Last week, EU Ambassador to Indonesia and Brunei Darussalam H.E. Vincent Piket presented at the INAPalm Talkshow. Palm Oil Monitor – which has also previously presented at INAPalm – was in attendance and paid careful attention to everything that was coming from the Ambassador’s briefing sheet. Ambassador Piket made three key points that are worth drawing out for readers.
The first was Piket insisted that “There is no ban on the import of palm oil biofuels into the EU, there isn’t any ban now, not in 2023, and also not in 2030. I keep on reading that such a thing exists but I want to state that this is not so”.
There may not be a de jure ‘ban’ on importation, but there is a de facto ‘ban’ on the use of palm oil – and only palm oil – in the EU’s renewable programs from 2023. And, if the Ambassador isn’t aware, there’s also a countervailing duty that has been placed on Indonesian biodiesel, which makes it uneconomical to import. So, if the Ambassador keeps reading these things, it’s because the country where he is posted knows the difference between semantics and reality.
The second was that Piket stated that a key plank of the EU’s trade negotiations in the region – and consequently palm oil trade – involves the Farm to Fork (F2F) Strategy. This gives the impression that the F2F document is the overarching strategy for engagement on sustainability issues with the EU.
This, in our view, is simply untrue. F2F is a strategy; it is not a legislative proposal. Other proposals are both more concrete and more immediate than F2F, and more deserving of the palm oil sector’s attention. As we pointed out last week, the European Commission is moving in a new, greener direction with trade. The EU’s trade policy review – an ‘Open, Sustainable and Assertive Trade Policy’ – released in February, underlined clear new areas of work that will make trade difficult for palm exporters.
The EU’s deforestation regulation, Taxonomy (Sustainable Finance), the carbon border adjustment mechanism and a trade enforcement mechanism applying to new trade agreements will materialise well before the implementation of F2F; all these policies are likely to apply to palm exporters.
The third – and this relates to the second – is that when asked about recognition for ISPO certification by the EU, Piket stated that Indonesia should push ISPO certification within the F2F framework and recognition of sustainability systems.
This would appear to be a case of ‘misdirection’. Why?
Because recognition of ISPO within the F2F framework would be years away, and in the meantime ISPO would remain in limbo when it comes to EU recognition. Producing countries should focus on how palm oil certification can be treated more fairly in the short-term, for example recognition of national standards within the EU Due Diligence regulation.
This is not to dismiss or undermine RSPO and other voluntary standards: there is room in the marketplace for all. The question is whether or not Brussels will accept that reality, and integrate it into current thinking – or are they determined to push ISPO into the long-grass?
Piket avoided talking about these practical elements, which are so important to exporters: how recognition of ISPO could assist exporters in not being penalised with a carbon border tariff, mitigating importer deforestation risks under a due diligence framework, or being ‘called out’ under a trade enforcement mechanism within a future Indonesia-EU agreement.
All of these types of regulatory mechanisms in the EU that penalise palm oil are referred to in the EU’s own trade review as ‘autonomous measures’ – and that is for a reason: they are not part of the F2F strategy or any other overarching policy strategy, but will significantly impact trade.
Just like pretending there is ‘no trade ban’ on palm oil, Piket appears to be pretending that recognition of ISPO within F2F will make the EU’s trade barriers go away.
An immediate opportunity for palm oil producing countries to raise national certification schemes is via the EU-ASEAN Joint Working Group on Vegetable Oils. F2F is not an EU legislative priority, and palm oil producing countries need to focus their attention on pending EU legislation such as RED III, Due Diligence, Forests Regulation, Taxonomy and Trade enforcement. If this item is not already on the agenda for the Working Group, it would be wise to request it.
Sri Lanka’s Palm Ban: An Explainer
At the beginning of the week Sri Lanka’s President Gotabaya Rajapaksa ordered a ban on palm oil imports, and an uprooting of some of the country’s existing oil palm plantations.
Although some media outlets are claiming that the ban is a response to environmental impacts, this is simply not the case.
There are two parts to Sri Lanka’s actions.
The first is Sri Lanka’s dire economic state and a misguided leadership. Sri Lanka is currently having a significant financial crisis. Covid has slashed tourist revenue and exports, and the government’s response has been to ban imports and print money. This is despite significant debt commitments that are equal to around 50 per cent of export revenue, with half of all tax revenue going to debt repayments. Unemployment has spiked and there is strong talk of IMF intervention.
The value of the currency has fallen dramatically in response to the money-printing spree, with the price of goods – particularly imported goods – rapidly rising.
The import ban response has been designed to safeguard the country’s currency reserves and to improve the balance of payments. The bans have so far included cars, floor tiles, pepper and turmeric, among others.
Palm oil has simply been added to this list.
The second part is the order to replace oil palm plantations with other crops. Again, this decision stems from a poor decision by the Sri Lankan government. The government chose to raise import duties on coconut oil and other vegetable oils since 2012 in order to protect the local coconut oil industry. This, however, increased the profitability of oil palm plantations, and ultimately undermined the aim of protecting the local coconut growing industry. The forced uprooting of existing palm plantations is an extreme extension of that aim, outlined in a government report produced in 2018.
As a result of the ban, the country’s largest coconut plantation company’s share value soared by more than 20 per cent.
So, while NGOs or lazy journalists may run with a story on Sri Lanka’s commitment to the environment, this is nothing more than a story of poor economic leadership with a dose of protectionism.
