Palm Oil Monitor Special Edition Exclusive: PM Mahathir’s letter to Macron

Two weeks ago, Malaysian Prime Minister Mahathir took the step of writing directly to French President Emmanuel Macron to protest the National Assembly’s Finance Bill – and the President signing it into law.

The new law ‘declassifies’ palm oil under the country’s renewable energy scheme, meaning it will no longer receive a renewable energy subsidy. This will make the palm-based biodiesel around 30 to 40 per cent more expensive than other biodiesels.

POM has obtained a copy of PM Mahathir’s letter.

There some vital aspects to the letter.

First is that PM Mahathir has taken the step of writing to a fellow world leader. In diplomatic circles, this is a significant escalation.

Matters are normally handled by the bureaucracy. If matters can’t be resolved, they might go to an elected official such as a Minister. When they go via country’s leaders, this is a massive step.

Second, PM Mahathir is a heavyweight in global terms. He has more than two decades of leadership experience under his belt. By way of comparison, when Mahathir took office, Macron was just four years old.  This isn’t a new leader in a small developing country asking France to drop it; this is a highly respected elder statesman with global support flexing his muscle.

Third, Malaysia took the step of publicising the letter via its foreign minister, escalating the matter further. This means that this isn’t simply a matter of sending the letter and hoping for the best; this is now a public battle that the PM will want to win.

Fourth, the content of the letter lays out the Malaysia’s position, and sends volleys across France’s bow.

These are straightforward, and have already been expressed in no uncertain terms by Primary Industries Minister Theresa Kok:

  • The action will breach WTO rules; and
  • Other commodities – such as soy and beef – have a bigger deforestation footprint.

But there are two new points made by Mahathir. He makes an explicit threat to suspend any free trade negotiations, and undertake retaliatory action on France’s sizeable exports to Malaysia.

The kicker, though, right from the outset is that he calls out the French action for what it is: an unfair, politically motivated attack on palm oil:

“We can agree that the motivation and the effect is to make biofuels uneconomical, excluded from the national renewable energy and mandate, and therefore aims to discontinue palm oil’s future use in France.”

PM Mahathir’s letter is not an endpoint; it’s the beginning.  Malaysia and the palm oil producer countries have optionality here; old Europe does not.

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Palm Oil Monitor Weekly Update – 18 January 2019

Darell takes swing at EU

Malaysia’s Trade Minister, Datuk Darell Leiking, has taken a swing at the EU’s broader approach to both palm oil and its trade partners in ASEAN.

At an industry meeting last week, Darell said that “If [EU policymakers] keep on attacking our palm oil industry that means their intention is not as pure as they claimed to be.”

The comments come after several new developments related to biofuel developments in the EU.  Although the EU has undertaken supposedly good faith negotiations with Malaysia and other trading partners in relation to the revised renewable energy directive, other actors within the EU seem to have deliberately sought to undermine any progress.

The most obvious example of this was the French Parliament’s decision to effectively remove palm oil from its renewable fuel credits program, which will push its price in the EU market up by around 35 per cent according to one source, rendering it uncompetitive.

At the same time, the European Commission has provided assurances to the US that its soybean certification scheme will meet European sustainability benchmarks going forward.

Darell’s comments come at a critical moment for regional and global trade, and are aimed at shoring up the broader palm ‘ecosystem’ – downstream processing, logistics, as well as upstream agriculture – in the face of global trade headwinds.

“We need to start protecting our basic products which are creating jobs, especially in the manufacturing sector,” he said.

Finally, the comments are yet another signal from the government of Dr Mahathir that its waking up to the fact that policies like no further expansion may win you applause from some, but in reality, it won’t stop Walker, the European Commission or the NGOs from attacking you nor will it stop RSPO from introducing more regulations.  Stopping these actors will require more stick than carrot.

The WHO takes on palm oil?

Arguably the biggest palm oil policy story in a relatively slow week was the publication of an article in the World Health Organization’s monthly bulletin, which argues that the palm oil industry is using similar communications tactics to tobacco and alcohol lobbies. The basis for the claim is as follows:

  • There is generally no conclusive evidence of negative impacts of palm oil from current and recent studies;
  • There are nine studies that show positive health impacts of palm oil, and four of these were published by the Malaysian Palm Oil Board (MPOB);
  • Therefore the MPOB is running public affairs strategies similar to the alcohol and tobacco industries.

