Both palm oil producers and environmental activists alike have expressed dismay with a move by European officials to phase out palm-oil based biofuel by 2030.

Officials in Indonesia and Malaysia, which together produce 85 percent of global supply of the commodity, say the move is discriminatory and have vowed a vigorous response, including lobbying EU member states to oppose it, bringing the matter before the WTO, and imposing retaliatory measures on goods from the EU.

Environmental activists say the policy doesn’t go far enough, leaving loopholes that will allow palm oil produced under certain circumstances to continue being treated as a renewable fuel, thereby allowing for the expansion of palm estates into peat forests.

They have also criticized the policy’s failure to label soybean oil as high risk, in light of growing evidence that deforestation linked to the cultivation of soy may be just as bad as or worse than that of palm oil.

JAKARTA — The European Commission has officially approved a measure to phase out palm oil-based biofuel by 2030. But while the move has angered major palm oil producers, it hasn’t entirely pleased environmental activists either.

The so-called delegated act marks yet another step by the European Union (EU) to curb the use of crops that cause deforestation in transportation fuel, over concerns that their production contributes to global carbon emissions and thus exacerbates climate change.

But the phase-out doesn’t mean a ban on palm oil in biofuels. EU member states will still be able to import and use palm oil-based biodiesel, but it will no longer be considered a renewable fuel or be eligible for the attendant subsidies.

The process will also be gradual. Member states’ maximum share of palm oil-based biodiesel that can be counted toward EU renewable transport targets for national governments (and hence be eligible for subsidies) will be capped at 2019 levels until 2023. After that, it will be progressively phased out of renewable targets to zero percent by 2030.

Bas Eickhout, a Dutch Green member of the European Parliament, lauded the commission’s decision.

“Burning food for fuel is nonsense and has a huge impact on climate change and biodiversity,” he said as quoted by Forbes. “Today’s decision sets the tone that Europeans want to shift away from unsustainable biofuels.”

Response from Indonesia and Malaysia

Officials in Indonesia and Malaysia, which together account for 85 percent of global palm oil supply, have slammed the European Commission’s decision as discriminating against palm oil to support producers of other types of vegetable oils, primarily made in Europe.

Malaysian Primary Industries Minister Teresa Kok said the decision wasn’t based on any science, but rather on “the politics of protectionism,” and that it was “totally without foundation.”

“The Delegated Act is discriminatory against the economies of developing nations in Southeast Asia, Africa and Latin America which produce palm oil,” Kok said in a statement received by Mongabay. “And it is designed to hurt the livelihoods of millions of small farmers.”

The EU is the second-largest market for palm oil from the two Southeast Asian countries, after India, importing 4.37 million tons of the commodity from Indonesia in 2016, according to the Indonesian Palm Oil Association (Gapki), and 2.06 million tons from Malaysia. In 2017, more than half of the palm oil imported into the EU, around 4 million tons, was used to make biodiesel.

Indonesia’s Coordinating Ministry for the Economy said the government would challenge the European Commission’s latest decision at the World Trade Organization (WTO).

“[T]his is a form of discrimination against Indonesian products,” Musdhalifah Machmud, the ministry’s deputy for food and agriculture, told local news site Bisnis.com.

The WTO can order member states to remove policies deemed to be in breach of free trade rules.

The Indonesian government disputes the EU’s assessment of the risk of carbon emissions from palm oil production compared to other vegetable oils, saying in a document reviewed by Reuters that the list of criteria “gives advantages to local European Union commodities such as rapeseed oil.”

The government also plans to lobby individual EU member states to reject the delegated act. The member states as well as the European Parliament and the Council of Ministers can raise objections to the European Commission’s decision during a two-month scrutiny period.

“If the EU proceeds [with the phase out], then we will also keep fighting,” Darmin Nasution, the coordinating minister for the economy, said as quoted by Bisnis.com, adding that officials would visit Europe in April as part of their lobbying efforts.

“We won’t wait anymore,” Darmin added. “We will try to convey our position to them.”

Malaysia, meanwhile, has threatened retaliatory restrictions on European imports should the EU proceed with the palm oil phase-out.

“Malaysia’s Prime Minister has made clear that if the Delegated Act is finally adopted, Malaysia will investigate retaliatory actions against European exports, to combat this aggressive protectionist measure,” Primary Industries Minister Kok said. “Malaysia will also be working with partner countries in the Council of Palm Oil Producing Countries to address this issue in the WTO.”

She said palm oil wasn’t a major driver of deforestation, and that both Malaysia and Indonesia were committed to capping the expansion of oil palm plantations in a bid to address environmental concerns and improve the commodity’s reputation abroad. President Joko Widodo of Indonesia last year declared a moratorium on the issuance of new permits for oil palm plantations; Malaysia is mulling a cap on the country’s total palm oil estate at 60,000 square kilometers (23,200 square miles), an area just 2.5 percent larger than currently planted.

