In the Media: Does the UK’s ‘Green Aid’ serve Indonesia’s interests?

The following opinion piece by World Growth chairman Alan Oxley appeared in the Jakarta Post on April 23. See the original article here.

In 2011, the UK Government announced that it would end bilateral aid to Indonesia, with the exception of environmental programs to halt deforestation and to promote climate change remediation. Continue reading

The Green Development Oil Newsletter – Issue 30, April 2013

RSPO calls EGA to tightening standards for growers

The Roundtable on Sustainable Palm Oil (RSPO) has announced an extraordinary general assembly at the end of April to seek the adoption of its revised standard (known as the RSPO Principles & Criteria). The new standard represents efforts by NGO members of the RSPO to ‘ratchet up’ the standard (see September 2012 newsletter ‘WWFs plan to shackle RSPO growers’). The revised standard includes onerous provisions for growers to report on greenhouse gas emissions, despite the RSPO’s acknowledgement that there is currently no practical or robust methodology to undertake such an assessment.

Growers are left scratching their head, as they wonder how to comply with such politicised criteria.

According to an RSPO statement, the revised standard includes several new criteria: requirements for growers to minimise greenhouse gas emissions from new plantings; requirements for companies to commit to ethical business practices and implement policies countering corruption; requirements to develop and communicate policy on human rights; and a ban on forced labour.

The revised standard would require new plantation to be “designed to minimise net greenhouse gas emissions”, effectively requiring growers and millers to commit to reporting on projected GHG emissions associated with new developments. This is required despite RSPO’s acknowledgement that “these emissions cannot be projected with accuracy with current knowledge and methodology”.

Growers and millers are being asked to comply with sustainability requirements which lack scientific rigour, and are costly and technically demanding.

An association of Malaysian growers from Sarawak has already criticised the revisions for placing additional and unnecessary burdens on growers, while highlighting that other crops and land-uses are not subjected to similar GHG emission checks. A prominent Malaysian commentator writing for a national daily – Hanim Adnan – argued that the revisions will come at the “expense of oil palm growers having to be saddled with additional costs to produce the CSPO.”

The RSPO system is already too expensive and technically difficult for the vast majority of palm oil growers who manage small scale plantations. Recent World Growth research has shown that even the current RSPO standard and certification requirements are too costly for most smallholders operating in South East Asia, where the majority of global palm oil is produced.

There is little evidence that certification under RSPO adds value for growers who have to meet significant certification costs. The system effectively prices palm oil producers out of the global oilseed and vegetable oil market.

Revisions to the RSPO standard also place bans on labour violations. The revised standard explicitly prohibits “forced or trafficked labour”. The current iteration already addresses labour issues, restricting child labour and requiring employers to meet national legal standards.

The suggestion there is a serious ‘labour’ issue in the palm oil industry is politically motivated. The issue of labour rights in the palm oil industry has also recently received some coverage in US press, due to financial grants provided by US foundations.


EU renewable energy policy failing; protects EU industry

A progress report released by the European Commission has highlighted the failure of the EU’s Renewable Energy Directive (RED) in promoting renewable energy. The Commission acknowledges that the Directive has failed to reduce “key barriers” which are hampering the switch from conventional fossil fuels to renewable energy sources in Europe.

RED requires member states to set a 10% target for renewable energy in the transport sector. According to the Commission’s report however, most EU Member States (22 out of 27) failed to reach their renewables target in transport for 2010. The report reveals a “less than optimistic outlook for 2020”, raising the question of whether RED can deliver on its goals and reduce barriers to renewable energy development.

Many biofuel producers outside the EU see RED as the problem rather than the solution; itself an indirect barrier to trade. EU biofuel production and consumption is currently dominated by biofuel feedstock growers in France, Germany, Italy, Spain and U.K. European producers have successfully lobbied policymakers in Brussels to develop policy which can be used to limit competition from cheaper imported biofuels, under the baseless claim that Asian imports are unsustainably produced.

RED is a particularly significant barrier for biofuel producers in South East Asia who utilize palm oil as a feed stock. RED requirements potentially discriminate against palm oil imports by not recognizing an accurate default value for greenhouse gases emitted during production.