Malaysia’s Primary Industries Minister Teresa Kok described the report as ‘ irresponsible and unprofessional’, stating that “this is a tactic to discredit palm oil’s image … and support the EU in its campaign to halt the entry of palm oil into their markets.”

This WHO article’s logic is nothing short of bizarre for two reasons.

First, health agencies like the WHO and US Food and Drug Administration have been actively calling for removal of trans fats in partially hydrogenated oils (PHOs) in food because of their contribution to heart disease. The FDA took the step last year of banning the use of PHOs and revoking their ‘generally recognised as safe’ (GRAS) designation. One of the key replacements has been palm oil. Similarly, the WHO has called for the global elimination of trans fats by 2023. In other words, the WHO has (albeit indirectly) has now become a major supporter of the use of palm oil.

Second, and this is related to the above, the increased switch to foods high in trans fats – particularly in the US – was precipitated by a public health campaign to move diets away from saturated fats and towards partially hydrogenated oils, containing trans fats. This campaign was supported by the American Soybean Association (ASA), which waged a public affairs campaign against what it called ‘tropical oils’, including palm oil throughout the 1980s and 1990s.

Third, industries and organizations generally defend their own interests and products or services. The global dairy industry — in the form of the US Dairy Council, Dairy UK, the European Milk Board — publishes reams of information and supports studies on the health benefits of dairy products —  and they are indeed beneficial. At the same time, cheese is generally recognised as a contributor to any number of health problems. This isn’t a tobacco-style conspiracy; this is industry-funded research and marketing.  There is no conclusive evidence that palm oil has negative health impacts. So why would the industry that supports palm oil go out of its way to find it? There’s a significant difference between attempting to promote health benefits and outright discrediting negative findings.

The WHO has been under significant scrutiny for nearly a decade. This is in part because it has been accused of being unable to carry out the mission it was founded upon: preventing the spread of infectious diseases. It has also been accused of ‘mission creep’, i.e. trying to do too much. This includes attempting to tackle environmental problems or focus on non-communicable diseases, which are the generally the brief of domestic health agencies. Critics have said that it should pull back, shrink, and stick to its core mission.

The WHO’s defenders argue that it needs larger budgets and more staff.  The WHO, like any other organisation, is out there to defend its interests and justify its existence.

The important question now is if Malaysia will escalate the situation. The WHO has lost a great deal of credibility over the past few years. In 2017 the organization appointed Robert Mugabe as a goodwill ambassador. Neither Malaysia – nor Indonesia – would have much to lose by taking further steps calling for the organisation to be censured.

Iceland Palm Ban Controversy Continues

The UK’s Iceland Foods has responded to a fiery critique of its palm oil policies by Nigerian think-tank chief Thompson Ayodele.

Ayodele’s thoughts on Iceland appeared in Malaysian media; the key criticism of Iceland’s ban on palm oil products is its intent. Iceland Foods and CEO Richard Walker continue to state that its objective is stopping deforestation and that sustainable palm oil isn’t possible.

Ayodele quite rightly points out that there are bigger causes of deforestation, e.g. beef, soybean, and maize, and these aren’t being taken out of Iceland’s supply chain.

Yet Walker’s statement, “we are not against palm oil itself, but against deforestation”, is problematic. Why isn’t Iceland tackling demand for other deforestation-related commodities? A counter-argument might be that sourcing British or Australian beef, or US soybean, avoids contributing to beef-related deforestation in Brazil.

But that counter-argument can be applied to no-deforestation palm oil from Costa Rica or Peninsular Malaysia.

The Iceland talking points are remarkably similar to those that are regularly trotted out by Greenpeace, which run along the lines of “We’re not against palm oil – we just hate companies that have anything to do with it.”

However, Iceland’s big public affairs problem this week has been created by a potential UKP 21 million fine from the UK’s revenue and customs office (HMRC), which has called out its employer Christmas saving program. The HMRC alleges the savings program resulted in paying below the minimum wage.  Iceland chair Malcolm Walker stated that he recently spoke to UK PM Theresa May when he recently sat next to her at dinner.

This prompted two thoughts on Iceland’s CSR approach.

