The Future of Palm Oil in Europe
European Union on their new
resolution the Renewable Energy Directive also known as RED 2 or The Directive,
feedstock for Renewable Energy Sources (RES) that come from unsustain process are
banned with approach called Indirect-land usage change (ILUC) as criteria for
material selection. Palm oil is included as unsustain material for RES because
the indirect land-usage change from forest, wetland and peatland into cropland.
European Union feels their effort
to reduce greenhouse gas emission with Renewable energy sources (biofuel) is
wasted as the producer of biofuel material do deforestation and produce
greenhouse gas emission more than EU tried to reduce. The EU made bold
statement with RED II as to ensure the RES producer stop deforestation. The
Directive adopted on March 13, 2019 and have two-month period scrutiny period
to express an objection. Indonesia and Malaysia as the palm oil largest
producer think The Directive is discriminative against their material and sent
an objection letter to challenge it for the future of palm oil in Europe.
1. European Union current usage, future plan and Palm oil for Renewable Energy Sources
European Union mandated their 28
state members to maximizing usage of renewable energy sources and enforce the
usage to at least 32% by 2030[1], and with another sub target that
member states must require renewable energy fuel supply a minimum 14% of the
energy that consumed in the road and rail transport by 2030[2].
Current 2017 report show that EU member states usage of Renewable Energy
Sources currently sit on 17.52%[3], main consumption on RES is on
transportation, Electricity and Heating & cooling.
A. EU consumption Renewable Energy Sources for Transport (RES-T)
In 2016, the EU
consumption of sustainable biofuels amounted to 13,840 ktoe (kilotonnes of oil
equivalent) 6.7% of total Transport energy usage. The Final bioenergy
consumption in EU for transport breakdown to Road 13,796 ktoe, Rail 33.1 ktoe,
Domestic Navigation 5 ktoe, non-specified transport 6.7 ktoe and zero for
International and Domestic aviation. Of
this, 11,083 ktoe (80%)
was biodiesel and
2,620 ktoe (19%)
was bioethanol. In 2016, Sweden
(30.3% of renewable fuel energy used in transport) and Austria (10.6%) were the
only two Member States to reach the target of using 10% of renewable fuel
energy for transport. While France (8.9%) and Finland (8.4%) were relatively
close to achieving the target, most of the other EU Member States were around
the half-way point to meeting the 2020 objective. With a use of less than 3% of
energy from renewables in transport, Estonia (0.4%), Croatia (1.3%), Greece
(1.4%) and Slovenia (1.6%), followed by Cyprus (2.7%) and Latvia (2.8%) were
furthest from the 10% target[4].
B. EU consumption Renewable Energy Sources for Electricity (RES-E)
In 2016, the EU
consumption of RES for Electricity amounted to 29.6% total Electricity usage, Hydro
power is the most important source with 36.9%, followed closely by wind power
31.8% and then solar power 11.6%. Other renewable sources for generating
electricity include wood, biogas, renewable waste and geothermal energy. At the
level of EU Member States, in five countries more than half of the electricity
consumed in 2016 was generated from renewable sources: Austria (73 %), Sweden
(65 %), Portugal and Denmark (both 54 %) and Latvia (51 %). In contrast, there
were four countries where less than 10 % of the electricity consumed in 2016
came from renewable sources: Malta (6 %), Luxembourg and Hungary (both 7 %) and
Cyprus (9 %)[5].
