How to Wrestle Out of Southeast Asia’s Palm Oil Dilemma?

​Being the most produced, imported, exported, and traded vegetable oil in the world, palm oil is now facing a cut-off by its fourth largest consumer, the EU, in the EU Deforestation Regulation (EUDR) released in 2022. The Regulation specifies that by the end of 2024, products that cause or worsen deforestation in the supply chain will be totally banned from importing and exporting, with palm oil on the list. 

The restriction sparks an inevitable tug-of-war between its consumers and growers because of the controversy nature of palm oil. For one thing, palm-growing countries count on palm oil trade which can earn them money with the wide use of palm oil products in the lives, ranging from processed food, cosmetics, and soaps, to even fuels, and help alleviate poverty. However, it also causes damage to forest resources and biodiversity in planting areas.

Malaysia and Indonesia, producing over 85% of global palm oil, are trying to get out of this dilemma.

“Price” Paid for Palm Oil

The EUDR did not come from nowhere. A report put out by the United Nations Development Programme (UNDP) in China shows that from 1990 to 2015, about 1.5 million square kilometers of tropical rain forests around the world were destroyed, 5% of which, including peatlands with high capability for carbon storage, was caused by the expansion of oil palm fields. 

Malaysia and Indonesia, producing over 85% of global palm oil, are also home to precious tropical rainforests. Malaysia, with a territory of 330,000 square kilometers, owns oil palm plantations stretching more than 55 million hectares. In Indonesia, oil palm has become the largest grown crop with a coverage of 15.001 million hectares, accounting for 33.4% of the total cropping acreage.

The UNDP report also highlights the massive deforestation in Borneo, the largest palm oil-producing region. Palm oil plantations should take primary responsibility for the damage of rainforests rich in species there. In Malaysian Borneo, oil palm plantations caused 60% of the total deforestation from 1972 to 2015. In Indonesian Borneo, deforestation rate has been markedly rising since 2005, with the figure reaching as high as 50% between 2005 and 2015. Tropical areas rich in biodiversity are not only home to the majority of oil palms, but also the habitat of endangered species like orangutans, Bornean elephants, and Sumatran rhinos. According to statistics, unsustainable cultivation of oil palms poses a major threat to 193 critically endangered, endangered, and vulnerable species. The decline of orangutans at present is chiefly attributed to the rapid loss of their habitat turned into plantations for oil palms and other crops.

All these largely contribute to the approval and implementation of EUDR.

EUDR: Who’s the Target?

According to the Guancha network, on March 14th, 2019, the European Commission made its final ruling that oil palm farming, mainly in Malaysia and Indonesia, leads to deforestation and other environmental problems. Therefore, palm oil (save the oil from plantations less than 2 hectares in area) is no longer considered "renewable energy." Under the EU's mandate that all member states must reach a 32% renewable energy usage by 2030, using palm oil becomes uneconomical. 

On May 16, 2022, the EUDR was approved by the Council of the European Union to end importing and exporting products that involve deforestation in any link of their supply chain. These products include 7 key commodities-- beef, cocoa, coffee, palm oil, rubber, soy, and timber—as well as their derived products. The EUDR, which officially took effect on June 29th, 2023, is going to be enforced on December 30th, 2024. The enforcement for micro and small businesses is postponed until June 30th, 2025.

The EU is a major consumer of products associated with deforestation and forest degradation. Among these products, palm oil is a primary target. The EU ranks third among the global palm oil-consuming countries and regions, with Indonesia and India being the top two consumers, and China ranks fourth.

At the time of its release, the EUDR provoked a strong reaction from oil palm-growing countries, especially from Indonesia and Malaysia.

Worries: from Whom, for Whom?

There’s an opinion that although EU has made great efforts to curb deforestation in the supply chain, it fails to take into account the most impoverished growers who are the lifeblood in the palm oil production. Neglect on them could make developing countries pay a high price, and eventually fail the EU’s plan on forest protection.

Malaysia has been taking various measures over the years to reduce deforestation and restore vegetation in oil palm plantations. They tried to produce palm oil in a sustainable way to work in line with the Malaysian Sustainable Palm Oil (MSPO) certification. Therefore, they had strong discontent with the EU, one of its biggest customers, for this discriminative regulation.

“Malaysia cannot only be defensive on palm oil issues,” Johari Abdul Ghani, the Minister of Plantation and Commodity of Malaysia, posted May 8th, 2024 on the social media platform X, “we should instead show the world that Malaysia is a sustainable producer of oil palm that strives for protecting forests and the sustainable development of the environment.” 

It is reported by Malaysia’s Sin Chew Daily that Johari is planning to offer orangutans as gifts to trade partners such as the EU, China, and India, calling it “orangutan diplomacy”—a counterpart to China’s “panda diplomacy.” Meanwhile, the minister also calls on collaborations between palm oil enterprises and NGOs, so as to work together to protect wildlife in Malaysia and provide relevant technology and expertise.

The Path to Sustainable Palm Oil

Though a highly controversial product, palm oil still plays an essential part in the world. 

Palm oil is more lucrative than any other plant oil, with its production 6 to 10 times higher than that of other vegetable oil crops. Furthermore, the land used for palm oil production is less than 10% of all land used for oil crops. If people want to obtain the same amount of plant oil from other crops with a concern of forest protection and biodiversity, it would take 5 times the planting area of oil palm. This could lead to a loss of biodiversity, higher deforestation rates, and causing more greenhouse gas emissions. 

World Wide Fund for Nature (WWF) claims that growing and producing palm oil in a sustainable way to minimize the adverse effects on forests and nature has become a global consensus.

Measures that are more sustainable have been promoted by many stakeholders in palm oil industry. In 2004, WWF, joining hands with key multinational companies in the industry chain of palm oil, launched the largest and most well-known palm oil certification scheme-- Roundtable on Sustainable Palm Oil (RSPO). Currently, nearly 20% of palm oil in global trade is certificated by RSPO. 

In addition to RSPO, common palm oil certifications include Sustainable Agriculture Network/Rainforest Alliance (SAN/RA), International Sustainability and Carbon Certification (ISCC), Malaysian Sustainable Palm Oil (MSPO), and Indonesian Sustainable Palm Oil (ISPO).

Efforts by Indonesia and Malaysia

Established in 2009 as a policy of Indonesian government, ISPO aims to develop sustainability and global competence of local palm oil. It is also in favor of reducing greenhouse gas emissions, and pays attention to environmental issues. ISPO has often been considered a legal standard since it becomes mandatory in 2004.

Coming into effect in 2015, MSPO is designed to support small and medium-sized growers, who were unable to afford RSPO certification and thus failed to run sustainable business. In December 2019, MSPO turned from a voluntary certification into mandatory one, which is thought to effectively contain the disorderly expansion of palm oil industry in Malaysia.

Much progress has been made since the implementation of MSPO. According to the Minister of Plantation and Commodities in Malaysia, as of April 2024, 4.94 million hectares (87.4% of oil palm planting areas), 407 out of 446 palm oil factories, and 151,152 small-scale growers (66.0% of the total) with the coverage of 542,215 hectares have been certificated. Meanwhile, MSPO is going to launch the Strategic Action Plan 2024-2026. The Plan will focus on building a powerful and reliable certification mechanism for sustainability, which helps guarantee the compliance of industry, enhance the value of MSPO certification, and promote people’s knowledge and recognition of such certification.

The exploration of sustainable palm oil planting and production will still advance. Besides, the “tug-of-war” between palm oil consumers and producers will not come to an end as long as there is a demand for palm oil.

来源：《中国东盟商界》杂志

文：林  涵 

翻译：李娜​        

审定：林  涵