EU biofuel subsidies driving unsustainable palm oil production, IISD report shows

GENEVA—September 9, 2013—European Union biofuel policy is pushing up demand for palm oil, says a report released today by the International Institute for Sustainable Development.

The report, "The EU Biofuel Policy and Palm Oil: Cutting subsidies or cutting rainforest?", highlights a tension in the EU's environmental policy—support for biodiesel may be undermining efforts to preserve globally significant carbon stocks such as rainforest and peat lands.

IISD found the use of palm oil in biodiesel production in the EU is much higher than previously estimated. According to IISD estimates, there was nearly a five-fold increase in the EU biofuels industry's use of palm oil as biodiesel feedstock to 1.9 million tonnes from 0.4 million tonnes per year, between 2006 and 2012

The additional demand can be linked primarily to the growth of biodiesel production, which has been stimulated by government policies. IISD estimates the value of the government support to biodiesel in the EU was in the range of €4.6 billion to €5.6 billion in 2011.

Global production of palm oil has doubled over the past 10 years to 56 million metric tonnes in 2013. By 2020 it is expected to grow another 40 per cent from current levels to 78 million tonnes. In 2013, 85 per cent of the global palm oil production will come from two countries: Indonesia (29 million tonnes) and Malaysia (19 million tonnes).

Every extra tonne of biodiesel produced in the EU in 2006–2012 was associated with an extra 110 kilograms of palm oil consumed as biodiesel feedstock. If no policy change occurs, and this trend continues, by 2020 the EU biodiesel sector will consume around 2.6 - 2.7 million tonnes of palm oil, or 40 per cent more than in 2012. As well, under the business-as-usual scenario, the EU will also increase imports of biodiesel, a significant share of which is derived from palm oil.

"If the EU doesn't cut its current subsidies to biodiesel, it may, in an indirect way, lead to the cutting down of more rainforests, the conversion of more forest and peat land for palm oil plantations, and the emission of more carbon into the atmosphere," said Ivetta Gerasimchuk, IISD research officer and one of the report's authors.

The European Parliament will hold a plenary vote on revisiting EU biofuel policies in Strasbourg on September 11, 2013. IISD recommends parliamentarians vote to support the European Commission's proposal to reduce the contribution of food-based biofuels towards the EU target of renewable energy in transport by 2020 to 5 per cent from the current 10 per cent target. IISD also recommends EU member states phase out the costly subsidies to biofuels.

For more information, contact Ivetta Gerasimchuk at +41 22 917-8238 or Damon Vis-Dunbar at +41 22 917-8848.