Loopholes

The delegated act leaves in some provisions that will allow certain types of palm oil to be counted as renewable energy, mainly those produced by smallholder farmers.

Palm oil cultivated on unused land, which includes abandoned or severely degraded land, is also exempted from the phase-out, as is palm oil derived from improved yields. The delegated act considers palm oil produced under these circumstances as low-risk crops in the context of carbon emissions.

The act defines smallholders as farmers with less than 2 hectares (5 acres) of land. The Malaysian government, though, says that all farmers with up to 5 hectares (12 acres) of land should be considered smallholders.

Both Malaysia and Indonesia say that the palm oil industry has lifted millions of their citizens out of poverty by supporting smallholders’ livelihoods, and that any restrictions will be detrimental to them.

“This is totally unacceptable and it is discriminatory and insulting to smallholders in the palm oil producing countries,” Kok said.

Environmental groups are also unhappy with the exemptions, though for different reasons. They say the assumption behind the smallholder exemption is that these farmers generally convert tiny patches of existing cropland and produce few negative environmental impacts, whereas big businesses generally clear large swaths of forests to make way for industrial-scale plantations.

This isn’t always the case, environmental activists say; instead, by allowing this exemption for palm oil, the measure opens up a potential loophole for exploitation.

An analysis by the Rainforest Foundation Norway has found that while corporate plantations play a major role in the razing of primary and peat forests into farmland, independent smallholders of all sizes are also present in these areas and thus shouldn’t automatically be deemed “low-risk.”

“Agricultural land scarcity combined with restrictions on corporate plantations may have spill-over effects by encouraging smallholders to expand even further,” the report says. It also cites evidence that smallholders contribute to expansion of plantations into land with high carbon stock.

A study by the Center for International Forestry Research (CIFOR) in Indonesian Borneo has found that smallholders are more likely than ever to clear carbon-rich peat forests as a result of land scarcity.

“The agricultural land that people are prepared to convert to palm oil has already been converted — and a lot of the existing farmland is becoming exhausted, so farmers are venturing further away and going into more marginal areas,” said CIFOR senior scientist George Schoneveld.

By 2030, the study projects, the majority of smallholder oil palm expansion will happen on peat soils. “From the perspective of greenhouse gas emissions this type of conversion is especially disastrous,” Schoneveld said.

In Indonesia, smallholders are also predicted to overtake companies as the majority owners of oil palm plantations. The combined area cultivated by smallholders is expected to expand from 40 percent of total national acreage in 2016 to more than 60 percent by 2030.

This could spell disaster for the climate, as peat soils store huge amounts of carbon, and the drainage that occurs when they’re cleared for planting releases that carbon into the atmosphere.

Palm oil-based biodiesel has since 2009 enjoyed generous subsidies under the EU’s Renewable Energy Directive.

But the policy failed to make any distinctions between the various feedstock available to produce biofuels, leading to a surge in palm oil biodiesel, the cheapest of biodiesel variants due to high yield of the feedstock.

The rapid expansion of palm oil plantations in countries like Indonesia and Malaysia has destroyed vast swaths of tropical rainforests that are home to endangered species such as orangutans, tigers and elephants. As a result, green groups have been pushing to get palm oil-based biodiesel out of the EU market, calling it “the environmentally worst form of biodiesel.”

A 2016 study by the European Federation for Transport and Environment showed that palm oil-based biodiesel was on average three times worse for the climate than fossil fuel, due to the emissions from the deforestation carried out to produce the commodity.

Soybean oil

Palm oil opponents have also criticized the delegated act for treating another vegetable oil, soybean oil, as low risk. They argue that soy cultivation can be as disastrous for the environment and climate change — perhaps even more so — than palm oil.

A report last year by the International Union for Conservation of Nature (IUCN) found that while palm oil production can lead to deforestation and biodiversity losses, replacing it with other types of vegetable oils might be even worse for the environment. The key factor is the high yield of oil palms, with other oil crops requiring up to nine times as much land to produce the same volume of vegetable oil. Transitioning to the latter would shift the deforestation associated with palm oil production to other regions, such as South America, a major producer of soybeans.

The decision not to label soy as high risk seems quite arbitrary, said Laura Buffet, a clean fuels expert with the clean mobility NGO Transport & Environment (T&E).

“Soy expansion has led to significant deforestation as the Commission acknowledged and soy biodiesel is on average two times worse for the climate than fossil diesel,” she said as quoted by Euractiv.

She called the European Commission’s decision to approve the delegated act a “breakthrough,” as reported by Bloomberg, but qualified it as a “partial victory since soy and some palm oil can still be labelled green.”

Eickhout, the MEP campaigning to ditch biofuels made from palm oil and soy, called the latter “the new palm oil.”

“The Commission’s own estimates show that at least 8 percent of global soybean expansion caused direct deforestation since 2008,” he said. “This is in complete contradiction with the EU’s commitment to halt deforestation by 2020.”

Banner image: Palm oil fresh fruit bunches in Indonesia. Image by Rhett A. Butler/Mongabay.