The Vegetable Oil Wars Start Another Round
This week Indonesia and the EU will face off over Brussels’ ban on palm oil within the Renewable Energy Directive (RED II).
The first WTO Panel meeting taking place in Geneva will be significant; there are a large number of countries that have not only formally expressed their interest in the particular case, but also a large number of parties – all on the exporting side – that have requested to join the consultations. Malaysia has followed up with a case that is separate to Indonesia’s challenge, specifically regarding France and Lithuania’s implementation of the EU policy.
Why the interest? As one prominent trade lawyer has put it, it is “the first significant challenge to the WTO compatibility of the EU’s climate policy measures.”
There isn’t likely to be a great deal of news emerging from the meeting this week; there will be a second panel meeting before the issuing of an interim report, and the proceedings remain confidential until the panel report is adopted by the WTO’s Dispute Settlement Body.
However, one key part of the case will be how well the EU understood that their actions would be trade disruptive. This was born out in European Commission documents uncovered by Palm Oil Monitor in 2019. Just to remind what we wrote then:
Hand-signed legal advice from EU’s Director General for Trade Jean Luc Demarty to Director General of Energy Dominique Ristori stated clearly that banning palm oil “(or an equivalent) proposal in the REDII would create serious risks of exposing the EU to WTO challenges with no solid defence.”
The detailed legal advice Demarty provides from DG Trade is that a ban on palm oil for the RED – even if it’s hidden behind an environmental argument around the level of emissions – would not be compatible with the General Agreement on Tariffs and Trade (GATT), the foundation agreement of the WTO.
How serious was this? Demarty stated that this advice should only be circulated on a ‘need-to-know basis’.
Demarty stated clearly that the Commission’s original proposal – that did not discriminate between any biofuels, and did not single out palm oil – was the best option.
“the Commission’s original proposal remains the safest option to avoid risks of incompatibility with the EU’s obligations under the WTO. Therefore, and in line with the position already agreed in the GRI discussions so far, I wish once more to stress the need for the Commission to uphold its original proposal throughout the trilogue process.”
At this point we’d love to be a fly on the wall in Geneva.
T&E Takes Another Swipe at UCO
The EU-based Green NGO Transport and Environment (T&E), which has lobbied against the importation of nearly all vegetable oils and biofuels into Europe, has taken another swipe at the EU’s Used Cooking Oil (UCO) market in the lead-up to revisions to the RED.
T&E is attempting to make the case once again that the European UCO market is subject to fraud, that there is no way of tracing the used cooking oil to its point source, and that palm oil may be being ‘laundered’ in the UCO supply chain.
This idea is something that was first floated back in 2019, when UK-government supported researchers first made the claim. T&E jumped on this bandwagon, and commissioned a European consulting firm to look at global UCO dynamics.
This report makes some startling claims around the used cooking oil market in China, EU incentives for UCO and palm oil demand:
“In China, a large amount of UCO is currently used as gutter oil [recycled cooking oil used in food service]. This is illegal and is detrimental to public health in China. The collection and export of this UCO to the EU would thus have a positive effect on public health. However, it will also probably create a high-ILUC risk, as the food sector replaces it with virgin oil.”
In other words, T&E is creating the argument that the EU use of used cooking oil for transport may actually increase emissions and the use of palm oil, because it will mean demand for used cooking oil in the EU is high. And why is the demand high? Because EU policy has artificially inflated UCO prices.
T&E’s solution is, of course, greater levels of regulation and monitoring. But this gets back to how absurd the EU approach to renewable biofuels actually is. It commenced as a support for uncompetitive farmers who grow inferior rapeseed. But when the farmers couldn’t compete, and the supports failed, it sparked a trade war.
Is WWF abandoning RSPO to please Brussels?
WWF has commenced its lobbying on the EU’s forthcoming deforestation regulation with the release of a new report. Although in the past, WWF has been in favour of sustainability certification, the new report essentially argues that no certification systems should be used as a form of compliance with the EU’s new deforestation regulation.
In its essential ‘asks’ for the new regulation, WWF wants among other things:
- Regulation of sustainability, not a legality standard;
- Inclusion of all ecosystems, not just forests;
- Inclusion of ‘risk’ criteria, as opposed to empirical criteria;
- Human rights requirements;
- Due diligence for the finance sector, traceability and supply chain transparency.
It’s a big wish list that’s in line with demands from other NGOs – particularly Greenpeace – which launched an attack against certification several weeks ago.
A real change for WWF here is that it consistently refers to certification systems as providing ‘ambiguous outcomes’ when it comes to sustainability or its ability to prevent deforestation. This is despite WWF being the driving force behind two of the biggest certification schemes in the world, RSPO for palm oil and FSC for forest products. And also despite opinion pieces in the last few weeks claiming support for certification.
This is WWF playing a duplicitous game; on the one hand it lobbies companies to sign up to certification commitments, but declares those commitments to be unsatisfactory when it comes to government regulation.
But this also points to WWF doing the bidding of Brussels. The WWF report was funded by the EU’s LIFE grants system, with WWF’s Policy Office receiving EUR1.25 million this financial year under the grant system.
We’ll have a closer look at the WWF deforestation report with specific reference to palm oil in the weeks to come.