Palm Oil Politics Strike Again

As legislative reversals go, this one was a biggie.

French legislators planned to impose a punitive tax on palm oil products from leading producers like Malaysia and Indonesia as part of a new biodiversity law. The planned tax – dubbed the Nutella Tax (after the famous chocolate spread, which contains plenty of palm oil) – would have tripled the current tariff of €103 per metric ton of palm oil products to €300 by 2017 and tripled it again to €900 per metric ton by 2020. Then, in an abrupt about-face, French lawmakers have decided to scrap the tax plan, which was meant to help protect Malaysia’s and Indonesia’s natural environments from further harm at the hands of palm oil cultivators.

Why the sudden change of heart? you may wonder.

The French said they were “blackmailed” by producer countries into doing so. “We are legislating with a knife at our throats,” Delphine Batho, a French politician, explained. “The French parliament is being blackmailed.”

An orangutan perches on the branch of a tree standing at the site of a newly felled forest, which was cut down to make way for a palm oil plantation in Indonesia. Photo Credit: Biosprit-subventionen

The lobby group Malaysian Palm Oil Council called the proposed tax “an unjust and unfair campaign against palm oil.” The Indonesian government, meanwhile, threatened to retaliate economically if the French legislature signed the tax into law by refusing to buy Airbus airplanes and communications technologies from France. The French lawmakers duly caved in, allowing cold hard economic considerations to take precedence over a principled stance of environmental protection.

Not surprisingly, palm oil producers were delighted. “We’re happy with the results,” said Eddy Martono, head of land and spatial division of the Indonesian Palm Oil Producers Association. “France’s additional tax would have negatively affected our palm oil trade with other EU countries; if one country imposes such a high tax, others would follow suit. That would have been a big burden for producers and manufacturers.”

Now it will be back to business as usual for Malaysian and Indonesian palm oil producers, whose activities have caused untold damage over the years to the two nations’ world-renowned biodiversity. Palm oil cultivators have felled large swaths of forest. They have drained vast areas of peatland and converted them into plantations (with a million hectares of peatland torched in Indonesia last year alone). They have helped drive numerous species of wildlife, including iconic tigers and rhinoceroses, to the brink of extinction. Albeit palm oil producers have frequently paid lip service to adopting “sustainable” practices, they have frequently failed to do so. Some have even gone so far as to violate the industry’s own regulatory practices with impunity. In other words, short-term profits have invariably come at the expense of long-term environmental protection.

Large-scale palm oil production has been a boon financially to both Malaysia and Indonesia, yes, but at what cost to the environment? Together, the two neighbors have planted 15 million hectares of oil palms and produce 84% of the world’s palm oil, much of which the two countries export to the EU. European politicians should do the right thing and use their financial leverage to try and force palm oil cultivators to stop degrading Malaysia’s and Indonesia’s natural environment.

That’s because expecting local producers to put their own houses in order is bound to remain a pipe dream. Leading palm oil heavyweights, several of which are Malaysian and control 25% of production in Indonesia, operate just as colonial-era rubber plantations once did. They have helped transform rural economies across the two countries but have wreaked havoc with natural environments in the process. In doing so, they have routinely taken advantage of legal loopholes, exploited or disadvantaged local populations, and degraded natural environments almost at will.

A palm oil plantation in Indonesia. Photo Credit” Wikimedia Commons

Consumer activism and international pressure can help force palm oil producers to change their ways. In response to revelations, for instance, that the Indonesian subsidiaries of the Malaysian palm oil giant IOI Group violated sustainable practices, to which it had signed on, the Anglo-Dutch consumer goods giant Unilever –  a world leader in palm oil use that purchases 1 million tons of crude palm oil each year – has decided to stop selling and making products with IOI oil in them. The American food manufacturing giants Kellogg’s and Mars Inc followed suit by likewise phasing out products with palm oil content from IOI subsidiaries. “We expect the highest standards from all of our suppliers [and the] suspension puts IOI in breach of our policy,” Unilever said.

We should all expect no less from palm oil producers: the highest standards of environmental sustainability. “While pressure for major reforms increases, governments and their domestic agribusiness allies (in Malaysia and Indonesia) are pushing back,” observe John F. McCarthy and Rob Cramb, authors of the recently published book The Oil Palm Complex. “Change will require a fundamental shift in accountability and enforcement within the two countries, driven by market pressure, support from reform-minded officials and advocacy from civil society,” they add. “It is no exaggeration to say that the political and economic processes at work in the oil palm complex will ultimately shape the outcomes for sustainable development in the region.”