The EU Biofuel Policy and Palm Oil: Cutting subsidies or cutting rainforest?

The EU biofuels industry has increased its use of palm oil by 365 per cent over 2006-2012, from 0.4 to 1.9 million tonnes per year. The additional demand can be linked primarily to the growth in biodiesel production stimulated by government policies (primarily purchase mandates) during the same period. The increase in palm oil consumption in the biofuels sector has amounted to 1.6 million tonnes, or 80 per cent of the total increase in palm oil consumption in Europe (1.9 million tonnes) over 2006-2012. At least 10 per cent of this increase was accounted for by increasing palm oil consumption in the electricity and heat generation sector, and another 10 per cent by growing consumption in other sectors, mainly food processing.

Every extra tonne of biodiesel produced in the EU in 2006-2012 was associated with an extra 110 kilograms of palm oil consumed as biodiesel feedstock. If no policy change occurs, and this trend persists, by 2020 the EU biodiesel sector will consume around 2.6 - 2.7 million tonnes of palm oil, or 40 per cent more than in 2012. Additionally, under the business-as-usual scenario, the EU will also increase imports of biodiesel, a significant share of which is based on palm oil.

The efforts that the EU has undertaken on different levels to switch to palm oil certified as "sustainable" address only concerns about direct land-use change. However, "sustainable" palm oil use also may have indirect land use change effects. That is, the EU's increased use of certified palm oil may be diverting it from the uses where it will be replaced by unsustainable palm oil.

The only unequivocal way to cut this trend and prevent the further increase of palm oil consumption in the EU is to freeze its biodiesel production and consumption at current levels in accordance with the European Commission's legislative proposal of October 17, 2012 that seeks to limit the contribution of food-based biofuels to meeting the EU target of renewable energy in transport by 2020 to 5 per cent from the current 10 per cent target. If the EU does not cut its current subsidies to biodiesel, it may, in an indirect way, lead to the cutting down of more rainforests, the conversion of more forest and peat land for palm oil plantations, and the emission of more carbon into the atmosphere.