Minster of Coordinating Maritime Affair Luhut Pandjaitan on Indonesia-EU Discussion over Palm OIl Ban in Brussels, Belgia.

JAKARTA (TheInsiderStories) – Indonesian government reacted strongly to the issuance of palm oil as a raw material for biofuels based on Renewable Energy Directive (REDII) as outlined in the delegated act. The European Union (EU) also released a defense about the ban.

In his statement, the EU Ambassador to Indonesia, Vincent Guerend said the EU planned to ensure the sustainability of the bio energy program. In addition, it is also committed to meeting the energy and climate targets in 2020 and 2030 by utilizing safe, affordable and sustainable energy sources.

As part of a comprehensive policy framework, the EU targets the use of renewable energy by 2030 to reach a minimum of 32 per cent. The target was approved by the European Parliament and EU Member States in June 2018 through RED II.

The direction also states that starting in January 2024, there will be a gradual reduction in the use of biofuels from certain types of raw materials. To implement this directive, the European Commission even passed a delegated act on March 13.

Within the two-month period of the assessment, this institution has the right to object. If there are no objections, then after this period, these rules will be ratified or published in the EU Official Journal.

Guerend said biofuels are an important element of the EU’ renewable energy policy. However, there must be rules that ensure biofuel feedstock is a sustainable material and does not cause deforestation through indirect land use change.

Therefore, the direction of renewable energy will determine a new approach to ensure that the plants used to produce biofuels are not related to deforestation.

Regarding the policy, he also argued that there were no biofuels or certain raw materials that were targeted for prohibition. “All vegetable oils are treated equally and palm oil is not treated as a bad biofuel,” he said in an official statement on March 21.

However, from the data received it shows, that there are links between palm oil and high deforestation rates for the 2008-2015 period. Which, 45 percent of expansion occurs in areas with high carbon stocks. “This is not even comparable with other raw materials,” he wrote.

Indeed, on the other hand, palm oil productivity is admittedly higher than other plants. However, the factors used in the ILUC determination formula are calculated based on the energy content of the products traded from various annual crops such as soybeans, rapeseeds and sunflowers compared to oil palm.

The EU will review the data and if necessary its methodology in 2021 and will revise the Delegated Act in 2023. At that time, all efforts that have been made by Indonesia, such as changes in ISPO certification, moratorium policies, policies for one map or national action plan recently published will be considered.

“It is also important to remember that the EU market, which consists of 28 member countries, is fully open to palm oil. There is no ban on palm oil at all,” he added.

The EU is the second market for Indonesian palm oil, below India and above China. Most of Indonesia’s palm oil enters the EU at zero rates or very low tariffs (22 per cent without import duties and 55 per cent below duties 5.1 per cent). This condition also confirms that other export markets are not as good as the EU.

As a supporter of the rule-based system, the EU also considers REDII and the delegated act in accordance with the World Trade Organization provisions. Because according to his claim, RED II establishes sustainability criteria for biofuel and biomass that are global, objective and non-discriminatory.

These sustainability criteria are considered not to distinguish biofuel or certain raw materials. RED II’ sustainability criteria identify sustainable biofuels that qualify for public support or are taken into account against EU and national renewable energy targets. Therefore, RED II’ sustainability criteria do not limit access to EU biofuel markets.

He said the EU was open to discuss and dialogue about this issue with the Indonesian government and other stakeholders. He also hoped that the formation of a joint working group between the EU and related ASEAN countries could be another option for discussion.

“The implementation rules of the European Commission are not the beginning or the end of the policy process. This is another step in the long and joint journey towards sustainable development and carbon neutrality,” he said.

Indonesia Threatens Retaliation

The European Commission’ policy of classifying palm oil as unsustainable high-risk vegetable oil has drawn strong protests from both the government and Indonesia entrepreneurs. The decision was accused of being politically charged because it was aimed at removing palm oil from the EU’ biofuel mandate to protect other vegetable oils.

“There is no doubt, the policy is discriminatory, against a background of protectionism which is then wrapped in various scientific materials,” said Coordinating Minister for Economic Affairs Darmin Nasution.

He added the government would take steps to resist palm oil discrimination, one of which was to bring the dispute to the WTO table. “In addition to going directly to the WTO, we can also retaliate. What is it that, if he is unilateral, our period cannot be unilateral,” he said.

Meanwhile, Coordinating Minister for Maritime Affairs Luhut Binsar Pandjaitan threatened to ban imports of some goods from the EU as a retaliation. He hinted that jets manufactured by European companies could be among the targets.

He added Indonesia may need about 2,500 aircraft in the next two decades. The EU’ palm oil restriction is feared to harm Indonesian economy. Especially, almost 20 million people in Indonesia are dependent on the commodity. This situation also created tension in Malaysia, as both countries hold 85 per cent of palm oil global supply.

While in terms of trade, palm oil is a very important commodity for Indonesia. This is reflected in the value of the export contribution of Crude Palm Oil in 2018 worth $17.89 billion. This industry contributes up to 3.5 per cent of the Gross Domestic Product.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com