C. EU consumption Renewable Energy Sources for Heating & Cooling (RES-H)
In 2016, the EU consumption of RES for Heating & Cooling amounted to 19.1% total Heating & Cooling in European Union (EU). This is a significant increase from 10.4 % in 2004. Increases in industrial sectors, services and households contributed to this growth. Aerothermal, geothermal and hydrothermal heat energy captured by heat pumps was also taken into account if reported by countries. In four EU Member States, more than half of the total energy used for heating and cooling came from renewable energy sources in 2016: Sweden (68.54 %), Finland (54.75 %), Latvia (54.6 %) and Estonia (51.81 %) and the highest is negotiating EU member Montenegro (69.19%). In contrast, the lowest shares were in the Netherlands (5.38 %), Ireland (6.3 %) and the United Kingdom (6.97 %)[6].2. The Palm Oil and specification as unsustain feedstock
The Directive reinforces the EU
sustainability framework for bioenergy, in order to ensure robust greenhouse
Gas (GHG) emission savings and minimize unintended environmental impacts, with
introduced a new approach called indirect land-use change (ILUC) associate with
biofuel, bioenergy and biomass, this sustainability framework set criteria that
the use of materials from high ILUC Renewable Energy Sources will gradually
became zero at 2030. Palm oil is phased
out by EU, Using Ecofys, IIASA & E4tech report that claim it as one of the
feedstock with highest ILUC expansion since 2008 and highest contributed to GHG
emission with 231 grams of CO2e per megajoule of biofuelconsumed–(gCO2e/MJ)
this method of calculation using GLOBIOM model with 20 year amortization,
including DLUC which oppose by far to IFPRI & JRC-EC report that placed
palm oil at 54-64 gCO2e/MJ[7][8].
The Palm oil are categorized into
High ILUC risk with expansion 45% since 2008 into land referred in article
29(4)(b)(c)[9], EU argue that expansion palm oil was so massive and
change previous wetland & forested area into palm oil agriculture area with
report from IIASA, EPA, & GARD. The classification of commodities to
deforestation impact is also signed on Amsterdam Declaration in 2015 with
purpose eliminating deforestation from agricultural commodity chains. Yield of
Palm oil is actually higher than their counterparts for biofuel 4500 liters per
hectare dwarfing rapeseed almost 3.5 times with 1200 liters per hectare and
soybean just 400 liters per hectare[10], by the yield result Palm
oil establish itself a giant for renewable energy sources by yield but EU think
that the process of this feedstock production that make EU phase it out and
claim it as unsustain renewable energy sources.Most 64%
of the biodiesel consumed
in the EU
in 2016 was
produced from feedstock
from the EU,
mainly from rapeseed 38%,
used cooking oil 13%,
animal fat 8%
and tall oil
2.5%. Of the remaining
36% of biodiesel
consumed in the
EU, 19.6% was palm oil
from Indonesia 13.3% and
Malaysia 6.3%, 6.1% was
rapeseed from mainly
Australia 2.6%, Ukraine 1.8% and Canada 1.2%, 4.8% was used
cooking oil from various countries outside the EU and 4.3% was soybean from
mainly the United States 1.5% and Brazil 1.5%[11].
Palm oil production in Indonesia
in 2015 is 31.07 million ton with breakdown Private Sector 58.56%, Government 7.55%
and Smallholder farmer 33.88% on 11.02 million ha with Private sector 53.12%,
Government 6.61% and Smallholder farmer 40.28%[12] ,based on 2016
The Indonesia Ministry of Agriculture the smallholder farmer produce less than
Private Sector or Government, and actually the smallholder farmer was the
biggest player on the directive 2, because Mr. Saragih on World Plantation Conference
and Exhibition 2017 estimated that smallholder farmer cropland will double
their area on 2030 with forecast about 60% of total Indonesia palm oil cropland[13].
This forecast is based the data that on 1982 small holder palm oil farmer hold
2% of palm oil cropland increase to 26% in 1990 and on 2015 hold 40.28%.
The Forest fire for opening palm
plantation in Indonesia also need to take into account when talking about Palm
oil sustainability, no justification for burning forest as the step to plant
the feedstock for renewable energy sources. Burning forest for new plantation
or old plantation that no longer productive is the cheapest way to clear the
land, not only smallholder who do not understand climate impact for their
action but big corporation also took the same action, which in 2015 Indonesia 7
company executives and investigating 24 companies and 126 individual[14].
This action need to be stop soon and Indonesian Government need to take
responsibilities on this. As the fire happen in some provinces in Indonesia and
with the effect of El Nino the haze is occurred in some ASEAN country risking
health and climate impact. The haze happened several time with 2015 was one of
the largest and forest fire for palm plantation is the main suspect, which
Indonesian Government estimated 475 Trillion IDR (35.2 billion USD) cost as the
effect of the haze[15].
3. Impact
Indonesia and Malaysia reacted to
the Directive with fury and will be challenged the RED 2 with trade boycott on
EU products, Indonesia and Malaysia are the largest producer of the palm oil.
