Pushing Europe’s economic levers for a greener world

The EU is reconsidering its approach to deforestation and palm oil. This could be a good thing.

The future of the world may be determined by how well major powers—not least the European Union—develop robust partnerships with emerging markets in the global south. Therefore, although it may not initially seem so, Europe’s recent flip-flops over palm oil are far more consequential than we might assume. 

The calculation had been simple. The production of palm oil, an edible food product, was identified as a major driver of tropical deforestation. Deforestation is of course bad for our planet, particularly as a major driver of climate change. And, even worse, as reports by the World Wildlife Fund among others have reiterated, deforestation increases the risk of pandemics such as Covid-19. 

De facto ban

Based on such evidence, the EU implemented a de facto ban on palm oil for biodiesel in 2019. Yet scientists have pointed out that the ban would be ineffective—it wouldn’t reduce deforestation—and might even be counterproductive. Research by the University of Bath, for instance, recently found that a boycott of palm oil would drive a switch to less eco-friendly alternatives. 

These edible oils use more fertiliser, water and land—land which had once been untouched forest. The ban would harm the very environment it had set out to protect. Which is why we should welcome a paper published last month by the European Parliament’s Directorate-General for External Policies of the Union.

The paper admits that it would be ‘more effective and less costly’ if major palm-oil producers, such as Malaysia and Indonesia, were to ‘implement a moratorium on deforestation’. Such a national-level moratorium in other words would be more effective and less costly than trying to prevent deforestation by banning the import of palm oil.

‘Inclusive partnerships’

What is unclear is what follows from this about-face. Another recent report from the European Parliament’s Committee on Agriculture and Rural Affairs throws some light on the new thinking emerging in Brussels. The report encourages ‘inclusive partnerships’ with the global south to prevent deforestation, but also calls for new legal powers and certification standards effectively to criminalise deforestation. The problem is there is little or no explanation as to how this could work in practice. 

What is meant by an ‘inclusive partnership’? What kind of criminal penalties are proposed and how would they be imposed? How can Europe encourage developing nations to co-operate on common standards of sustainability? 

One part of the answer to these questions could be trade. For those palm-oil producers which meet environmental standards designed to prevent deforestation, the EU should, as an economic carrot, open its markets. This would protect the environment, halt deforestation and benefit European consumers. It would also help the economies of the global south. This would be a model for how the EU engages with the developing world. 

Another part would be for the EU to do more to understand, engage with and support national-level progress, providing a substantive context for the ‘inclusive partnerships’ being contemplated. For instance, by the end of 2019, two-thirds of Malaysian palm-oil plantations were certified under the Malaysia Sustainable Palm Oil scheme, a mandatory national certification programme which is now enforceable by law.

Malaysia’s goal is to certify all of its palm oil by 2020. Last month, too, the World Resources Institute found that Malaysia’s rate of deforestation had slowed over the past three years, attributed to successful national efforts.

Enforcement action

This example shows that local efforts play a key role in meeting the EU’s important goals on deforestation. As both the recent European Parliament documents show, these cannot be achieved without enforcement action within producer countries. 

Yet the case of Malaysia demonstrates that the EU has a viable path forward in partnership with countries evidencing real commitment to stopping deforestation, which can form the ecological foundation of mutually beneficial trade relationships. This can protect the hundreds of thousands of smallholder farmers who depend on palm oil for their livelihoods, while simultaneously protecting the environment and boosting economies.

What is missing so far from the current discussions in Brussels is attention to the frameworks which could regulate such partnerships. To be properly incentivised, the EU must on the one hand work closely with countries such as Malaysia to develop a joint mechanism for determining rigorous sustainability standards. On the other, that incentivisation must coexist with meaningful penalties. Just as there are opportunities for those who meet environmental standards, there should be consequences for those who do not—loss of access to markets, for instance.

Targeted approach

The EU should, therefore, shift from an inefficient blanket ban, which is potentially counterproductive and self-defeating even from an environmental perspective, to a targeted, inclusive approach. 

The task of engineering these ‘inclusive partnerships’ will not be easy. The EU will need to draw on all its diplomatic nous to design a participatory architecture that will enable the EU to fight deforestation by partnering with like-minded countries. But the benefit of this approach would be remarkable. A successful model developed with Malaysia, for instance, could provide a powerful template to be applied in other regions such as south America, where deforestation has recently accelerated.