Palm Oil – The Green Development Oil Newsletter Issue 7, June 2010

European Commission Tries to Downplay Biofuel Trade Control
The European Commission has represented its recent announcement that it will require biofuel importers to demonstrate good carbon emission management in land management as a contribution to sustainability – but it still remains a WTO inconsistent trade barrier.

UNEP Research: Palm Oil Not the Greatest Threat to Orang-utan
Research for the UNEP revealed that palm oil was not considered the greatest threat to the Orang-utan – even in the midst of South-East Asia’s palm oil boom.

Palm Oil is the Most Efficient Biodiesel Feedstock
A recent study by the International Food Policy Research Institute entitled, “Global Trade and Environmental Impact of the EU Biofuels Mandate”, found that “even if peat land emissions are considered, palm oil is the most efficient Feedstock”.

GlobEcon Finds EU Renewable Energy Directive is Protectionist and Discriminatory
A telling report from the director of the independent economic consultancy GlobEcon, Dr. Gernot Pehnelt, found that the EU Renewable Energy Directive “… set unfair values on greenhouse gas savings for foreign biofuels, thus precluding market access.”

Malaysia and Indonesia Unite to Fight Anti-Palm Oil Campaigns
Malaysian and Indonesian palm oil producers have united to fight the anti-palm oil campaigns being carried out by European non-governmental organisations.

Australian Senate Bill Likely to Breach Trade Laws
The Australian Senate is currently considering a Bill for the mandatory labelling of palm oil on products sold in Australia.

European Commission Tries to Downplay Biofuel Trade Control

The European Commission has represented its announcement that it will require biofuel importers to demonstrate good carbon emission management in land management as a contribution to sustainability – but it still remains a WTO inconsistent trade barrier.

The Commission has just released papers advising how exporters to the EU are to meet a requirement in the EU Renewable Energy Directive that production methods take into account carbon emission impacts on land use of production of biofuels. The Directive adopted by the European Parliament requires each member state to establish procedures which demonstrate imports meet carbon emissions standards set by the EU.

The opinion among trade lawyers is that this measure would conflict with WTO rules that do not allow different standards to apply to imports than those applying to domestic products. Whether or not measures would conflict with WTO rules would not be known until member states enshrine these controls in regulation.

The European Commission has now stated it will be the arbiter of the consistency or otherwise of measures taken by exporters with the EU Directive.

It has also stated that the aim of the new procedures will be to facilitate imports of biofuel. No matter what the Commission says or does, the EU Directive mandates it to implement procedures which discriminate against imports and which thereby are likely to conflict with WTO rules.

The Commission material has caused some confusion among exporters about exactly how the Commission will implement the regulation.

UNEP Research: Palm Oil Not the Greatest Threat to Orang-utan

Research for the UNEP revealed that palm oil was not considered the greatest threat to the Orang-utan – even in the midst of South-East Asia’s palm oil boom.

In 2005, during the large expansion of plantations in Indonesia, research for the Great Ape Survival revealed that palm oil was not considered the greatest threat to Orang-utan populations – or any threat at all to the Bornean Orang-utan.

A draft study for the Great Ape Survival Project, a joint programme between the UNEP and UNESCO, identified the priority populations of the four species and sub-species of Orang-utan and the threats to those populations.

It did not list oil palm plantations as a threat to any of the Bornean Orang-utans subspecies.

The study did list oil palm plantations as a threat to the Sumatran Orang-utan in five of eight priority populations; however, it was only listed as the leading threat for one population.

Noticeably, anti-palm oil campaigns had not commenced in 2005 and this study blamed the primary loss of Orang-utan habitat on illegal logging. [1]

Studies have also found that the population of the Sumatran Orang-utan were severely depleted as a result of rebuilding efforts following the 2004 tsunami and declined by one third due to the 1997 forest fires. [2]

Most Sumatran Orang-utans are located in Aceh where there is only a 12 percent cross over between oil palm plantations and Orang-utan habitat.

In 2005, UNEP stated that the greatest threat to the Great Apes, including the Orang-utan, was poverty. [3]

This research is still more evidence that anti-palm oil campaigns are based on exaggerated and misleading claims.

And worse still, while the misleading anti-palm oil campaigns continue – some of the major threats to the Orang-utans are being ignored by the anti-palm oil campaigners.

Palm Oil is the Most Efficient Biodiesel Feedstock

A recent study by the International Food Policy Research Institute entitled, “Global Trade and Environmental Impact of the EU Biofuels Mandate”, recently found that “even if peat land emissions are considered, palm oil is the most efficient Feedstock”.

The report finds that palm oil can compete with other biofuels because it has a very high yield and generates co-products which can be used for energy generation.

It was also found that once indirect land-use change was taken into account, palm oil was the only biodiesel to generate emissions savings over a 20 year period – even after plantations on peatland were taken into account.

Rapeseed, soybean and sunflower oil were all found to generate positive net emissions once indirect land use change was taken into consideration.