Indonesia Coordinating minister of Maritime Affairs Luhut Pandjaitan said it
will about the survival of 20 million people under direct/indirect of the palm
oil production, Indonesia palm oil export to Europe is accounted 3.32 billion
USD[16] about 18.24% of total Palm oil export and in Malaysia is
accounted at 1.2 billion USD[17] about 12.4% of total Palm oil
export. Both Indonesia and Malaysia sent joint letter of objection about the
Directive to European Commission and feel that the directive is discriminative
toward usage of their material.
Indonesia even took further step
with threaten to quit Paris Agreement, the decision which I think took in rush
and didn’t look for long term longevity not only on Palm oil trade but other
Indonesia products, Malaysia follow the step to boycott EU products. EU is a
market that these 2 largest palm oil producer can’t lose by any measure,
especially on the usage of palm oil as biofuel, because EU is a pioneer of
green technology and have committed to it, so the market is already there and
need to fill but need to follow the regulation. As the adoption of
supplementing Directive to RED 2 on March 13, 2019 about the determination
high/low ILUC the EU exempt the small holding farmer as it stated on article 5[18],
this exempt is already on debate in EU itself, Green energy advocate stated
that this is not over and want to repeal the exemption on small farmer, this
will be directly endanger livelihood of the small holding farmer.
The Directive also make a huge
economic impact, as feedstock price for the biofuel sinking since EU plan to
revise the Directive, the feedstock that EU used for biofuel mainly are
rapeseed, palm oil and soybean. The price of palm oil and soybean oil which EU
highlighted it as unsustain fell apart with high price volatility on this
commodity, on commodity market Rapeseed and Palm oil are sold per metric ton
while Soybean oil using pound, which needed 2204.623 to equivalent a ton[19].
As of May 10th, 2019 the price of Palm oil are on 461.65 USD[20],
rapeseed 360.75 USD[21] and soybean oil on 595.25 USD[22]all
per metric ton, with price of palm oil sunk it is harder for smallholder to
establish as sustainable process for their palm oil production, plus their
exemption on the Directive is it likely they will continue to practice
unsustain way to produce palm oil, which make this endless loophole.
4. Conclusion
Palm Oil is a feedstock which
famous for high yield and cheap to produced, could be the answer for renewable
energy sources, with world population in 2019 is more than 7.5 billion and with
limited amount of land for food, if produced following sustainability standard.
EU knows that to achieve Paris Agreement climate change target that keeping
global temperature to below 2 percent needed serious commitment, and giving the
example for rest of the world by released Renewable Energy Sources Directive,
which is a great move for EU 28-member states but not so good for their
diplomatic action.
Palm Oil Future in Europe is just
not about Sustainable Green Energy, but also Politic, and Economy. European Union
indirectly ask Indonesian Government to
keep their forest and not to expand the palm oil plantation into high carbon
stock area with Renewable Energy Directive II, on my opinion EU plan to pushed
Indonesia to stop deforestation with the Directive is a harsh way. EU plan for
better future should be tighten on diplomatic relation between EU and two largest
palm oil producer and solve the problem together carry on the sustainable Palm
oil, Indonesian minister for Coordinating Economic Affair said that Indonesia
is willing to accept the EU terms but with the standard sustainable Palm oil
come higher production cost with EU also bear the price of this sustainable
palm oil in the future, but will they? Well in this free market and France
yellow vest movement, I don’t think so.
Indonesia need to start produce
all of their product sustainable not just Palm oil, but pulp and paper also
rubber from now on, not just because the risk of losing EU market but the
awareness of climate change, currently only EU raise concern about Palm oil sustainability
as Indonesia and Malaysia largest trading partner China and India not yet
concern about this but it is right decision to produce all product sustain on
all level: small holding farmer, private company and government plantation
itself, Indonesia already starting ISPO and RSPO certification but need to push
harder as currently only few companies that hold the certification, producing
sustainable product also make a great reputation for Indonesia.
