European Parliament Elections – What’s in Store for Palm Oil
The latest European Parliament elections saw the highest turnout of voters in 25 years.
Most importantly, the 27-member European Union voters also unfolded a shift in power in their choice of 751 MEPs to serve them for the next five years.
Two EU blocs, the centre –right European People’s Party (EPP) and the Progressive Alliance of Socialists and Democrats (S & D) – lost their majority in the Parliament even though the EPP continues to hold the reins of the largest group in the Parliament.
The Greens coalition party made significant gains across Europe when it increased its representation to 75 in the Parliament, making it the fourth largest voting bloc in the EU.
With its focus on environmental issues, this can only spell serious implications for palm oil.
This would have a major impact on future palm oil trade and environment policymaking.
It is likely there will be a greater push for much more stringent environmental and energy polices in EU trade agreements.
This is already reflected in the Delegated Act under the RED 11 where palm biofuels was placed under the ‘high risk’ category.
Market access is less of their concern as the Greens would be much keener on the EU using trade deals to export European values on the environment and human rights, according to the UK Financial Times.
The EU was created in 1950 to enable a single market for goods and services for the 500 million citizens.
Apart from the European Parliament, there are two other institutions involved in decision-making at EU level; the European Council which consists of the Heads of State or Government of the EU Member States and the European Commission which represents the interests of the EU as a whole.
The European Commission proposes new laws and the European Parliament and Council adopts them.
Parliamentary seats are allocated among the Member States on the basis of their share of the EU population. Germany, France and Italy have the largest number of MEPs.
Battles are going to be tough in the need to balance trade and environmental regulations that will be pushed by the Greens, who have often lobbied against the interest of palm oil with claims that it is the cause of deforestation although palm oil has moved faster in addressing sustainability issues.
The climate change agenda will feature prominently and take centre stage.
Under the Paris Agreement, the EU pledged to reduce emissions by at least 40 per cent by 2030, with a long-term strategy is to make EU carbon neutral by 2050 by preventing GHG emissions caused by human activity.
It is likely that the Greens will soon lobby for this target to be increased and this would mean more environmental regulations passed in the Parliament.
The British government was the first to announce legislation for long term reduction in carbon emissions to net zero by 2050.
Finland’s Presidency of the European Council, which takes effect from July 1, is also expected to focus the bloc’s leadership in climate action.
The EU recently classified palm oil as an unsustainable feedstock for biofuels in its Delegated Act of 13 March 2019; this means palm oil cannot be counted towards renewable energy targets under its Renewable Energy Directive (RED II).
In effect, palm-based biofuels will be gradually phased out from the EU market.
Palm oil imports will be capped at 2019 level and completely removed from the EU by 2030.
Ironically, EU struck a political deal with President Donald Trump of the United States, declaring US soya as sustainable. In exchange, Europe was promised no tariffs on German cars and steel.
Both Indonesia and Malaysia have stated publicly they will challenge the regulation at the WTO, and have put the EU-ASEAN relationship on hold.
Sustainability and deforestation issues will continue to feature prominently in EU debates.
The resolution “TOWARDS 2019: Let Us Move Europe!” will see the European Greens stand for the politics of progressive change, favouring environmental and social responsibility, freedom, democracy and openness to the world.
Although Malaysia and Indonesia are the largest producers of palm oil, some of the largest areas allocated for the production of vegetable oils are in the USA, China and Brazil where soybean and maize are the predominant crops.
The palm oil industry has moved forward to meet the challenge of embracing sustainability through either the RSPO, MSPO or the ISPO scheme.
Netherlands based IDH stated in a report that palm oil has made remarkable progress with 74% of imports sustainable but very little soy (22%) is sustainably sourced by Europe’s food industry in 2017. Soy is the second largest agricultural driver of deforestation after cattle products.
With Greens gaining ground, there will be a greater push to mitigate climate change to reduce GHG emissions from all economic sectors.
Discussions surrounding carbon taxes will also take centre stage.
The idea behind carbon border taxes is that if goods are produced under conditions where more carbon is emitted, a levy is introduced.
Although this is meant to push industries to produce goods in a least polluting ways, it will increase the costs for doing business similar to certification where a substantially high cost is incurred by farmers to be certified.
This will inevitably push industries to produce goods that are environment friendly but it will punish small farmers as a cost increase will mean lower income levels. This will eventually mean a higher cost of doing business for developing countries.
Any progress that needs to be made in the area of sustainability or an imposition of carbon tax must always take into account challenges of feeding a growing word population and providing a decent livelihood and income to many poor farmers.
Carbon taxes may seem like a positive initiative but will increase the cost of producing agricultural goods and will lead to much higher prices for consumers.
Belvinder Sron is the Deputy CEO of MPOC and has been actively involved in addressing European issues .