“Green” Policies of EU Predicted to Phase-Out Palm Oil
The Indonesian government is currently fighting against the European Union (EU) Commission at the World Trade Organization (WTO). The lawsuit filed by the Government of Indonesia was related to three of the EU’s policies, namely RED II ILUC, Delegated Regulation (DR), and French Fuel Tax.
In the RED II ILUC and DR policies, palm oil has classified as high-risk Indirect Land Use Change (ILUC), because the EU Commission considers that it’s production as a raw material (feedstock) for biodiesel causes the conversion of food/feed areas, which also triggers forest or land with high carbon stock conversion become food/feed production land. So that the use of palm oil as a biodiesel feedstock for the EU will be drastically reduced and must be eliminated (zero percent) or phase-out by 2030.
Meanwhile, the French Fuel Tax policy imposed by the French Government was sued by the Indonesian Government related to the exception of palm oil-biodiesel from the tax rate reduction scheme on the production of renewable and sustainable biofuels, even though palm oil used as a feedstock comes from sustainable palm oil.
These EU’s policies are considered to have discriminated against palm oil and palm oil-biodiesel. In addition, these policies also considered not in accordance with the fairtrade principle, where the European Union, which is also a member of the WTO, but applies different treatment (highly regulated) only for palm oil, while the same treatment is not applied for other vegetable oils.
The impact of these policies that discriminates against palm oil will hinder exports of Indonesian palm oil to EU countries. Besides that, it is feared that the bad image of palm oil caused by these policies and will influence other countries to implemented similiar policies, so that it will threaten the existence of the world palm oil market and Indonesian palm oil exports perfomance. Based on this, Indonesian Government sued the EU Commission at the WTO.
However, it’s seems that not only these policies, the EU Commission has also issued another policy which has addressing the issue of palm oil in the region with the aim to phase-out palm oil.
This was confirmed by Andri Hadi, Indonesian Ambassador Extraordinary and Plenipotentiary (EP Ambassador) to Kingdom of Belgium, Luxemborg, EU and international organizations in Brussels in a Webinar initiated by the Secretariat of the Vice President of the Republic of Indonesia in November 2020, revealing that the EU Commission has issued a policy that will affect the trade of palm oil in the EU region. The policy is the European Green Deal (EGD) with aim to realizing the EU region as climate neutral by 2050. This policy also shows that “green ideology” has become part of the lifestyle of the EU community which has been supported by the market and constituents.
This EGD policy is also supported by other policy instruments such as: (1) European Climate Law Proposal; (2) Decarbonising the Energy System Policy; and (3) Carbon Tax Policy. These policies will further encourage the using of eco-friendly energy sources (such as electricity) and eliminate energy sources that are considered not eco-friendly and have a high carbon footprint. With the current paradigm of the EU Commission which considers palm biofuels not include in eco-friendly energy sources, so that the implementation of these instrument policies has the potential to reduce the competitiveness of palm oil in the EU’s market to phase out palm oil in the trade of feedstock and biofuel products in the region of the country.
In 2019, the EU Commission also published a Communication on Stepping up EU Action to Protect and Restore the World’s Forest with the aim of increasing their contribution to addressing global deforestation. In the conception of EU’s policy to protect the world’s forests (European Forest Policy), the EU Commission has a basic paradigm that agricultural expansion is the main cause of deforestation, so with this paradigm, the RED II ILUC and DR policies were born.
In addition, there is also a Mandatory Due-Diligence policy in the importation of products that are included in the Forest and Ecosystem Risk Commodities (FERC) category, which is palm oil with soybeans, rubber, corn, beef (skin flesh and leather), and chocolate are included in that category. Implementation of this policy making EU importers must ensure that the supply chain of product include in FERC category is free from deforestation and other environmental issues as well as social/human rights issues.
Within the scope of policy, the EU Commission also applies Non-Tariff Measures (NTM) for palm oil products. Due to the submission from the European Biodiesel Board (EBB), commision has made several attempts to impose NTM on Indonesian palm oil biodiesel products. As happened in November 2013, the European Union imposed an Anti-Dumping Import Duty of 8.8-20.5% against five Indonesian exporters, but Indonesia filed a lawsuit against the policy and the lawsuit was won by Indonesia. The EU Commission has conducted an anti-subsidy investigation on Indonesian biodiesel since December 2018. The results of this subsidy have decided that seven Indonesian exporters will be charged for Countervailing Duties (CVD) of 8-18.8% from January 2020-2025.
Not only in the scope of government policy, the issue of palm oil in the EU is also in the business/industrial scope, as indicated by the widespread labeling of Palm Oil Free in consumer goods traded in the region of the country. Although this labeling is not supported by scientific studies, the label is increasingly being carried out by industries or entrepreneurs targeting EU consumers who already have negative perceptions of palm oil such as unhealthy oil, not environmentally friendly, drivers of deforestation and not respecting human rights.
Finally, Ambassador Andry also mentioned that the issue of palm oil in the EU region was a form of norm-setting carried out by various groups including the government, business actors, media, and NGOs. Therefore, needed of comprehensive strategy to handling this issues by involving all Indonesian parties including the government, business actors, media, and NGOs by utilizing various international forums.
Another thing that needs to be considered in handling with various EU policies that discriminate against palm oil is the EU’s psychology which is very concerned about environmental sustainability issues. Therefore, Indonesia as the largest palm oil producer in the world, also needs to emphasize that concern for the environment is not only the right of EU, but developing countries like Indonesia also have the same rights to protect the environment.
This efforts within the scope of the palm oil industry can be seen from the various governance policies (ISPO, oil palm moratorium, PSR) in order to creating a sustainable palm oil industry not only in environment aspect, but also in economic and social aspects. This also shows that the palm oil industry is part of solution to realize Sustainable Development Goals (SDGs) as a global development platform.
Share this article
You may also like these articles