The Palm Oil Monitor has gained exclusive access to the latest internal documents on the EU’s Renewable Energy Directive (RED) ahead of today’s Trilogue in Brussels.
The documents reflect the fierce debate that is underway in Brussels over the future of palm oil biofuels, evidenced by the intense lobbying campaign on both sides. One thing is clear: Nothing is really clear in the RED process to date, and it can be categorized by confusion, indecision and conflict. Predicting the outcome is difficult, if not impossible.
The starting point is the following: the EU Parliament voted to ban palm oil biofuels. The EU Commission supports its original RED proposal (which did not include a ban on palm oil). The Council is divided on whether or not to support the ban.
There are three documents.
First, a Working Paper from the Council. This document outlines an attempted compromise on palm oil that was proposed in the Council of the EU. The compromise was proposed because the Council is divided between countries that oppose the ban (France, Spain, Italy, Sweden, Netherlands); and those who are tempted to support the ban, either for reasons of domestic environmentalist pressure (Germany, U.K.) or for protectionist reasons (some rapeseed-producing countries in central & eastern Europe).
The compromise was proposed by the Bulgarian Government, which currently holds the Presidency of the Council and is therefore charged with acting as Chair of the negotiations. This compromise was not uniformly popular, our sources tell us, although it is still in the running.
Second, another Working Paper which outlines an attempted path forward on all first-generation biofuel targets (including palm oil). It offers a different form of compromise – not a restriction on palm oil, but a commitment that the Commission will study and report on how sustainability criteria can be best revised to prevent deforestation in ‘producer countries’ outside the EU. Additionally, it suggests another possible compromise based on a form of ‘high carbon stock’ methodology.
Third, what is known in Brussels as a “4-column” document. This document is used to chart the progress of EU Trilogue negotiations by explaining the positions of all three EU Institutions (Commission, Parliament, Council) in a three-column table, with a fourth column reserved for suggested compromise positions between the three institutions. The compromises are generally suggested by the Presidency of the Council of the EU: in this case, the Bulgarian Government. It is constantly updated to take account of the changing positions during the negotiations.
This 4-column document shows that the Council currently does not plan to support the Parliament’s ban on palm oil biofuels: although it seems that the Council is moving towards the Parliament’s position on many other areas of disagreement under the RED. The 4-column document does integrate elements of both the proposed compromises related to palm oil that were proposed in the two Working Papers: so things are clearly beginning to move inside the Council.
All three documents illustrate very different positions on the palm oil issue, and presumably all three positions remain realistic outcomes as the Trilogues continue.
So – what do these positions mean? It helps to look at the documents one-by-one.
The compromise language in the first Working Paper is highly technical: at first glance it appears to give Member States more flexibility over which biofuel inputs they would like to restrict. However, that flexibility is clearly restricted by the stated need to apply similar restrictions to all ‘like products’ (in other words, you could not discriminate against palm oil without applying similar restrictions to rapeseed). So – at second glance, the compromise offers less flexibility than it may seem. POM suspects that there is a sting in the tail for palm oil producing countries, though. The compromise language mentions indirect land-use change (ILUC), a theory much-beloved by environmentalists but much-decried and debunked by scientists and agronomists.
Could the introduction of ILUC criteria be used, within this compromise, as a weapon to give Member States the power to restrict palm oil while sparing rapeseed and other EU crops? It’s possible, but such a text would surely provide work for lawyers for years – especially lawyers in Geneva.
What to think of the second Working Paper, and the potential report and action by the EU Commission on deforestation? Again, this is a mixed picture for the palm oil sector. The wording is clearly aimed at palm oil: the expectation should be that any such EU report would be focused on palm oil and probably negative. It could lead to restrictions on palm oil biofuels after the report is published in 2023 – as foreseen in this Working Paper.
On the brighter side for palm oil interests, a report in 2023 is a huge improvement on a ban in 2021 – which is what the EU Parliament is currently pushing. This outcome may be desirable from a palm oil perspective: it solves the current debate (without a ban) and gives time for the sector to prepare for the next round of debate in 2023.
Add to this that a common complaint from producing countries about the Parliament’s ban on palm oil is that it is based on little evidence. This gives the EU, and palm oil producing countries, an opportunity for fact-based evidence gathering. Perhaps this possible solution has more mileage – although it is not clear at this stage whether the EU Commission or Parliament would accept this idea in the Trilogues.
The other proposal contained in the second Working Paper is for ‘high carbon stock’ criteria to be applied to all biofuels after 2021. Again, this is quite transparently aimed at palm oil and looks suspiciously like a manufactured attempt to push palm oil out using technical criteria – rather than the blunt instrument of an outright ban. Whether palm oil producing countries will walk into this trap – and how they will react if it is formally proposed in the RED – will be interesting to see.
We now arrive at the ‘4-column’ document. Currently the Council’s formal position remains a hash of half-agreed compromises and patched-up technical language. That means the Member States have not settled on a real compromise position on which they can agree: this is most likely due to the prevarication of wavering nations, most notably Germany and the U.K., who cannot decide whether to support the ban pushed by Green groups, or to support their valued trading partners from palm oil producing countries.
In the 4-column document’s language, ‘tropical deforestation’ is particularly highlighted: an even more obvious signpost that any future reports and investigations will be focused on palm oil.
Where does all of this leave the EU process on RED? The next Trilogue negotiation will take place today in Brussels.
The real question though is this: what is acceptable for all of the different actors in the process? Will the EU Parliament accept anything less than a total ban on palm oil biofuels? Will the Commission be willing to compromise, even if it means violating WTO rules? Will the palm oil producing countries – who have been so vocal about retaliation against an outright ban – take the same strong approach if a ‘compromise’ restriction on palm, perhaps one of those outlined above, is agreed by the EU as part of RED?
We’ll have to wait and see.