First, it seems Iceland’s policies are full of good intentions, but require more polish when it comes to execution. Iceland is a relatively small player and is growing its market share. If it wants to be taken seriously in the public policy debate, it needs to take more care developing and implementing its policies – and do some research. Unilever’s well-publicised error on cutting smallholder suppliers when it went to a traceable palm oil supply chain is a good case study.

Second, Iceland’s leadership team should probably get out more. The UK is going through its largest political change in a generation, and the company pressed the PM on a matter of employee wages. In the case of palm oil, it would seem Iceland has let a narrow, European notion of conservation get in the way of a global picture of sustainability.

Malaysia Should Emulate Gabon?

An opinion piece arguing that the Malaysian palm oil industry should emulate Gabon’s approach to palm cultivation appeared in the Malaysian media this week.  According to the author, this would mollify European concerns about Malaysian palm oil. The proposal hinges on the idea that Gabon’s national land use plan – as reported in National Geographic – is an appropriate model to copy. The Gabonese approach has been supported by a number of international agencies as well as Singapore’s Olam.

However, to anyone who has actually studied this sector would know a direct comparison is hardly appropriate because of vastly different social and economic contexts. Gabon’s population is around 2 million people; its population density is around 8 people per km2. Malaysia’s population of 31 million people has a population density of around 95 people per km2.  Malaysia supports a vast number of smallholder farmers that have private property rights; Gabon’s population are largely considered as landless peasants in a country where government ownership of land is high.

The real clincher for Gabon, however, is that because a vast proportion of its GDP comes from petroleum rents, it has become one of the richer countries in Sub-Saharan Africa; at the same time this has meant that the small population places relatively low pressures on its environment.

It is true that Gabon has made strides in sustainable palm production and environmental management. But when it is noted that the environmental pressures are low to begin with, it hardly seems like an achievement.

Finally, the Malaysian model has actually been replicated throughout Africa.  The Gabon system has not.  So here’s the bigger question: what is this author’s real agenda?

US-Canada trade deal: A surprise on palm

The US and Canada trade deal has yielded a small surprise for palm oil growers. The agreement gives sees the gradual elimination of tariffs on margarine over the next five years. But the surprise is that the tariff cut will also apply to margarine that uses non-originating palm oil, i.e. palm oil imported from other countries.

Bilateral and multilateral trade agreements generally have complicated ‘rules of origin’ chapters that place limits on how much content from outside of the free trade area can be used, and still have access to tariff cuts. Farmers and margarine producers could not export to each other tariff free, because they would generally use palm oil in their formulations. This particularly irked Canadian canola farmers and margarine producers; US exporters didn’t necessarily see the Canadian market as being important. This should, however, provide a small boost in demand in the US market.

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Palm Oil Monitor Weekly Update – 9 January 2019

A New Year Exclusive

One week into 2019, palm oil policy is heating up. Two major policy developments took place in the days leading up to Christmas. First, France instituted a new ban on palm oil; second, the EU set up a RED approval for US soybean, potentially squeezing out palm oil. We look at both developments below, with an exclusive look at the first response to France’s actions, which has come from the Malaysian Government.

France hits palm, Mahathir government belatedly recognises the threat

POM has gained exclusive access to a blistering letter from Malaysia’s Minister of Primary Industries Teresa Kok, sent to France’s Environment Minister and Environment Secretary, calling for them to reject the French Parliament’s latest attack on palm oil.

The letter to the French government, written at the end of 2018, has never been released publicly either by the French or Malaysian Governments.

What prompted the letter? On December 20, the French National Assembly passed its Finance Bill. The Bill included a provision to remove a renewables subsidy that is applied to vegetable oils. But it was only removed from palm oil.

The removal of the subsidy will increase the cost of palm oil for biofuels in France by around 30 to 40 per cent, according to the amendment’s author, French MP Bruno Millienne. The Bill has been signed into law on 28 December by President Macron. The price change is scheduled to happen from January 1, 2020 – nearly 12 months from now.

Minister Kok calls the Finance Bill amendment what it is: a ban. It would make it essentially impossible for palm oil biofuels to continue in France.

