Opinion: E.U. is tilting at windmills with new Deforestation Regulation

Though well-intended, the sweeping attempt to green Europe’s supply chains is unlikely to work as intended, writes palm oil observer Robert Hii. The law has sparked controversy in Malaysia and Indonesia, where Hii argues it will undermine ongoing domestic efforts to make the industry sustainable

Robert Hii
July 7, 2023
Opinion: E.U. is tilting at windmills with new Deforestation Regulation
Workers transfer harvested palm fruits to a transport truck before being processing into crude palm oil at a palm plantation in Pekanbaru, Indonesia, on 23 April, 2022. Photo by Wahyudi for AFP.

The E.U.’s Regulation on deforestation-free products is starting to play out like Don Quixote.

Much as the protagonist in the 17th century Spanish epic, the E.U. sees itself as a knight seeking to do good – and, in the process, finding enemies where there may be none. On a quest to limit the ecological impacts of E.U. commodities imports, this regulation is tilting at windmills, attacking illusionary foes.

The windmills right now in the E.U.’s case are countries that export commodities such as timber, palm oil, coffee, cocoa and rubber to Europe, which has long called for greater monitoring of the environmental impact of this kind of trade.  

At its core, the new legislation, which entered into force on 29 June, holds that firms importing goods into Europe need to prove they did not originate from land cleared since 31 December, 2020. Companies must also confirm imported commodities are produced in compliance with the “relevant laws” of their country of origin.

Trade partners such as Indonesia and Malaysia, which together produce about 83% of the world’s palm oil supply, share many of the ecological goals and declarations as stated by E.U. lawmakers.

But in May, the two sent a mission to Brussels arguing the Deforestation Regulation discriminated against their palm-oil-dependent economies and would harm their agricultural sectors. Both have long perceived the E.U. as taking unfair advantage of palm oil to stifle competition against its own oilseed crops, particularly rapeseed, and view the new regulation as yet another act of economic protectionism pressed under the cover of environmental concern.

In 2018, when Europe banned palm oil from biofuel use under the E.U. Renewable Energy Directive (RED), palm-oil-producing states lobbed accusations of ‘crop apartheid’. They soon appeared vindicated when the International Union for Conservation of Nature (IUCN) published a report acknowledging the land efficiency and productivity of palm oil as a crop – as compared to other seed-oils, including those preferred by Europe – meant there were “no easy solutions” to regulating its role in deforestation.

“Palm oil is decimating South East Asia’s rich diversity of species as it eats into swathes of tropical forest,” said Erik Meijaard, the report’s lead author and then-chair of IUCN’s Oil Palm Task Force. “But if it is replaced by much larger areas of rapeseed, soy or sunflower fields, different natural ecosystems and species may suffer. To put a stop to the destruction we must work towards deforestation-free palm oil, and make sure all attempts to limit palm oil use are informed by solid scientific understanding of the consequences.”

The new Deforestation Regulation are unconvincing on that last point, which should concern conservation-minded readers. To their credit, the E.U. Commission has set up a Joint Task Force with Malaysia and Indonesia to address issues related to palm oil smallholders and other challenges of the regulation’s implementation. 

But they’ll have to work quickly on that front. European importers now have 18 months or less to find a way to comply with this new legislation. The only sure way for them to meet this target is if the E.U. acknowledges certification programs for targeted commodities. For the palm oil industries, national programmes such as the Malaysia Sustainable Palm Oil (MSPO) scheme and its Indonesian counterpart (ISPO), must be counted in as credible enablers towards meeting the regulatory deadline.

Though these domestic sustainability schemes are not perfect programmes, they have greatly developed in recent years and have made tangible advancements in reigning in deforestation.

This would seem to be evidenced by the World Resources Institute (WRI) in its latest report on Global Forest Review. The report found that Indonesia and Malaysia marked near-record low levels of deforestation even as tropical forest loss elsewhere worsened in 2022, making specific mention of the MSPO and other domestic, industry-focused measures of recent years.

This kind of data will be instrumental in the E.U.-Malaysia-Indonesia task force’s work to resolve the palm oil problem, which stands in the way of trade deals between the three entities. If the E.U. refuses to acknowledge the ongoing efforts to make the industry more sustainable, it will effectively discourage its further advancement – instead incentivising producers to turn their backs on the European market as they seek less discriminating trade partners in Africa and Asia

Major exporting countries such as Brazil, the world’s biggest exporter of soy, have chosen to brush off the demands of the new E.U. regulation by quoting national laws as being compliant with global commitments. It is worth noting at this point that the expansion of soy plantations is the second-largest direct driver of deforestation and conversion, after the expansion of pasture for cattle farming and land speculation

Brazil’s confidence in maintaining its exports is bolstered by China and – as a further disregard of what the E.U. is demanding in terms of deforestation – these two countries have made a joint commitment to end illegal deforestation. This is very different from what the E.U. is demanding, which is that all imported commodities must be free of deforestation, whether legal or illegal.

Back in Southeast Asia, E.U. Member of Parliament Bernd Lange has appealed for understanding of the E.U.’s position in an opinion published in The Jakarta Post. The European Parliament in ASEAN tweeted in support, urging a constructive and result-oriented negotiation with Indonesia towards a trade agreement. 

Such negotiations are in everybody’s best interest, especially when compared to a more Quixotic approach. But the European Parliament should note that consensus on the regulation can only be reached when the E.U. stops making one-sided demands on its trade partners and engages with them as part of the solution to greener supply chains – not as the problem. 

Robert Hii is an independent industry monitor whose focus is on the sustainability of palm oil. He was born in Sarawak, Malaysian Borneo, and later moved to Canada. He now runs CSPO Watch, a platform that monitors the palm oil industry with a focus on sustainability.

Read more articles