More importantly, those savings from palm oil were increased under a scenario of ‘free trade’ in biofuels.

The report concluded that on the current estimates of the use of biofuels to reach the EU Renewable Energy Directive’s target of 10 percent for renewable fuels in the transport sector, there is no threat to the environmental viability of biofuels.

The report is yet another clear indication that the EU’s default emissions rates for biodiesel from palm oil feedstock are inherently protectionist and completely without basis.

It is also a clear rebuff to the unfounded and misleading claims of environmental groups such as Greenpeace and Friends of the Earth which often associate palm oil with increased carbon emissions.

GlobEcon Finds EU Renewable Energy Directive is Protectionist and Discriminatory

A telling report from the director of the independent economic consultancy GlobEcon, Dr. Gernot Pehnelt, found that the EU Renewable Energy Directive “… set unfair values on greenhouse gas savings for foreign biofuels, thus precluding market access.”

The report found that deforestation associated with palm oil was much less than claimed by anti-palm oil campaigns. Dr. Pehnelt concluded that that while palm oil has significant green house gas savings compared to rapeseed, the Directive does not account for this, and in fact, claims that palm oil does not even qualify for classification as a renewable fuel. Indeed while all studies cited evidenced higher savings than the EU default value for palm oil, many studies showed rapeseed biodiesel falling under the default value.

Dr. Pehnelt concluded that the EU renewable energy directive was an example of protectionism under the guise of the protecting the environment, rather than a measure to reduce greenhouse gas emissions.

The report also stated that while not reducing greenhouse gas emissions, the EU Renewable Energy Directive would also “[restrict] palm oil production worldwide and limiting access to European markets would limit an important opportunity for developing countries to raise living standards and reduce poverty”.

Dr. Pehnelt urged the EU to review the Directive and refocus European policy on supporting and expanding imports from the developing world – rather than restricting them.

This report, combined with a possible complaint to the WTO over the EU’s Renewable Energy Directive from the Indonesia and Malaysia Governments, should send the EU back to the drawing board over its treatment of palm oil.

Malaysia and Indonesia Unite to Fight Anti-Palm Oil Campaigns

Malaysian and Indonesian palm oil producers have united to fight the anti-palm oil campaigns being carried out by European non-governmental organisations.

Coming off the back of the campaigns launched by European environmental NGOs such as Greenpeace to pressure companies such as Nestle and Unilever to halt imports from Indonesian palm oil suppliers, the Indonesian and Malaysian have united to fight for their countries’ right to economic growth.

While Indonesian palm oil growers have responded to Nestle and Unilever by taking to the streets to protest the victimisation of Indonesian palm oil and its contribution to increasing living standards – palm oil industries have responded by agreeing to work together to dispel the myths and misleading statements made by environmental NGOs.

Following Nestle’s decision to review its contract with Sinar Mas, under pressure from Greenpeace, the Malaysian and Indonesian palm oil industry have become concerned that large companies are listening only to environmental groups – and not to efforts to raise living standards and reduce poverty in developing nations.

The joint communiqué by the two sides agreed not only to seek a legal opinion on the inconsistency of the EU Renewable Energy Directive with trade law obligations, but also agreed to a joint taskforce to tackle negative publicity.

The coalition will also seek to liaise with the Roundtable on Sustainable Palm Oil to achieve a “more practical scheme”.

This is a clear indication that the Governments of Indonesia and Malaysia are not going to sit back, while a key industrial sector important to livelihoods and economic growth is put at risk by environmental NGOs and Europe companies.

Australian Senate Bill Likely to Breach Trade Laws

The Australian Senate is currently considering a Bill for the mandatory labelling of palm oil on products sold in Australia.

The Bill seeks to single out palm oil as the only product which would be mandatorily labelled for reasons other than health reasons – despite the Food Standards Authority previously rejecting such an application.

World Growth has commissioned a legal opinion on the implications to Australia’s trade law obligations if the Bill is passed into law. That opinion found that the Bill is most likely to breach Australia’s obligations under the Technical Barriers to Trade Agreement and the General Agreement on Tariffs and Trade.

Australia’s WTO obligations require that any trade restrictive measure aimed at protecting the environment must have a direct impact on the environmental problem in question.

It appears clear that labelling palm oil in Australia can in no way be proven to protect Orang-utan in Malaysian and Indonesia – not in the least because the claims that palm oil is the greatest threat to the Orang-utan are unfounded.

Australia has a long history of avoiding trade bans and encouraging growth and economic development in developing countries. This Bill risks Australia undermining its history of support for economic growth and free trade for a cheap and unfounded political stunt.


[1] UNEP World Conservation Monitoring Centre, 1 September 2005, “POVERTY WILL MAKE THE GREAT APES HISTORY”, http://www.unep-wcmc.org/press/WAGAC/pressrelease.htm
[2] Wildlife Conservation Society-Indonesia Program (WCS-IP); cited in Mongabay http://news.mongabay.com/2006/0814-orangutans.html; and
[3] Ibid, n. 16

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