But the gravity of the situation is shown in Minister Kok’s letter as follows:

It is my duty to convey the urgency and importance of the issue to Malaysia. Any ban on palm oil biofuels would harm millions of Malaysians dependent on the sector, and would therefore necessarily cause disruption to France-Malaysia and EU-Malaysia relations. The ban could lead to regrettable economic and trade consequences for both Malaysian exporters of palm oil, and French exporters of other products.

This is no veiled threat. Malaysia has previous form in tying purchases of European Airbus planes to bans on palm oil. This isn’t any different.

There are also rumours coming out of Jakarta that the Indonesian government is considering a suspension of Airbus purchases, as well as tax audits of European cars and fashion brands, in response to the French ban.

Why have France’s lawmakers done this?

First, the circumstances are right. The recent ‘yellow vest’ movement in France has brought many parts of the country to a standstill; Macron’s approval rating has dived. The current government is clearly vulnerable.

Second, the amendment to the Finance Bill for palm oil was a recommendation made by France’s ‘Sustainability Commission’ from the middle of 2016.  These recommendations were taken up by France’s former Environment Minister Nicolas Hulot, who, like many French politicians, is unashamedly antipathetic towards palm oil. French energy company Total has been under political pressure to reduce the use of palm oil in its biodiesel production and was also subject to protests by farmers.

EU farmers remain in an anti-palm oil frame of mind. In mid-December, the Commission launched an anti-subsidy investigation into palm biodiesel exports from Indonesia, at the behest of the European Biodiesel Board. This is just months after the WTO ruled that the EU’s antidumping tariffs on Indonesian biodiesel were illegal.

Third, France’s politicians are sending a clear message to the European Commission (EC). The EC is currently finalising its revisions to the Renewable Energy Directive, which will almost certainly single out imported biodiesel feedstocks (palm oil most prominent among them) as ‘unsustainable’, effectively banning them from the EU’s renewable subsidy scheme. By removing its own taxation subsidy for palm oil, France is telling the EC that it should follow suit.

What will happen next is up to the European Commission, France, and palm oil exporting countries.

The National Assembly’s new legislation will more than likely violate World Trade Organization (WTO) rules, as well as the single market rules of the European Union. The European Commission will – if pressed — provide an opinion to lawmakers in France that states that the palm oil element in the Finance Bill is not consistent with EU law, and the EU’s WTO commitments.

However, this might take some time. What could happen in the meantime?

Palm oil exporting countries do have options.

The WTO is the most obvious venue to raise objections to France’s new rules. Both Minister Kok and Indonesian officials have already flagged this, although any resolution will take some time.

The signing of an agreement between the EU and Malaysia – a Partnership and Cooperation Agreement (PCA) – had been slated for January. This could be called off. Indonesia could also consider suspending its FTA negotiations with the EU. Again, this has been threatened before, when previous Malaysian and Indonesian Ministers took strong stances against EU attempts to ban palm oil.

At the very least, this letter is the first signal that the new Mahathir Government is finally taking the threat seriously. The previous positions held (when in opposition) such as supporting the No Deforestation campaign, have limited utility and value in the real-world if you don’t stop the EU from taking legislative and regulatory actions that will ban your exports – particularly when the motivation is blatantly political. Let’s see what happens.

A RED approval for US soybean; Nothing stopping palm oil from demanding the same treatment

The EU has already drafted regulations for US-certified soybeans to be considered as ‘sustainable’ under the revised Renewable Energy Directive (RED). The draft was published on December 21, with a consultation period open until mid-January.

This is clearly an attempt to appease President Trump, as part of the broader EU effort to prevent tariffs being applied to German car exports to America.

The draft proposes that the certification scheme – the US Soybean Sustainability Assurance Protocol (SSAP) – meet the RED’s sustainability criteria.

The SSAP is unusual when compared with other certification schemes such as ISCC and RSPO. The key difference is that it uses a mass balance system for the entire US soybean industry and uses FDA audits as a basis for determining the quantity of soybean that can be considered ‘sustainable’.

It’s a world away from the increasingly strict traceability requirements of systems that exist currently in the space of palm oil such as RSPO and even ISPO or MSPO, which has introduced a chain of custody component.

But the EU’s decision raises more questions than it answers.

First, how is it possible for anyone to know whether the scheme meets any new criteria? The draft – known as an ‘implementing decision’ – has been drafted without the relevant Delegated Act for the revised RED being completed. This clearly smacks of political expediency rather than anything to do with the sustainability of biofuels.

