Palm Oil Monitor – Weekly Update 31st July 2018

Malaysia right to be wary of France

Malaysia’s Ministry of Primary Industries has issued a statement in response to a comment by the French Ambassador to Malaysia, Frederic Laplanche.

Laplanche said, opinion in Europe on palm oil, “is still negative due to concerns on climate change, environmental protection and biodiversity conservation,” and that both governments should work together to allay these concerns.

Indeed, government-to-government cooperation was floated in the recent SNDI document issued by France’s environment ministry.

A close look at France’s track record on being nice to palm oil simply isn’t that great.

Go back to 2012: France introduced the idea of a ‘Nutella Tax’, which was scrapped after a four-year battle.

Go back to 2016: France’s Sustainability Criteria Commission (introduced in the aftermath of the Nutella debate) made a series of recommendations on palm oil. Among them:

  • the EU should take the lead in a possible future EU scheme for sustainable palm oil;
  • the EU should adopt a clear definition of HCS land;
  • the EU should consider a FLEGT-style agreement for all commodities (including vegetable oils).

These look like the current actions around RED.

Go back 12 months and Nicolas Hulot, France’s environment minister, was actively looking for ways to ban palm oil from the RED – and he stated that publicly. The RED ban, of course, was also eventually dropped.

Ambassador Laplanche says it is ‘public opinion’ that is driving French actions on palm oil , but it’s pretty clear from Hulot and others that this extends to the French government as well.

It also needs to be remembered what the ‘public opinion’ actually is. Most French consumers simply don’t have that much of a problem with palm oil. Nutella sales in France are holding up just fine.

When Laplanche is talking about ‘public opinion’, we think he means European farmers, NGOs like Friends of the Earth and Greenpeace and French retail private brands looking for ways to compete with Nutella.


Indonesia – EU trade agreement: Progress?

The European Commission has released its report on the fifth round of negotiations with Indonesia that took place in Brussels two weeks ago.

According to the document, the EU side gave Indonesia a briefing on future Renewable Energy Directive regulations going forward. We understand, however, this is probably quite difficult given the complete lack of certainty on where things are headed with how ‘high risk’ biofuels will be defined. As reported earlier, this will incorporate both indirect land use change (ILUC) and high carbon stock (HCS) definitions.

On trade and sustainable development, the EU wrote:

Text consolidation started after a fruitful exchange of views at chief negotiators’ level. Formal text consolidation started and covered provisions of seven articles. On the other hand, further work is required on existing conceptual differences. The TSD negotiators agreed on detailed information exchanges and to work intersessionally on additional text proposals to address some of the specific diverging points.

This is a very nice way of saying that the countries are miles apart when it comes to sustainability.

Similarly, Indonesia has expressed dissatisfaction at the EU’s new system for investment dispute resolution. Indonesia has been antipathetic to dispute resolution mechanisms in international trade agreements. It recently tore up a number of bilateral investment treaties for that reason. This will be a let down for EU investors, who see these sorts of mechanisms as the only way of mitigating the risks of investing in Indonesia.

What does this all mean? Both countries have now laid out offers on tariff reductions and there is also a proposal on rules of origin. This means work is progressing in other areas, but the tough stuff still has some way to go.


ISPO and the I-EU trade agreement

Some observers – including Palm Oil Monitor – had hoped that Indonesian Sustainable Palm Oil certification would provide a means of satisfying the European Union’s desire for sustainable palm oil imports.  But this appears to be less and less likely from both the European and Indonesian sides.

ISPO was originally established under the Indonesian Agriculture Ministry. It was effectively a legality verification scheme rather than a sustainability standard and has significantly lower compliance requirements than other standards, such as MSPO, RSPO and ISCC. The ambition – articulated in 2016 – was for it to become a national standard, endorsed by Indonesia’s national standards body.

This didn’t happen.

Instead, the scheme is being ‘revamped’ under a joint project between UK Aid and Kehati, a biodiversity conservation group. Looking at the project documentation, neither group appears to understand how national standards are created and the significance of ISPO membership in the process.

In any trade agreement it will be difficult for ISPO to be recognised as a standard in the strict, technical sense.  It may need to be recognised in a ‘softer’ part of the agreement, such as the Trade and Sustainable Development chapter. Kehati wishes to make ISPO mandatory for exports, with a licensing system similar to that of the Indonesian timber legality standard. This, however, requires a separate bilateral agreement, and a vast array of implementation processes.

In other words, a ‘magic bullet’ for ISPO in the EU-Indonesia agreement is unlikely.