- The Deforestation Regulation isn’t the victory palm oil opponents are claiming
- The industry successfully pushed back against some of the worst proposals in Brussels
- There are still many facets of the regulation that will need to be worked out over the implementation period
The EU’s agreement on a final Deforestation Regulation prompts a simple question: is this a major victory for palm oil’s European opponents, or can the industry be optimistic?
First, the bad news. The EU regulation will impose additional cost burdens on the palm sector – and others. There is no doubting that the palm oil community would be better off without it.
In particular, requirements on traceability and due diligence for farmers will be potentially costly and difficult. The threat of ‘high risk’ designation hangs over producing countries (this will be decided over the coming 18 months). The addition of palm derivatives complicates things, as palm kernel oil is difficult to trace back to plantations.
But is this the victory palm oil opponents are claiming?
Not quite. It’s important to remember the anti-palm landscape in Brussels. Many wish to ban most, or all, palm oil from Europe completely. This includes powerful European agriculture lobbyists (for protectionist reasons); green NGOs and media outlets (for ideological reasons); a number of MEPs from different countries (for political reasons); and assorted others.
These opponents proposed what amounted to outright bans in the EU and removing palm oil as a competitive threat in the EU.
These proposals included:
- setting the deforestation “cut-off date” as far back as 2008, meaning a good proportion of Indonesian palm oil would be immediately illegal in the EU.
- cutting the implementation timeline to 12 months, making compliance more costly (and, for some, almost impossible); and
- giving a formal role to NGOs in determining ‘high risk’ status for countries (potentially leading to a system where producers are at the mercy of NGO complaints).
- placing smallholders on the same footing as large plantations.
All of these plans were, of course, opposed by palm oil interests. All were defeated and did not survive into the final agreement.
Palm oil producers have earned clear successes in the Regulation. The cut-off date of December 2020, for example, was an issue that palm oil industry leaders had raised specifically with EU leaders – knowing that MEPs were pushing an earlier date.
Similarly, the implementation period remains at 18 months, against the wishes of MEPs. Palm oil sources tell POM producers had pushed for this, and will benefit from additional time to make the necessary compliance changes.
Finally, there is an expectation that small farmers under 4ha will be exempt from the Regulation (this is based on media reports, as the final agreement is not yet public). If so, it’s an important development as protecting small farmers has clearly been a top priority for governments in recent years.
The Deforestation Regulation is not the first attempt to restrict palm oil exports to Europe. European lobbying efforts to ban or restrict palm oil go back to the original Renewable Energy Directive in 2009; the Food Information to Consumers legislation in 2011; the Nutella Tax in 2012; and many others in the years since.
After a decade of such efforts, the anti-palm oil lobby groups have failed in their maximalist objectives to push palm oil out of the EU. Why?
- First, there is a clear market demand. Palm oil remains an essential product with strong demand. Its natural advantages of low cost, high productivity, and versatility remain attractive to European businesses and consumers. In addition, new research (such as the importance of palm oil being trans-fat free) has reinforced palm’s position.
- Second, sustainability has played an important role. Accelerated commitments to sustainability, deforestation, traceability and certification by the palm oil private sector have addressed the concerns of European customers and supply-chain partners. Government schemes such as ISPO have added to this and engagement in Indonesia from countries such as Norway has also helped.
- Third, clear communication is another reason. Renewed confidence about sustainability has allowed producing countries to be more assertive in public communications on EU rules. Linking palm oil to broader EU relations, as both Indonesia and Malaysia have done in different ways, has given palm oil the prominence and weight that it deserves as a strategic national commodity.
This has been noticed in Brussels – and London. It is no coincidence that palm oil’s opponents are struggling to push through their agenda: producing countries have stepped up their game.
The best example is the recent speech from EU foreign affairs chief Josep Borrell, who recognised publicly that Brussels needs to “listen more” and lecture less, in dealing with the developing world. Producing countries should remind EU officials of this as the Deforestation Regulation rolls forward. Some battles have been won by the industry, some have been won by governments and others conceded, but there are plenty more ahead in 2023.