Why EU Ministers should reject ILUC

The original Renewable Energy Directive (RED) was passed in 2009 by the EU, and has been heavily criticized for discriminating against non-EU biofuel feedstocks, in order to prop up the uncompetitive European industries, notably the rapeseed industry which is a powerful lobby in France and Germany, among other countries. The EU provided a ‘default value’ for each feedstock – this was meant to represent the emission-saving value of each feedstock (and therefore calculate its environmental value). However, a study from scientists at the University of Jena have since proved that the EU massively underestimated the emission savings value of palm oil – therefore putting it at a deliberate disadvantage. The EU’s value for palm oil was set at 19 per cent, but the independent analysis from these German scientists calculates palm oil to save between 38.5-41 per cent. Independent estimates published in the scientific journal Nature similarly calculate that the EU has over-stated the emissions-saving value of rapeseed, therefore giving it an unjustified privileged position in the marketplace. Rapeseed was given a value by the EU of 38 per cent – conveniently above the EU’s minimum threshold of 35 per cent. However, Nature reported the new calculations showed rapeseed biodiesel achieving only a 29.7 per cent savings value.

These studies, and the clear protectionist nature of the RED, have led to substantial protests from non-EU Governments. Argentina has already announced the intention to take the EU to the World Trade Organisation (WTO) in protest, and Indonesia and other countries have signaled they could follow suit. The EU should not be allowed to get away with rigging the numbers in a way that harms small farmers, innovators, and producers within the Malaysian Palm Oil industry.

The new revision of RED, which has been discussed throughout 2012 in Brussels, has proved very difficult and controversial for the EU. The Parliament’s lead MEP, launched a crusade against palm oil, making wild accusations and introducing major discrimination that would harm Malaysian small farmers, workers and companies. ILUC  has been derided by scientists and economists around the world, as anti-scientific, discriminatory, and impossible to calculate. Introducing ILUC factors would lead the EU renewable energy policy into further protectionism and hurt the EU’s ability to reduce greenhouse gas emissions through efficient biofuels, such as those produced from Malaysian Palm Oil.

A major concern for Malaysian Palm Oil, in addition to ILUC, lies in direct discrimination that has been introduced by the European Parliament. Malaysian Palm Oil products (POME and empty FFB) have been removed from an EU definition of ‘advanced biofuels’. The EU’s policy statements throughout the revision of RED make it clear that ‘advanced biofuels’ are the future of European renewable energy. The share of ‘first-generation’ biofuels has been capped at 6 per cent, and will likely decline, but ‘advanced biofuels’ are given special treatment and incentives. The share of the market is predicted to rise, and the European market will become dominated by advanced biofuels in future. Mrs Lepage stated that “support should be focused on advanced biofuels”. The European Parliament has attempted to shut off this major market, and deny entry to palm oil products, by taking POME and FFB off the list of ‘advanced biofuels’. This will clearly be harmful to producers, most specifically small farmers, across Malaysia. This must also be considered a new threat from the EU against palm oil.

EU Ministers must reject such protectionism in their meeting of December 13th. The Council needs to reset EU renewable energy policy, in order to avoid further conflict with its trading partners around the world. The USA, Canada, Argentina, Brazil, Indonesia and Malaysia are just some of the countries that are loudly expressing concerns. The EU is currently discussing trade deals with many of those countries, and those deals would be harmed by continuing EU protectionism over renewable energy. The ILUC Working Group, and the Ministers, need to see sense: let’s choose free & fair trade over protectionism; and let’s choose facts and science over dogma.