Malaysia and Indonesia warn that EU is hampering palm oil trade

Palm Oil

Palm Oil

Indonesia and Malaysia warned on Tuesday that new European rules to ensure the sustainability of biofuels might hamper their exports of palm oil and breach rules on free trade. But they stopped short of threatening action at the World Trade Organization and said they would monitor the situation.

The European Union’s energy chief, Guenther Oettinger, set green standards for biofuels in June to discourage companies from felling forests to grow profitable biodiesel or bioethanol crops.

“This directive discriminates (against) palm oil producers compared with other competing oil crops used as feedstock for biofuel production,” Malaysian commodities minister Bernard Dompok and Indonesian deputy agriculture minister Bayu Krisnamurthi said in a joint statement.

“This directive has set criteria … which could form a non-tariff barrier for the imports of palm oil into the European Union,” they added during a visit to lobby EU officials.

The EU wants to obtain 10 percent of its road fuels from renewable sources by 2020, about 90 percent of which is seen coming from crops such as grains, palms or sugar cane.

Within the next decade that could create a market worth $17 billion, and critics say that creates an incentive for farmers to hack into forests.

The new sustainability standards state that biofuels used to meet EU targets must save at least 35 percent of greenhouse gases compared with oil and cannot come from recently cleared land.

EU experts are also examining a new scientific perspective known as “indirect land use change”, which suggests that even biofuels grown on established agricultural land can have widespread negative impact by forcing food production into new areas.

Krisnamurthi told reporters on Monday that although about 3-4 percent of plantations had been developed unsustainably, the greenhouse gas savings from Indonesian palm oil were generally much higher than envisaged in the EU rules. He urged a review.

“The first casualties will be the smallholding farmers,” he added. “The big companies will have the energy and capability to meet the requirements.” (Reporting by Pete Harrison, editing by Jane Baird)

Source Reuters

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