The Malaysian Insight

TRADE protectionism, not environmental concerns, is behind Europe’s latest regulations on palm oil, said a top Malaysian Palm Oil Council (MPOC) official.

Europe is Malaysia’s second-largest customer for palm oil after India, buying 1.9 million tonnes of the commodity last year. About 45% of the amount went towards biofuels, used for heating and in the transport industry.

However, an act passed last month could see palm oil being phased out of biofuels, impacting on Malaysian exports to the region.

The European Union has said the Renewable Energy Directive II and its supplementary law, the delegated act, are aimed at halting the destruction of virgin forests to allow for the expansion of oil palm plantations.

MPOC science and environment director Dr Ruslan Abdullah, however, said the act specifically targets palm oil based on conditions that appear to be tailored around the commodity’s characteristics.

The law is more about protecting European edible oil industries, such as rapeseed, sunflower and corn, which have lost market share to palm oil, he said.

One of the “unfair” conditions is how the act doesn’t distinguish between different producer countries in terms of how they manage their plantations, he said.

“Our rate of deforestation is 2.7% per year, but our neighbours’ rates are higher. So, how can we be labelled the same as other countries?”

The act also contains an element called “additionality”, referring to improvements made to growing the crop each year.

 

Ruslan said the element is biased towards oil plants grown annually, pointing to rapeseed, sunflower and corn. Oil palm, on the other hand, is planted once in about every 30 years.

“In terms of biodiversity, oil palm plantations have more biodiversity compared to, say, a cornfield. Does a cornfield have tigers and elephants?

“This is about trade, and how palm oil went from having 4% of the edible oils market in the 1970s to 30%, in just three decades. Palm oil now owns the biggest chunk in the world market.”

Palm oil’s rise in Europe meant it took market share away from rapeseed, sunflower and corn oils, all of which are produced and used in the region.

“It’s clear that palm oil took over the market share from these oil crops… and logically, (Europe) is trying to control palm oil from taking out more market share,” said Ruslan.

Don’t ignore bad rap

The act essentially classifies palm oil as a cause of deforestation and removes financial incentives for its use in biofuels. This effectively makes it less competitive than other vegetable oils.

In the short term, Malaysia may be able to replace its lost market share in Europe by selling more to China, the Middle East and other new markets.

Ruslan warned, however, that Malaysia cannot ignore the bad rap that palm oil has gotten in Europe, as the region is a trendsetter.

Malaysian officials have started a globe-trotting expedition to find new markets for the oil after Europe’s move to pass the law.

If oil palm has a reputation as a “dirty crop” in Europe, it is feared that the region will influence other buyers of palm oil, eventually affecting consumer sentiments in those countries, said Ruslan.

“We should look for different markets, but we must be careful because the EU is a group of countries that influence world policy. They are trendsetters.

“We may get other markets, but we don’t want to reach a stage where the EU can tarnish the reputation of our palm oil. Of course, we can focus on countries such as those in the Middle East, the Philippines, Vietnam and Cambodia.

“But we cannot reach the stage where the EU labels palm oil as unsustainable.” – July 8, 2019.