Palm Oil Monitor Weekly Update – 3rd December 2018

Some questions on Greenpeace and Wilmar

Palm giant Wilmar appears to be taking a harder line on Greenpeace than ever before. Wilmar’s stance comes after a group of Greenpeace activists boarded a ship off Spain, calling on food manufacturer Mondelez to drop Wilmar as a supplier.

Wilmar is understandably incensed given the commitments made at the recent RSPO meeting, which included commitments to no deforestation and to supply chain transparency.

One of the problems for Wilmar is that Greenpeace’s message is very unclear. It is calling on Mondelez to drop ‘dirty palm oil’ and Wilmar as a supplier. Why is the Wilmar palm oil ‘dirty’? Greenpeace wants Wilmar to “prove its palm oil comes from producers that are not destroying rainforests or exploiting people.”

Apkasindo, the organisation representing Indonesia’s smallholders, has sided with Wilmar. Rino Afrino, head of the group, stated that Greenpeace had ‘insulted’ Indonesia.

“Can Greenpeace prove that the palm oil sold by Wilmar damages the environment?” Rino said in comments to the Jakarta Post. “Their campaign destroys the image of Indonesian palm oil.”

The bone of contention appears to be Indonesian group Bumitama. But even then, it’s very difficult to determine precisely what Greenpeace thinks Bumitama has done wrong, other than ‘raising serious doubts’ about its conduct.

It also should be noted that Bumitama is a supplier to Golden Agri Resources. Last month Golden Agri Resources executives were arrested for alleged bribery.

A genuine question: Why does Greenpeace dislike Wilmar so much, but appears to tolerate Golden Agri? Send anonymous tips to [email protected] or PM us on Twitter at @palmoilmonitor.

Criticisms of RED emerge from WRI, SIIA

The World Resources Institute (WRI) and the Singapore Institute of International Affairs (SIIA) held a workshop in Jakarta last week on Greening Supply Chains for the palm oil sector.

Participants varied, from RSPO and WWF to the Indonesian Government and European think-tanks. The range of topics varied, but inevitably the conversation turned to the Renewable Energy Directive and its revision.

Among the workshops, some of the conclusions on Indirect Land Use Change (ILUC) and the RED were as follows.

First, the ILUC data that the EU is using to justify classifying palm oil as high risk is outdated.  The last significant piece of work undertaken by the EU on ILUC was completed in 2012. According to Wageningen University, no major work has been undertaken since then.  For the past five years or more, the general consensus has been that ILUC models are highly variable upon the underlying assumptions. In simpler terms, the modelling is unreliable.

Second, there needs to be a strong, credible and scientific justification for the EU’s actions on palm oil. If the EU fails to justify their actions in this manner, those actions are illegal under global trade rules.

The Technical Barriers to Trade agreement requires that any measures introduced not be more trade restrictive than necessary to fulfill a legitimate objective. The legitimacy of that objective depends on scientific and technical knowledge, among other things. For example, if the EU says that ILUC emissions are significant from palm oil or that food- and feed- based biofuels can’t contribute to the EU’s efforts of reducing greenhouse emissions, it needs to be able to prove that with strong scientific evidence.

Third, relying on outdated studies or methodologies is no excuse. Trying to justify actions because of studies undertaken in 2012 on ILUC will not satisfy anyone, particularly not trading partners.  Although the EU has been consulting with its trading partners in Malaysia, Indonesia, and other countries, it will be difficult to consider those negotiations as ‘good faith’ negotiations if the EU doesn’t put the work in to improve the scientific knowledge base. This is critical given that the EU is attempting to negotiate a trade agreement with Indonesia, and is aiming to sign a Partnership and Cooperation Agreement with Malaysia in January.

Indonesia and Malaysia have already signalled they will take legal action against the EU if the RED discriminates against palm oil.

Malaysia phasing in B10, Indonesia removes export tax

Bloomberg is reporting that Malaysia will introduce a biodiesel mandate as early as this week. Bloomberg has reportedly seen a copy of a letter from the Ministry of Primary Industries to sector stakeholders, outlining the phase in one of the mandates, which will require 10 per cent biodiesel blending in diesel fuels.

For now, this will work in favour of both biodiesel suppliers and fuel retailers; current biodiesel prices are below regular diesel. It will also restore some stability to palm prices, which have taken a hit over the past few months.

On a similar note, Indonesia has removed its export levy after export prices from Indonesia fell below USD 500. The levy contributes to the country’s replanting fund. However, the levy and the currently suspended export tax, both provide some incentives for downstream processing in Indonesia. GAPKI, the country’s grower representative body, had recently called for the levy to be lowered.