Bridges Trade BioRes • Volume 10 • Number 9 • 14th May 2010

Possible WTO Case over EU Palm Oil Restrictions?

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At a recent meeting among Malaysian and Indonesian palm oil producers, Tan Sri Bernard Dompok - the Malaysian Plantation Industries and Commodities Minister - said the European Renewable Energy Directive unfairly excluded palm oil from the EU market. The meeting on 3 May launched a new grouping of six Malaysian and Indonesian palm oil producer associations, the Indonesia-Malaysia Palm Oil Group, which will seek to address concerns over the sustainability of their operations.

Dompok said he would consult informally with his Indonesian counterpart regarding the possibility of launching a dispute at the WTO to redress the situation, and seek legal advice from the WTO. Under a new directive on renewable energy, which was adopted last year and enters into force by the end of this year, biofuels must make up ten percent of transport fuel in EU countries. However, the EU has put in place a system of checks and balances to ensure that these biofuels are sustainable.

Notably, biofuels entering the EU market must be at least 35 percent more carbon efficient than fossil fuels, and cannot be derived from cleared forest or wetlands. In practice, these sustainability criteria would keep Malaysian and Indonesian palm oil off the EU market, while European rapeseed biodiesel, for example, would fulfil the criteria.

According to Dompok, the sustainability criteria represent green protectionism. Purboyo Guritno, Indonesian Palm Oil Association Chair, said his industry has been victimised by developed country environmental activists. “Indonesia and Malaysia must take a more proactive approach in protecting the growth of the oil palm industry that supports tens of millions of livelihoods,” he stressed.

The environmental claims of certified sustainable palm oil has been in question recently as Unilever - the world’s largest purchaser of palm oil - blacklisted two major Roundtable on Sustainable Palm Oil (RSPO) members in Indonesia for engaging in “unsustainable” practices (see Bridges Trade BioRes 5 March 2010). While the oil is primarily used as an ingredient in food and detergents - such as margarine, cooking oil, soaps, and shampoos - it is increasingly being used as a biofuel.

For years, several green groups have been campaigning against the palm industry, which they say destroys wildlife habitat, causes widespread forest loss and releases huge quantities of greenhouse gases into the atmosphere, primarily in Southeast Asia.

Together, Malaysia and Indonesia produce 85 percent of the world’s palm oil.

“Malaysia, Indonesia palm oil groups unite against critics,” AFP, 5 May 2010; “Indonesia, Malaysia seek WTO advice on EU biofuel policy,” REUTERS, 6 May 2010; “The EU must reshape its palm oil policies,” MALAYSIA STAR, 11 May 2010; “Move to have WTO’s ear on palm oil fight,” MALAYSIA BUSINESS TIMES, 13 May 2010.