5. Resolution
My resolution on this case are EU
and largest producer of palm oil Indonesia & Malaysia to reach an agreement
about the Directives, there is some option that both country could achieve:
A. Export Biofuel rather than raw material.
Both Indonesia
and Malaysia need to exporting more biofuel rather than raw material, as the
largest producer of the feedstock it is right act to produce the biofuel by
itself, make holding biofuel company and treat it as Saudi Arabia to Aramco not
just increasing GDP but also creating job opportunity on this future industry.
B. Stop Deforestation and create joint task observer
Deforestation is
impacted to climate change so huge, producing of palm oil should not be
expanding by deforestation, and risk the future of the World, and this is not
just about because the trade with European Union only but with the rest trading
partners. Indonesia, Malaysia and European Union can make a joint action task
on oversee the palm oil process production and create a win-win solution.
C. Educate smallholding farmer and Take back unsustain land.
Smallholding
farmer need to be educated on the production, regulation, market access and
climate change, current yield of smallholding farmer also the lowest compared
to government plantation and private company high yield on palm oil not just
increasing their revenue but also make the earth healthier and Indonesian
Government need to act serious about regulation and tack back unsustain and
illegal plantation if needed.
D. Applicable certification from EU and ISPO
Indonesia
Government already had ISPO (Indonesia Sustainable Palm Oil), and RSPO
(Roundtable on Sustainable Palm Oil) and need to strengthen on this area, and
ensure all palm oil producer certified with it.
E. Don’t pull off Paris Agreement
Pulling out from
Paris Agreement because Palm Oil just reckless, it’s not about Palm oil only
but also the world, Indonesia already received payment from Norway to keep its
tropical jungle from deforestation and more to come as 2020 EU plan to spend
100 billion EUR on REDD+.
References
[1] European Union, Directive 2018/2021 Promotion Renewable
Energy Sources, 2, (11), 2018.
[2] European Union, Directive 2018/2021 Promotion
Renewable Energy Sources, Article 25 (1), 2018.
[3] European Commission, Renewable Energy Progress
Report, 3, April 9th 2019.
[4] Eurostat, Share of energy from renewable source -
transport (nrg_ind_335a), June 26th 2018.
[5] Eurostat, Share of energy from renewable source -
electricity (nrg_ind_335a), June 26th 2018.
[6] Eurostat, Share of energy from renewable source – heating
& cooling (nrg_ind_ren), June 21st 2019.
[7] ECOFYS, IIASA, E4tech, The Land use change impact
of biofuel consumed in the EU, X, October 8th 2015
[8] European Union (Wageningen Economic Research,
Netherlands Environmental Assessment Agency, Wageningen Environmental Research,
National Renewable Energy Center) Reporting Requirements on biofuel and
bioliquids stemming from the Directive (EU) 2015/1513, 45-49, August 2017.
[9] European
Commission, supplementing Directive (EU) 2018/2001 as regards the determination
of high indirect land-use change-risk feedstock for which a significant expansion
of the production area into land with high carbon stock is observed and the
certification of low indirect land-use change-risk biofuels, bioliquids and
biomass fuels, March 13th 2019.
[10] CIFOR, Technologies to produce liquid biofuels for
transportation, 7, 2011.
[11] European Commission, Renewable Energy Progress
Report, 10, April 9th 2019.
[12] Tree Corp Statistics of Indonesia 2015-2017,
Indonesia Directorate General of Estate Corps-Ministry of Agriculture, 3, 2016.
[13] Oil Palm Smallholders In Indonesia: Origin,
Development Strategy And Contribution To The National Economy, Prof. Dr. Ir.
Bungaran Saragih, M.Ec. , 7, 2017.
[16] The Observatory of Economic Complexity,
Massachusetts Institute of Technology, 2017. https://atlas.media.mit.edu/en/visualize/tree_map/hs92/export/idn/show/1511/2017/
[17] The Observatory of Economic Complexity,
Massachusetts Institute of Technology, 2017
[18] European Commission, supplementing Directive (EU)
2018/2001 as regards the determination of high indirect land-use change-risk
feedstock for which a significant expansion of the production area into land
with high carbon stock is observed and the certification of low indirect land use
change-risk biofuels, bioliquids and biomass fuels, Article 5(3), March 13th
2019.
[19] Agricultural Commodity Metric Conversion Guide,
CME Group, 6, 2014.
Comments
Post a Comment