Second, what are the implications here for international trade rules? The governments of both Malaysia and Indonesia have already mentioned the possibility of action in the WTO, specifically citing technical barriers to trade. The drafting of the approval will add to the concerns of Malaysia, Indonesia and other palm oil producing countries.

Third, where are EU and US green groups on this topic? Green groups have been vocal throughout the revision process on the exclusion on food or feed crops, and demanded that the bar be set high for any exclusions. Soybean has a deforestation footprint that is double that of oil palm. According to the NGO logic, using more US soybean in EU biofuels programs will increase demand for soybean globally, and cause deforestation in countries such as Brazil. That, naturally, should mean Greenpeace and others are up in arms about this new deal. So far, strangely, they have been silent.

Fourth, what does this mean for other certification schemes? If the US and the EU can broker a deal for US-grown soybean certification, the EU must surely be open to putting together something similar for palm oil producing countries in the form of RSPO, or Malaysia’s MSPO system.

It’s reasonable to speculate that the soybean draft has been put into play by the EU in order to placate the US.  The US and the EU avoided a trade spat in July by agreeing to eliminate non-tariff barriers on a range of goods. A self-imposed November deadline passed with no result. USTR Robert Lighthizer and Trade Commissioner Cecilia Malmström meet on January 9. Malmström will clearly be putting the soybean deal on the table.

Malmström clearly thinks that having US soybean squeeze out palm oil in EU biodiesel markets is acceptable – and any harm to Malaysia and Indonesia can be considered acceptable ‘collateral damage’.

The EU talks a lot about the significance of its relationships in the ASEAN region. But it’s just talk: the EU is apparently willing to sacrifice ASEAN to save its US relationships. The move on soybean again demonstrates clearly that for all the stakeholder consultations, technical research and regulation, it is politics that is driving the EU’s attitudes on palm oil.

The question for palm oil producing countries to ponder is whether they are prepared to stand by quietly and allow the EU to impose Deforestation Criteria that will harm palm oil exports – or will they collectively put a formal position to President Juncker backed up by a public campaign demanding equal treatment that the EU is giving to President Trump and the American soybean industry under existing RED criteria?

EU launches deforestation roadmap consultation

The European Commission has opened a consultation on its ‘deforestation roadmap’. The roadmap is not legislative or regulatory at this stage – the idea is to put together a ‘coherent policy framework’ for the EU’s contribution to tropical deforestation and if or how the EU can intervene. The consultation is the next step in the EU’s attempts to block imports of any products it considers to be contributing directly (or indirectly) to deforestation. It follows the publication in March 2018 of possible regulatory or policy options for the EU to pursue the same objective.

The roadmap is being pushed by the Directorate General for the Environment (DG-ENVI). The agency’s track record on both trade and economic development is best described as woeful. Unsurprisingly, the roadmap mentions very little in the way of social and economic development, and, as usual, mentions many of the legislative and parliamentary proposals on palm oil. The highlight is that it mentions the significant contributions of other commodities that the EU imports to tropical deforestation, including beef and soy.

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Is Brussels Preparing to Delay Palm Oil Delegated Act?

As the EU institutions return from their extended Christmas and New Year holiday, our Brussels sources inform us that the controversy around palm oil in 2018 looks to continue well into 2019.

The EU’s progress on its Delegated Act on biofuels (including palm oil) continues, although not without difficulty, especially on the timeline. The Delegated Act was requested as part of the EU’s compromise deal on the Renewable Energy Directive (RED), which dates back to July: specifically, the Commission was tasked to determine which biofuels should be designated as “high risk” and therefore phased out of use in the EU market.

Our sources inform us that DG Energy has made the decision to classify palm oil as ‘high risk’ by default. New EU ‘Deforestation Criteria’ would then be applied to determine whether or not the ‘high risk’ designation is retained, or whether a new ‘low risk’ designation is applied instead. If this were the case, the freeze/phase-out applied to high-risk biofuels would not apply for low-risk biofuels.

The core question here is how are the Deforestation Criteria determined and applied? The Commission is, according to our information, considering a jurisdictional or quasi-jurisdictional approach whereby countries or other legal jurisdictions would be certified as ‘low risk’ if they met the criteria. This raises the possibility that the same feedstock would be treated differently dependent on its origin – leading to potential WTO questions.