Under RED, crop-based biofuels are recognised as sustainable if their greenhouse gas emissions (GHG) during production and use are less than 35% of those emitted during the production and use of conventional fossil fuels. In order to be eligible to meet EU transport targets, crop based biofuels must therefore have a GhG savings value of more the 35%. Under the EU’s guidelines, palm oil biodiesel was allocated a default savings value of only 19%.

Respected researchers have criticised the EU’s calculations, arguing that an accurate assessment would set palm oil’s default value above the minimum threshold; thereby making all palm oil-derived biofuels eligible to be counted towards national targets.

The same researchers found that rapeseed failed to meet the EU standards in most cases. Despite these findings, biofuels produced from European-grown feedstock such as rapeseed have been assessed by the EU as meeting the default GhG savings value, leading to speculation that EU sustainability criteria are being used to protect domestic oilseed producers against more competitive imports from developing countries.

The progress report states that 13 “voluntary schemes” for certifying the sustainability of biofuels have been approved by the Commission, enabling biofuel producers around the world to comply with high EU standards. These schemes include the RSPO-RED standard (see December newsletter – ‘EU RED recognises palm oil sustainability scheme submission’). However in reality, few growers and producers can afford to comply with strict certification requirements required for palm oil feed stock through the RSPO system.

The directive has been widely criticised for discriminating against products from developing countries and potentially contravening WTO regulations. According to the Commission report, 60% of EU-consumed biodiesel feedstock in 2010 was produced within the EU, while about 80% of biofuels consumed in the EU was produced in the EU. There is little evidence that the policy is making significant inroads in encouraging a switch from fossil fuels to renewable energy sources such as biofuels. Instead RED appears to be protecting and promoting domestically grown and produced biofuels.


EU funding campaigns against biofuel production

The EU and some EU member states are actively supporting and funding campaigns which attack biofuel production in developing countries. This activity represents a subtle and covert barrier to trade for biofuel producing countries, and raises questions about the appropriateness of NGO’s funded by the European commission.

A report published by ‘Fair Politics’ branded the production of palm oil used as a feedstock for biodiesel in Africa as socially and environmentally as unsustainable. The report also attacked the impact of EU’s RED policy, claiming mandatory targets for biodiesel consumption in Europe was having harmful effects on people in developing countries.

These claims are inaccurate. The biofuel market offers palm oil growers in developing countries in Africa and South East Asia the opportunity to participate in the production of value added commodity. It is a significant driver of economic growth, and contributes to growing prosperity on a village level. Palm oil derived biofuels is also environmentally friendly, and represent a practical and cost efficient substitute for fossil fuels in the transport sector, partly because they can be blended with conventional fuels with minimal infrastructure compatibility issues.

Fair politics is an initiative of the Evert Vermeer Foundation whose mandate is to provide “support to the Dutch Labour Party”. The initiative is sponsored by the EU.

Another EU funded NGO – ActionAid – released a report claiming that the “real” impact of EU biofuels policy has been to encourage ‘land grabs’ in Africa. ActionAid claims that European companies have ‘grabbed’ six million hectares of land to grow biofuels – a figure that is likely to be significantly exaggerated, given that the EU Commission’s progress report stated that global net land use for biofuels consumed in the EU is less than half this area. ActionAid’s stance is radical, calling on the Commission to phase out all land based (not just ‘food’ based) biofuels by 2020.

The appropriateness of the EU funding of NGOs which undertake political campaigning has been questioned. There is little assurance that these NGOs represent widespread public opinion. A recent report from the UK think tank – the Institute of Economic Affairs – found that “substantial EU funds are also used to support organisations that share the Commission’s environmentalist agenda… The Commission freely admits that funds are given to environmental groups ‘to support policy development’.”

The timing of the NGO activity is curious. It coincides with a proposal from the Commission to amend RED to cap land based biofuels (see March newsletter, ‘EU energy ministers question Commission proposal to expand GhG emission coverage of RED’). This raises the question of the appropriateness of EU funding towards NGOs which drive policy opinion in a direction supported by the Commission.


Agricultural protectionism in Europe harms free trade

EU protectionism continues to threaten market access and harm international trade and development, as European states such as France assert their protectionist tendencies.

Frits Bolkestein, the former Dutch EU Commissioner for Internal Markets, recently argued that French agricultural protectionism poses significant dangers to global development, citing the harm done to palm oil growers in developing countries as an example.

