For the past few years, the Renewable Energy Directive (RED) has occupied the thoughts of palm oil producing countries, when thinking about the potential challenges facing palm oil in Europe.

However, a new and potentially even more concerning issue is now presenting itself – related to food exports, which are by far the biggest share of the global palm oil market.

The EU Commission has presented an ‘Action Plan to Protect and Restore the World’s Forests’. This sounds innocuous, or perhaps even desirable but what always matters with the EU is not the friendly headline but the detail in the regulation. Some of the actions that are described could have significant impacts on palm oil  food exports if they were turned into EU regulation. For example, the EU Commission’s document call for the EU to:

  • Encourage the strengthening of standards and certification schemes that help to identify and promote deforestation-free commodities;
  • Build on the already existing monitoring tools, and establish an EU Observatory on deforestation, forest degradation, changes in the world’s forest cover, and associated drivers;
  • Increase supply chain transparency and minimize the risk of deforestation and forest degradation associated with commodity imports in the EU;
  • Promote trade agreements that include provisions on the conservation and sustainable management of forests and further encourage trade of agricultural and forest-based products not causing deforestation or forest degradation;

It’s not difficult to imagine how these vague aims could be twisted to justify restrictions on palm oil (just as the criteria under the Delegated Act were twisted to keep palm oil out). It is clear that there are many in Brussels who want to use this Action Plan as a tool to further control and restrict palm oil – even though the Action Plan is still only at a very early stage in the EU process.

What comes next in the process is a reaction to the EU Commission’s document from the other players in Brussels. Leading this will be the EU Parliament – which has been a major problem for palm oil producers before. The Members of the European Parliament (MEPs) have previously passed a Resolution on Palm Oil and Deforestation (in 2017), which was replete with errors, bad data and outright falsehoods. Then, in 2018, the MEPs attempted to introduce an immediate and total block on all palm oil biofuels in Europe – only to see their efforts rejected after a spirited campaign from producer countries. Of course, the now-famous Delegated Act which introduced a phase out of palm oil biofuels from the EU was introduced at the insistence of MEPs. So – it should be expected that the Parliament’s forthcoming ‘Strategic INI Report on Forests’, which will serve as an opinion on the EU Commission’s Action Plan, will not be positive for palm oil. The timeline for this MEP Report is likely to be January-June 2020.

During that same time period, the EU Commission itself will be taking some further steps. Notably, a ‘stakeholder engagement’ meeting will be taking place in Brussels in February 2020. No news yet on whether palm oil producers, companies, and governments will be invited to attend – but that shouldn’t be a concern as these meetings are rarely helpful. NGOs, EU industry and others will attend in mass numbers, with the aim of reinforcing the EU’s anti-palm oil instincts. It is a tick-box exercise in so many ways.

Even at this early stage, it is worth examining what the Action Plan on Forests could do, specifically, to impact palm producers. Reading the text, it’s clear that the scope is extremely wide: and is likely to be made even wider in the coming intervention from MEPs. Let’s look at some specific examples –

  1. Carbon Border Tax – this has the added force of being floated by new EU Commission President Ursula von der Leyen. It’s likely to be part of a ‘EU Green Deal’ package to be presented in early 2020, which could be integrated with the Action Plan on forests. Palm oil exporters would be among those negatively impacted.
  2. Sustainable Finance – this is an area that the EU has flirted with or many years and now it is pushing ahead. The goal is to disincentivize, or perhaps cut off completely, financing to sectors of which the EU Commission disapproves. European and global banks, international institutions, overseas development budgets, foundations, and other private sector funding sources are all likely to be targeted by EU demands to cut down on their financing of projects, and countries, that the EU considers to be linked to deforestation. It is not difficult to see how this weapon could be turned against palm oil producers.
  3. Standards and Certification Schemes – ‘strengthening standards and certification schemes’ features prominently in the EU Action Plan, and has been the subject of EU-funded studies as well in the past. Neither ISPO nor MSPO has found favour yet in Brussels: this element of the Action Plan will likely attempt to set out proscriptive EU rules for all certification schemes … or maybe even attempt to develop a new EU-centric commodities certification scheme. This puts the bloc on dangerous diplomatic ground, though: palm oil producing governments will be resentful if their mandatory (and expensive) domestic schemes are ignored by Brussels.
  4. Trade Agreements – the Action Plan will focus on ensuring all EU FTAs have ‘provisions on conservation and sustainable management of forests … and encourage products not causing deforestation’. That’s ALL trade agreements, including those with Indonesia and Malaysia: a clear sign that the EU will play hardball in pushing restrictions and red tape around palm oil, as part of any trade talks.
  5. EU Observatory on Deforestation – this will be a new body created by the EU to focus on monitoring ‘deforestation, forest degradation, changes in the world’s forest cover and associated drivers’. At this stage, it isn’t clear how powerful the new EU Observatory will be – but it will almost certainly represent another tool to be used to attack commodities, or countries, that the EU considers to be causing deforestation.

Much of the above – and much of the EU Action Plan document – is composed of generalities, and is all focused on preventing and discouraging deforestation. Limits on deforestation-causing commodities will be popular in Europe (and possibly in other parts of the world as well), but there is one fundamental flaw. Such regulations and restrictions are only justifiable or credible if they are based on impartial and measurable data. The EU’s track record on this is lamentable: the RED Delegated Act is just the latest example of data being ignored, and facts cherry-picked, to protect EU crops while hammering non-EU crops such as palm oil.

There will of course at this stage be protestations from EU representatives in Jakarta and Kuala Lumpur that nothing is decided, the Action Plan is at an early stage, and there is no EU anti-palm oil agenda.

And yet … palm oil is mentioned more often in this EU Commission document than any other commodity. This is despite the globally-known data (also available in Europe) that oil palm uses less land than other oil crops; fewer pesticides; less fertilizer; produces more oil; and is responsible for less deforestation than many other commodities. This fact does make it into the EU Action Plan – but it is concealed well out of sight in the footnotes.

If the EU is serious about putting forward, and implementing, a strategy to reduce deforestation, then it needs to do so on the basis of established and measurable facts. Recognising and championing countries that protect significant forests (such as Malaysia and Indonesia, both with 50 per cent of land preserved as forest area) is crucial. Accepting and apologizing for European nations’ past sins of deforestation – both on their own continent and in Asia and Africa during colonial times – should also be a prerequisite. Climate change and forest loss has been caused almost exclusively by emissions generated to fuel Western economic development. There is no logical, or moral, reason why developing nations should pay the price today for Europe’s historical sins. Finally, the EU institutions must recognise the limits of their moral and political powers: dictating how industries all over the world should act is both a slippery slope for the future and an unwelcome reminder of the past. Working with producing countries on their existing certification schemes could be beneficial and desirable; issuing threats from Brussels via a regulatory megaphone is not.