core question is this: Can
we build effective financial
mechanisms to offset the opportunity costs of keeping the forest standing?
These costs should not just be borne locally. Given the discrepancies in
forest
coverage between continents and their stages of development, an
international
settlement is needed. Asian- European cooperation must include this
financial
dimension, possibly as part of the proposed EuropeAid funding.
Investment in maintaining the
forest should be shared by all
actors in the supply chain.
MARKET-BASED SOLUTIONS
In essence there are two
parallel routes to take:
Market-based solutions and good governance. Combining the two is most
probably
the smartest way forward. Market-driven solutions to deforestation entail
developing the farmer business case for sustainable palm oil production in
at
least two scenarios:
• One is
the
concept of agroforestry, combining agriculture with forest coverage and
using
the economic potential of intercropping without destroying biodiversity.
Most
probably, this scenario will require additional earnings for farmers to
achieve
a living income. These could take the form of payments for environmental
services and carbon sequestration. As mentioned before, the resulting
financial
burden cannot be borne locally; all supply chain actors must contribute.
•
Secondly,
agroecology could redefine the concept of palm oil cultivation at scale,
moving
from maximization to optimization of production while respecting the
boundaries
of the landscape and ecosystems. This would help preserve fertile soils,
clean
water, biodiversity, carbon storage and other environmental services on
which
we are all heavily dependent. Markets
are best positioned to bring together the innovative power of science and
technology, capital and entrepreneurship to accelerate these innovations
towards functioning agroecological systems.
GOOD GOVERNANCE: ANOTHER
CRUCIAL COMPONENT
The existence of public goods
and the provision of ecosystem
services like clean air, water, fertile soils and biodiversity, should not
depend on their economic value alone. Society – as represented by
governments –
has a responsibility to safeguard these for future generations. This
requires a
very different timeline than short-term profits. If we put a monetary value
on
public goods as a strategy to save them, there is a risk of their being
appropriated by the wealthy few. Governance on a global scale is required to
deal with climate change and other cross-border issues like poverty,
migration,
fair trade relations, epidemics, etc. The Green Deal is a
laudable European
interpretation of a continental
responsibility to deliver sustainable development solutions. At the same
time,
we are all interconnected with other continents through trade relations.
One-sided measures will not have a positive outcome. Financial transfers to
help developing countries are crucial to achieving outcomes that serve the
worldwide community as a whole.
The EU and ASEAN Joint Working
Group on palm oil is to meet
again, preceded by expert meetings, to discuss possible two-way cooperation.
Let’s put the conflict behind us and work together.