According to Bolkestein, the powerful French agricultural lobby is attempting to protect domestic growers from competitive palm oil imports. It appears that protectionism is latent amongst the France’s agricultural industry, which according to Bolkestein represents the largest net recipient of European agricultural subsidies.

The editorial, published in Economie Matin, indicated that French protectionism is a danger to free trade in Europe and growers in developing countries. Bolkestein pointed out that the recently proposed French tax on palm oil would have had the effect of an import levy had it passed the Senate. This political campaign against palm oil was aimed at boosting French industry, presumably threatened by palm oil products that are processed in the Netherlands. The Netherlands is a major hub for palm oil imports and processing in Europe.

Bolkestein points out that although the French claimed the measures were proposed to counter alleged negative effects of palm oil consumption on public health, “the real reason was probably that the palm oil imported via our country was competing with French rapeseed oil.”

Such protectionist campaigns are not limited to France. A campaign is gaining traction in the Ukraine, also under the guise of factually incorrect health claims. A Ukrainian MP has reportedly proposed that parliament ban the use of palm oil in the production of foodstuffs in the Ukraine based on alleged health concerns.

Ukraine is one of the largest exporters of competing vegetable oils, raising concerns that the proposal is aimed at protecting domestic industry against more competitive palm oil rather than genuine concern for public health. Ukraine is the biggest global exporter of sunflower oil, with a share of over 50% of world market. Ukraine is also the largest rapeseed exporter to the EU.


Palm oil labelling campaign forsages brand blackmail

Anti-palm oil campaigners have intensified calls for labelling of products with palm oil, in an attempt to restrict consumption of palm oil in Western markets and booster failing certification systems (see January newsletter ‘RSPO certification not widely recognised’). This is part of the strategy employed by anti-palm oil campaigners: lobbying for government regulations or business procurement policy which requires food producers to label palm oil, so that campaigners can attack brands or products containing the ingredient.

In Australia, campaigners had previously lobbied for legislation to require mandatory labelling of palm oil in foodstuffs. This legislation is currently stalled and undergoing government review.

Campaigners have since lobbied leading retailers to voluntarily label palm oil in their ‘home brand’ products. The campaign exposes retailers to business risk. Retailers who have complied with voluntary labelling requests have subsequently come under attack by campaigners for using palm oil.

Woolworths, the largest supermarket chain in Australia, voluntarily labelled the palm oil ingredient in some baked goods. The retailer was subsequently attacked by campaigners for using palm oil in Hot Cross Buns over Easter. Activists circulated a photo of the food label, with calls to boycott the Woolworths product.

Woolworths were likely “set up”.  The retailer has a long record of collaboration with campaign organisations such as WWF. WWF is now likely to pressure Woolworths to use only labels that record RSPO-certified palm oil is used. This may not be so easy – RSPO certified palm oil only constitutes a small proportion of global palm oil production (10-15%), and procurement of RSPO certified supply appears to be inconsistent and often unreliable.

This campaign has important lessons for business operating in large European markets too. A similar campaign approach is expected in the EU, where regulations coming into effect in 2014 will require that labels specify vegetable oils sources. Countries such as Switzerland are in the process of adopting their national regulations to meet the EU labelling requirements.

European campaigners have recently attacked chocolate products which rely on palm oil as key ingredients. In the UK, one campaign organisation ranked ‘Easter egg’ manufacturers on how much palm oil they used. Companies that used palm oil could not score top marks. The ranking system used a methodology which penalised palm oil consumption, regardless of its sustainability.

The campaign represents a blanket attack and consumer boycott of all palm oil, regardless of its sustainability. The campaign is irrational. Commodities themselves are neither inherently ‘good’ or ‘bad’ – sustainability of a commodity is dependent on how they are produced and consumed.

In both Australia and the UK, activists are campaigning for efforts that would make it easy to identify palm oil in products, either through mandatory or voluntary labelling requirement, only to attack food manufacturers and brands once the comply with labelling demands.

The risk to business is significant. Fortunately businesses are in a strong position to defend their palm oil procurement by asserting the facts – campaign allegations against palm oil are trumped up. Palm oil is a sustainable, healthy vegetable oil, which drives prosperity throughout South East Asia.