Finally, the accompanying scientific report, requested by the EU Parliament alongside Delegated Act, is proving to be a major headache. There is a simple solution, which would be for DG Energy to simply disregard the unachievable and artificial timeline imposed by the MEPs. Extending the timeline beyond February would allow time for proper work to be completed, with the added advantage that MEPs, distracted by electioneering, would no longer be driving the process.

All of these developments come at the same time as 20 environmental NGOs leaned in on EU Commissioner Miguel Arias Canete in an attempt to influence the drafting of the EU’s Delegated Act on ‘High Risk’ biofuels.

The NGOs’ demand was that palm oil be subject to high-risk status, and that generally a tougher line be taken by the Commission against certain biofuel feedstocks.

Clearly, the NGOs have an agenda of their own. What should be the approach taken by the Commission, though, when considering the relevant facts?

A WTO-Compliant Delegated Act

First on the list must be working to ensure compliance with WTO. As noted on several occasions, Malaysia, Indonesia and several other countries have been quite aggressive towards the EU at World Trade Organization meetings because of lack of detail around the RED.

The WTO Agreements are there to prevent countries from distorting trade. The RED is likely to violate the following principles within the WTO:

Most favored nation (MFN) and National Treatment (NT). MFN is the principle that all countries must be treated the same, and that there should be no discrimination between products that are essentially the same – even if they have come from different countries or ecosystems. The problem with ILUC in the RED is that by singling out palm, it is singling out a crop that only grows in tropical climates, and implying that emissions from tropical biomass and soils are higher than in non-tropical climates. It’s therefore possible to argue that there is a degree of discrimination against tropical countries.  National treatment also stipulates that exporting countries must be afforded the same treatment as goods produced domestically; given that the EU has no tropical climates, the requirements extending to non-EU countries will be tougher.

Technical Barriers to Trade (TBT).  The TBT Agreement requires that any technical measure be necessary for its proposed objective, it not be more trade-restrictive than necessary, and that any technical barriers be based on available scientific and technical information. All of these points are contestable. The available scientific information does not present a consensus on ILUC. And it’s arguable that if the objective is to reduce greenhouse emissions then discriminating against palm oil will have no impact at all – producers can just sell to other markets or use the fuel domestically.

The EU had a similar problem with WTO rules when it introduced rules on illegally-imported timber. It undertook two regulatory paths.

First, the EU couldn’t stop timber based on the idea that it was harvested illegally elsewhere. However, it could place an onus on importers to undertake ‘due diligence’ to ensure that imported timber was harvested legally. Clearly it would be harder for those importing from developing countries to undertake those inquiries.  ‘Due diligence’ for palm oil sustainability would be close to impossible; sustainability is not like legality and would require a bilateral or multilateral consensus on what sustainable production is.  But, this could happen via standards such as MSPO.

Second, the EU negotiated ‘voluntary partnership agreements’ (VPAs) with some exporting countries to give a ‘green light’ to their exports. The first VPA was with Indonesia. Developing the VPA required the development of a legality standard for Indonesia and an export licensing system. This was in part because of the many complications of the Indonesian legal system; defining legal production was difficult, necessitating a legality standard. But, given that MSPO is mandated in Malaysia and based on both sustainability and legal criteria, would a VPA for Malaysia be necessary for palm oil?

High Risk Designation

The question also arises of what mechanism will exist to deal with the ‘high risk’ designation – or other proscriptive elements – contained within the Delegated Act, when the EU signs bilateral, multilateral or international deals. This could be anything from a Treaty, to a Free Trade Agreement, a sector-specific deal (such as a FLEGT) or a cooperation agreement such as a DCA or a VPA. Typically, for many such deals domestic regulation must be put on the table as part of the negotiations – and the possibility of mutual recognition of standards or regulations is common. The Commission therefore should explicitly acknowledge that future bilateral or other agreements could supersede the ‘high risk’ designation, and other elements of this Delegated Act. This may have the unintended – but probably positive – consequence of encouraging third countries to continue to negotiate such deals (the EU is in FTA or VPA discussions with several palm oil producing countries and regions at present, including Mercosur, Malaysia and Indonesia).

