High standards?
There are some similarities between Malaysia and Norway, as both are major commodity exporters. The New York Times reported in June that Norway is one of the world’s biggest producers of oil and gas and that it is increasing production, almost all of it for export. Malaysia is the world’s second-largest palm oil producer; due to its small population, it exports palm oil across the globe.

Although both countries are commodity producers, one produces an edible oil that feeds the world’s growing population, while the other extracts crude oil from the ground through a process that releases vast amounts of carbon.

Norway claims it wants to ban palm biodiesel in order to curb deforestation; yet, it exports huge amounts of fossil fuels that add to global greenhouse gas emissions. The New York Times report further highlights the work of Peter Erickson, a senior scientist with the Stockholm Environment Institute, a research organisation. He has found that emissions from Norway’s oil exports this year will be 10 times as much as its domestic carbon emissions.

Emissions are not the only example of Norway’s environmental actions failing to meet the high standards it demands of others. Other revelations claim that Norway is preparing to dump toxic waste into pristine marine environments in its world-famous fjords.

The oil and gas sector is an important contributor to Norway’s economy, representing 12% of GDP and more than a third of its exports. The Malaysian palm oil industry contributed almost 6.1% to the GDP and RM67 billion in terms of foreign exchange earnings in 2016, and it employs more than a million people.

A key difference is that Malaysia’s development causes less harm to the environment. Malaysia has had the foresight to keep more than 50% of its land area under forest, an unparalleled global commitment recognised by the United Nations. Due to its high yield, the oil palm uses just one-tenth of the land required to grow other oil crops. More land can therefore be preserved for Nature by growing oil palm.

In social terms, the oil palm industry has helped a great deal in reducing the national poverty rate; in Malaysia, this has come down from 50% in the 1960s to less than 5% today. So, there is no reason why small famers should be denied the right to cultivate oil palm, which is an important contributor to rural development, and a major source of employment and income.

In economic terms, palm oil is good for consumers, as well as producers. According to the media outlet Swissinfo.ch, replacing palm oil with rapeseed oil products would cost Swiss farmers an additional 1 million Swiss francs (US$1.02 million) annually.

Why is palm oil being targeted especially in the EU? One answer lies in the field of trade. Palm biodiesel has become a viable and cost-effective substitute for fossil fuels, and has been recognised by the EU as a sustainable renewable energy source. Since local oilseeds are unable to compete against palm oil, countries use trade or non-trade barriers to curb its market access.

A good example is the EU biofuels policy. In the words of Fredrick Erixon, Director of the European Centre for International Political Economy: “EU biofuels policy has become an industrial policy rather than an environmental policy.” He further notes that the Renewable Energy Directive (RED) “was designed to hit foreign competitors to Europe’s rapeseed oil producers”.

According to the USDA, the EU is the world’s largest biodiesel producer. On energy basis, biodiesel represents about 80% of the EU transport biofuels market. Rapeseed oil is the dominant biodiesel feedstock in the EU, accounting for 46% of total production in 2016.

If they come into effect, both the EU Resolution and the Norwegian proposal could be deemed a barrier to block or limit palm oil’s market access, as well as discriminatory to trade. For, obviously, the vacuum created in the market for palm biodiesel will be filled by local oilseeds.

Palm oil producers in fast-growing parts of the world would interpret such a ban as a distinctly negative signal. This would likely lead to calls for retaliation against European interests. Banning the use of palm biodiesel would ultimately be counter-productive to bilateral relations and trade opportunities for Europe.

Belvinder Sron
Deputy CEO, MPOC


 

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