Malaysia: Palm Oil’s Loss May Be U.S. Soybean Gain in EU Biofuel Rule

• U.S. soybean companies could be the big winners if an upcoming European Union rule on sustainable biofuels goes through.
• The rule, which the European Commission—the EU’s executive arm—is required to propose by 1 Feb 19, would define which feedstocks used in biofuel production are sustainable in terms of forest clearance and other land-use changes.
• Feedstocks identified as causing high levels of indirect land-use change (ILUC) will be capped and wouldn’t count toward EU biofuels targets after 2030.
• The main feedstock in the line of fire is palm oil from Indonesia or Malaysia, where it is linked to widespread clearance of tropical forests to make way for plantations.
• While palm oil faces phaseout, soybeans from the U.S. could take their place as a feedstock for EU biofuel. The EU forecasts that soybean imports from the U.S. will increase from 39% to 75% in 2018-2019.
• When the commission makes its sustainability judgment, it is likely to find the U.S. “one of the least risky countries in the world,” said Stephanie Searle, fuel program lead at the International Council on Clean Transportation in Washington.
• The requirement for an EU ILUC rule was triggered by a law on renewable energy, finalized in Dec 18, stipulating that the EU must meet at least 32% of its energy needs from renewable sources by 2030.
• The law also specifies that by 2030, 14% of transportation fuel consumed in the EU must come from renewable sources, including liquid biofuels and biogas.
• To prevent environmental damage, the law also requires specific standards for low- and high-ILUC biofuel feedstocks, with the amount of biofuel from high-ILUC feedstocks capped at 2019 levels and then phased out through 2030.
• Palm oil is the most harmful type of crop biofuel, mainly due to deforestation and peatland drainage, with triple the emissions of fossil diesel, according to a summary from the nongovernmental organization Transport & Environment in Brussels.
• When the commission proposes its rule, it could specify certain crops—such as palm oil—but allow exemptions where appropriate, or it could “focus on the areas that have a high risk of land-use change,” Gernot Klepper, senior researcher and head of environment and natural resources research said.
• For example, the commission could designate Indonesia and Malaysia as high-risk indirect land-use change countries, whereas Colombia, which also exports palm oil to the EU and where palm oil cultivation doesn’t cause major forest clearance, could be designated low risk, he said.
• Just over half (51%) of crude palm oil imported into the EU in 2017, largely from Malaysia and Indonesia, was processed into biodiesel, according to the European vegetable oil and proteinmeal industry federation (FEDIOL) in Brussels.
• Palm oil makes up about a third of the content of biodiesel in the EU, with the rest from rapeseed oil, soybean oil, and sunflower oil.
• Malaysia and Indonesia have pushed back against possible limitations on EU palm oil imports. They declined to take part in a Nov 18 workshop with EU representatives and said an EU indirect land-use change rule that effectively prohibits palm oil in biofuel could violate World Trade Organization rules and trigger retaliation.
• Malaysian Prime Minister Mahathir Mohamad said Malaysia will consider restricting imports of French products should Paris press ahead with “discriminatory” plans to ban the use of palm oil in biofuels, reports Reuters.
• In a letter to French President Emmanuel Macron dated 8 Jan 19, the prime minister called for the proposed ban to be rejected, saying the countries’ trade relationship is reliant on mutual respect for each other’s commodities.
• The indirect land-use change rule could yet have limited initial effects, because EU producers will continue to process palm oil for food and chemical use, according to Nathalie Lecocq, director general of FEDIOL in Brussels.
• The indirect land-use change rule “could lead to an increase of palm oil use in biodiesel in 2019, because this will be the reference year for its capping,” Lecocq said. But the “consequences are difficult to anticipate to the full,” she added.

External Link: https://news.bloombergenvironment.com/environment-and-energy/palm-oils-loss-may-be-us-soybean-gain-in-eu-biofuel-rule-1

External Link: https://www.themalaysianinsight.com/s/128100