Could such an approach eventually lead to mutual recognition of sustainability certification from other jurisdictions – such as MSPO or ISPO? It seems unlikely at present, in this iteration of the Deforestation Criteria. But future bilateral deals and/or politically-driven recognition remains a significant possibility if palm oil producing countries are willing to prioritise that ask in future negotiations with the EU.

Focusing on the Science

Perhaps the trickiest part of the Commission’s work is to balance science against politics. It’s essential that officials come down on the side of science. As a first order of business, the EU Parliament’s political clamour for particular outcomes – without first acquiring the evidence to support those outcomes – should be disregarded.

A second important step would be to acknowledge where existing science and regulation is fair and workable, and therefore could be applied to the new Delegated Act. This helps with predictability and consistency. A good example in this case would be the cutoff date of 2008 – which exists within the existing RED, and is broadly accepted now by most stakeholders and commentators. Similarly, the existing definition of HCS in the RED has been surprisingly uncontroversial (given the battles elsewhere over that definition), and so there is a strong case for retaining this rather than re-opening Pandora’s box.

Thirdly, the Commission should accept and work within the limitations placed upon it by current scientific conclusions. The most obvious example of this is ILUC. Every serious study undertaken and every serious attempt at regulation has shown that ILUC isn’t definable or measurable to the level required for regulation. It needs to be dropped.

Fourth, the Delegated Act must address the involvement of existing certification schemes under the RED. These – such as the Swiss-based RSPO-RED – have been painstakingly integrated into European and international determinations of sustainability. They are generally considered a success, by industry, NGOs and government. Securing a role for such schemes is eminently sensible: recognition of their certification as grounds for a ‘low risk’ designation, for example, would both reduce complexity and ensure immediate credibility. National certification schemes with strong criteria should also be part of this automatic recognition principle. Currently, Malaysia’s MSPO is the most developed of these, but that is not to discount other schemes. The Commission must take seriously the possibility of integrating MSPO or ISPO into the Delegated Act.

Timing of the Delegated Act

The artificial deadline (set for February 2019) looks too difficult, and even Commission insiders are now admitting this fact. This deadline should now be set aside: such politically-motivated deadlines are not conducive to good regulation.

2019 is also an election year, which offers another tantalizing option for the Commission officials tasked with drafting the Delegated Act – if they are brave enough to take it. Namely, to ignore the deadline of February and to take the time to do a proper piece of work. By the time that is completed, the current Parliament will be dissolved and the Commission will have bought enough time to put a properly-constructed Delegated Act in front of a brand new Parliament later in 2019. The hope, expressed no doubt quietly in the Berlaymont – but more loudly in the offices of biofuel exporters and importers – would be that at least some of the current MEPs involved in the RED negotiations are cast aside by Europe’s voters, leaving the path clear for wiser heads to prevail.

There is another reason for the delay. The Commission has completed a draft implementing action that will permit US soybean certified under the US Soybean Sustainability Protocol to gain access to the RED. This has been drafted without the Delegated Act being completed and is being put on the table to appease aggressive trade policy coming out of Washington.  If approved, that will make the Delegated Act irrelevant under current circumstances. It indicated that the Commission needs to get its house in order and move beyond political expediency.

To summarise, much of Palm Oil Monitor’s analysis and criticism over the Deforestation Criteria and the Delegated Act, is aimed at the EU Commission. In many respects this is slightly unfair and undeserved: the Commission did not put itself in this position. It was placed in this almost-impossible position by an intransigent and politically-motivated EU Parliament, which prioritized a populist demand to attack palm oil ahead of sound science or effective regulation. The MEPs’ action also reflects the intensive lobbying by NGOs and other environmental groups: including many of the 20 organisations who recently wrote to the Commission on this subject.

It is EU Parliamentarians who should bear the blame for the morass of contradictions that EU biofuels policy is becoming. Those Parliamentarians, however, are unlikely to pause for reflection of this fact – because they are too busy electioneering. Recent history suggests that, when the Parliament and other EU institutions reconvene for a new 5-year term late in 2019, MEPs are unlikely to move far from its NGO-driven position. Nevertheless, for both palm oil exporters and the EU Commission, a delay to the Delegated Act may just be the best New Year’s Resolution they can make.

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