Palm oil and the EU’s anti-deforestation law: Why the backlash?

The EU’s new deforestation law was hailed as watershed in the fight to protect the world’s forests. So why is it provoking such a fierce backlash in Indonesia and Malaysia? In the wake of a high-level meeting in Brussels last week, Giorgio Budi Indrarto charts what went wrong, and how to rectify it.

Giorgio Budi Indrarto, S.H is the deputy director of the Indonesian NGO Madani Berkelanjutan, which builds bridges between the Indonesian government, private sector, and civil society to tackle the country’s overlapping environmental crises.

The European Union was widely praised when it reached an historic agreement on the world’s first ever law banning imports of products linked to deforestation, in December 2022.

In the future, companies will have to prove that their goods haven’t harmed forests if they want to sell them on the EU market.

The law arose after years of tireless work by environmental campaigners and others, and was hailed as a “ray of hope”, a “global benchmark” and a “gold standard” for forest protection.

Recently, however, the glowing headlines have given way to disparaging ones.

These have largely emanated from Indonesia and Malaysia, the world’s two biggest producers of palm oil, one of the products covered by the new law.

In my country, Indonesia, the expansion of oil palm plantations is estimated to have caused the destruction of a third of our old-growth forest between 2001 and 2019.

But our government is calling the new EU law protectionist and discriminatory, while palm oil farmers have protested against it outside the EU Embassy office in Jakarta, and threatened to boycott EU goods if the law isn’t revoked.

So why has a law with the laudable aim of protecting the world’s forests provoked such a fierce backlash? And how can the current impasse be resolved?

This was the question at the heart of discussions in Brussels last week between the Indonesian Coordinating Minister for Economic Affairs, Airlangga Hartarto, Malaysian Deputy Prime Minister, Fadillah Yusof, EU lawmakers and officials, including Frans Timmermans, Virginijus Sinkevičius and Josep Borrell.

The roots of the divide over the new deforestation regulation lie in an earlier, unresolved dispute: the EU’s decision to phase out palm oil as a renewable biofuel for transport, also on the grounds of its environmental impact: a decision which led to claims from Indonesia and Malaysia that the EU was indulging in “crop apartheid”.

Both Indonesia and Malaysia see the new regulation as a challenge to their sovereignty: a law which will impact them, but which they weren’t adequately consulted on.

In a statement issued in the wake of last week’s meeting, the Council of Palm Oil Producing Countries (CPOPC), which is led by Indonesia and Malaysia, called the law “inherently discriminatory and punitive in nature”, adding that it would “have detrimental effects on international trade” and hinder the industry in its attempt to achieve the UN’s Sustainable Development Goals (SDGS).

From Indonesia’s perspective, the law also marks a shifting of the goalposts.

Almost eight years ago, we became the only country in the world to be awarded a license under an agreement with the EU guaranteeing the legality of our timber. Now another set of EU trade regulations relating to deforestation have been placed before us.

Yet, as somebody working on the frontline of protecting Indonesia’s forests from the expansion of oil palm plantations and other threats, I believe that much of the hostility against the new law comes from a misunderstanding of what it actually entails.

Indonesia’s national laws already meet some of the most significant criteria included in the new measures.

In order to export palm oil (and the other commodities included in the regulation) to the EU, businesses will be required to provide precise geolocation information on where it’s been produced.

Yet Indonesia already has a law requiring even the smallholders at the very bottom of the oil palm supply chain to provide this information: the difficulty, so far, has been in implementing it. If the EU was to offer support doing so, it could go some way in narrowing the divide, and easing the tensions, between the parties over the regulation.

The law will also require companies to provide evidence that their goods weren’t produced on land that was deforested after the end of 2020.

This also shouldn’t represent a significant barrier for Indonesia, given that deforestation for palm oil production has fallen dramatically in recent years: in 2020 it was almost 90% lower than the peak in 2012, despite palm oil production increasing.

So rather than presenting a threat to our sovereignty, the new EU regulation could offer a chance to help us implement our own laws – and redouble our efforts to stop palm oil production from destroying our tropical forests – at vast human, social and environmental costs.

But for this to work, the EU needs to abandon the unilateral approach it’s taken so far.

There are signs that it’s willing to do so.

Following the meeting with Indonesian and Malaysian ministers in Brussels, the European Commission indicated that it will set up a task force to address the thorny issues which divide them – taking on board the former’s demand for a more consultative process.

Partnerships – particularly with smallholders and Indonesian civil society organisations who, until now, have had little or no say in the regulation – must be at the core of this process. If they are, then there’s every chance that the regulation can succeed in its laudable aims.

Diplomacy is the key for all parties to forge a mutually beneficial path to a more sustainable future, and lift the clouds of misunderstanding which have gathered in recent months.

Tags: oil palm, agreement, Plantations, Indonesia, forests, EU, deforestation law, European Union, Malaysia, palm oil, imports, ban, Market