Yay or Nay – Will EU really say no more palm-based biodiesel?

February 3, 2018 |

In the EU and Asia, the chaos continues about the proposed EU palm oil ban and outlook.

The Backstory

In case you haven’t heard about it and in a very simplified explanation, palm plantations have been expanding in several countries like Indonesia and Malaysia, leading to deforestation concerns. Environmental groups have long been against palm oil plantations on these crucial climate fighting forests. But consumers are using more palm oil products, from cosmetics to biofuels to food ingredients, and the demand for palm oil continues to increase, thus pushing along the expansion of palm oil plantations. A vicious cycle that no one can seem to stop…that is, until the EU stepped in with a proposed palm oil ban.

The EU proposes a ban on the use of any vegetable oil, including palm oil, in biodiesel production starting in 2021. Palm oil is the second most popular biodiesel feedstock in the EU and nearly half of that is used up by the biodiesel sector. The EU has a target of sourcing 10% of transport fuels from renewables by 2020, coinciding with a five-fold increase in the use of palm oil for biodiesel, according to The Guardian.

Analysis by the Zoological society of London found that nearly a million hectares of undisclosed land owned by the world’s major palm oil companies had gone missing from the inventories, according to The Guardian. Studies have found that “overseas demand for palm oil, soy, beef, wood and other agricultural products are key drivers of illegal forest clearances in Indonesia, Malaysia and other countries,” according to The Guardian.

Laura Buffet, clean fuels manager at T&E goes as far as citing a study that “crop-based biodiesel on average produces 80 percent more carbon dioxide emissions than the fossil fuel it is replacing and palm oil biodiesel is on average three times worse for the climate than fossil diesel,” though some in the biofuel industry dispute that study.

Thus, the EU proposed ban was created as an attempt to do their part to stop deforestation created by vegetable oil and palm oil production.

It won’t be easy becoming law though, as the proposal needs signed agreement from member states and the European Commission – and with the reactions from several EU member states so far, we aren’t so sure that will happen quickly or easily.

The Reactions

In France, Sweden, and a number of other EU countries, ambassadors and government officials are speaking out against the European Union’s planned ban on palm oil on the grounds that it is discrimination.

Just last week, Ambassador of Sweden to Malaysia Dag Juhlin-Dannfelt voiced opposition to the European Union’s ban on palm oil saying that the requirement to be phased out before others is discrimination. As reported in the Digest today, Juhlin-Dannfelt said “Sweden and many other European countries who are member states of the EU are against any kind of discrimination. That includes any regime that would be discriminating against other products.”

And the French ambassador says his country is against any kind of trade distortion resulting from discriminating measures for individual agricultural commodities and as such does not support the European Parliament’s push to ban the use of palm oil in biodiesel post-2020, as reported in The Digest in January. He said France will try to get the proposal removed from the final Renewable Energy Directive II that will be negotiated between the European Parliament, European Commission and EU member states.

What about Malaysia and Indonesia? You know, the ones who are most impacted by this proposal.

They’ve called it a “black day for free trade,” spoken out that this is flat out discrimination against palm oil and a “crop apartheid,” and are holding tons of meetings with EU officials and WTO to try and get the proposal withdrawn.

Over 1,700 Malaysian stallholder farmers protested against the EU proposal outside the European delegation’s offices in Kuala Lumpur, as reported in The Digest in January. The head of Felda said as many as 3.2 million smallholder farmers could be negatively impacted by such a policy. The protest included handing over more than 103,000 signatures protesting the European Parliament’s vote on the issue.

The Future

While many are looking into their crystal balls to see what the future will be for palm oil producing countries, a few predictions are already being made.

Glen Pownall, managing director of Peter Cremer Canada told Western Producer that the European Union decision to ban palm oil biodiesel will not likely lead to an increase in canola oil biodiesel.

So what would fill the gap if the European Union rejects palm oil biodiesel? His prediction is Argentina soybeans, not Canadian canola.

Why? Because of the new U.S. antidumping and countervailing duties imposed on soybean biodiesel from Argentina – which is causing Argentina to look for new markets for its biodiesel.

“Ever since those have been imposed we’re just seeing a huge amount of biodiesel from Argentina move into Europe instead,” Pownall told Western Producer.

Others, however, are not so quick to predict just yet. Brian Innes, vice-president of public affairs with the Canola Council of Canada, told Western Producer that it is premature to draw conclusions about how the palm oil ban will affect overall vegetable oil demand.

Things are looking good for China, however, which is now set to become Malaysia’s largest palm oil importer in the next two years, overtaking the EU as #1 importer of palm oil. Malaysia’s Plantation Industries

Minister Datuk Seri Mah Siew Keong told The Malay Mail at a joint press conference with the new Chinese ambassador to Malaysia, Bai Tian, “We expect in two years’ time China to be the biggest importer of our commodity. We are also looking at more joint ventures especially for biomass technology in Malaysia…we have got a lot of biomass and this is an area we can work on.”

At the press conference, Bai said, “This means, we need to import eight million tons of biodiesel. I think this is good news for palm diesel producers. We hope Malaysia will take up this golden opportunity.”

Malaysia is also looking to expand its palm oil exports to other countries like Iran, Vietnam, Philippines and the Middle East, according to Mah at the press conference.

Bottom Line

Either way you slice it, the message is clear from the EU – yes to sustainable advanced biofuels like waste-based biofuels, but no way to food or crop-based biofuels. The EU wants to support biofuels that are good for the environment and sustainable while helping their domestic economy – palm oil from abroad doesn’t seem to fit the bill for either of those two goals.

What they may not realize is that this offers up opportunity for other countries like China to swoop in and up their palm oil imports. But it also offers up opportunity for advanced biofuels and non-food based biofuels to step up their game and take off with much needed support and demand.

So this is one instance when “what’s good for the goose is good for the gander” works. What’s good for advanced biofuels and non-crop biofuels is not so good for palm oil producers.

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