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Studies reveal palm oil impacts in Southeast Asia, propose EU policy changes

SEI research presented at European Development Days shows that as production has soared to meet global demand, driven in part by the EU’s Renewable Energy Directive, communities have been harmed. EU policies should be revised to ensure sustainability.

Tom Gill / Published on 3 October 2012

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Rasmus Kløcker Larsen
Rasmus Kløcker Larsen

Team Leader: Rights and Equity

SEI Headquarters

Palm oil grown in tropical countries is one of the main sources of biodiesel, and producing palm oil for global commodity markets has been an attractive economic-development pathway for some countries – most notably Indonesia and Malaysia, which together produce 90% of the world’s palm oil.

A major driver of recent growth in palm oil production is the EU market for biofuels (as well as for food and cosmetics). The European Union’s Renewable Energy Directive (EU-RED) has set a target of meeting 10% of the European transport sector’s energy needs with renewable energy by 2020, which in practice has meant an increase in the use of biodiesel, which accounts for over three-quarters of EU biofuels consumption.

The field research, presented in a recent SEI policy brief, found that local people pay a steep price for the biofuels boom. Interviews with villagers in Central Kalimantan, for example, a poor Indonesian province with large-scale palm oil production, show the plantations have harmed the local environment and people’s livelihoods.

The reported impacts include deforestation; water pollution from run-off, pesticides, and dumping of palm-oil mill effluent and other waste; a decline in fish stocks and aquatic plants, and redirected water flows. Plantations also dry out the adjacent community land, which lowers water tables, dries out wells, and forces people to give up traditional rice farming.

Creating sustainable EU policies on palm oil
Another new SEI policy brief shows how improving the EU-RED – which is currently under revision – can increase the sustainability of Europe’s biofuels use and make a positive impact on local livelihoods.

To qualify for the mandatory EU-RED targets, and for EU subsidies, biofuels must comply with so-called ‘Sustainability Criteria’, set out in articles 17, 18, and 19 of EU-RED. Yet, as currently formulated, the criteria focus on greenhouse gas emissions and preventing deforestation, and make no attempt to regulate for sustainable management of land and water resources in biofuels production outside the EU.

It remains optional for member states to monitor such impacts. Nor does the EU-RED include social and/or economic criteria related to impacts on local livelihoods. This approach is justified by reference to the free trade principles of the World Trade Organization (WTO) and to the risk of legal liability if the EU were found to promote protectionism.

Although the EU does encourage national authorities and companies in producer countries to implement voluntary certification schemes that adhere to the Sustainability Criteria, SEI researchers argue that these “do not on their own adequately represent the interests of local people in producer countries”.

“Not only are the schemes voluntary, but the spirit of the EU-RED is as a climate mitigation policy, which tends to promote centralized schemes and sideline those that take into account a wider range of local impacts,” says Rasmus Kløcker Larsen, an SEI research fellow who coordinated the EU-RED analysis.

“The EU-RED is also not aligned with the EU’s ‘policy coherence for development’ agenda, which says that development cooperation objectives should be taken into account in all sectoral policies,” Larsen adds. “In that context, the severe impacts of palm oil cultivation on livelihoods, water resources, land management and ecosystem services ought to stimulate immediate action in the European Parliament and in Member States.”

The researchers put forward a range of ways in which the EU can revise its biofuels policies for sustainable production of palm oil in Southeast Asia. They include stricter and mandatory criteria for water resource and land use management in the EU-RED, as well as prioritizing more robust sustainability standards, such as those of the Roundtable on Sustainable Palm Oil (RSPO), which could be embedded them into trade agreements and also incorporated into businesses’ corporate social responsibility policies.

In addition, the policy brief recommends aligning the EU-RED with the “policy coherence for development” agenda; incorporating the United Nations principle of “free, prior and informed consent” into the EU-RED, and strengthening traceability and transparency in the audit trail, to reward governments and companies that follow formal requirements and actively promote espoused sustainable water and land management strategies.

Read the policy briefs: The Oil Palm Sector: Community Grievances and Water Governance in Central Kalimantan, Indonesia and How the EU Can Revise its Biofuel Policies to Promote ‘Sustainable’ Palm Oil Cultivation in Southeast Asia.

Along with the biofuels presentation, SEI Executive Director Johan L. Kuylenstierna will participate in a panel discussion on Wednesday: “Post-Rio+20: which strategy for sustainable and inclusive growth?” To learn more about European Development Days, visit

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