The Malaysian Government has launched an aggressive retaliation to the European Union’s recent revision of its Renewable Energy Directive. The new EU regulation is set to completely phase out biofuels, whose emission-saving properties are negated by the carbon emissions they create through indirect land use change, by 2030. Palm oil biodiesel is one such biofuel. Malaysia, which accounts for 28% of global palm oil production and 33% of palm oil exports, views the exclusion of palm oil from renewable energy sources as the start of a bigger environmental attack on its lucrative commodity.
Palm oil has long been known for its ties to deforestation with the resultant decimation of the orangutan population being but one of many consequences. Yet, as the supermarket chain Iceland found out last Christmas when their evocative ‘rang-tan’ advert was pulled from the air for being too political, the palm oil industry does not like being challenged.
Malaysian Prime Minister Mahathir Mohamad has labelled the EU’s decision regarding palm oil as a “grossly unfair, misguided policy”. He argues that the policy, rather than attempting to counter climate change, is only protectionism, aimed at supporting European farmers producing sunflower and rape-seed biofuels. He has denounced the EU’s stance on palm oil as “modern colonialism that has no place in today’s world.” He has threatened to raise tariffs on EU dairy imports and urged Malaysian airlines to stop purchases of European Airbuses in favour of Chinese models. What began as an environmental issue is devolving into a full-on trade dispute.
And one is not hard-pressed understand Malaysia’s outrage. Estimated to account for 3.8% of the country’s GDP, and supporting four million people throughout the country, palm oil is viewed, certainly in the eyes of the Malaysian Palm Oil Board (MPOB), as “a pillar of the Malaysian economy”. The MPOB also makes a fair point in stressing the productivity of the crop, which at 4.03 tonnes of oil per hectare per year far exceeds the productivity of its European counterparts sunflower and rapeseed at 0.6 and 0.8 tonnes respectively. The hypocrisy of the EU is also undeniable: its recent trade deal with the South American bloc ‘Mercosur’ clearly paves the way for expansion of the meat industry, whose greenhouse emissions far eclipse those of palm oil.
Yet the environmental damage the palm oil industry has inflicted is also irrefutable. The EU’s report reveals that from 1989 to 2013, 45% of the palm oil expansion was onto land that was previously rainforest. It also underlines that, despite the productivity of palm oil, the draining of peat land in palm oil plantations leads to significant carbon emissions. The MPOB’s claim that the “Malaysian palm oil industry is very well regulated and current practices remain committed towards the three components of sustainability” sits uneasily with the numerous accusations of worker exploitation as well as the illegal culling of orangutans. Unless sustainability efforts are taken seriously, the industry only promises to cause more environmental damage.
Moreover, Malaysia’s pro-palm oil campaigning has been undermined by its own hypocrisy and deception. Campaigns such as “Farmer’s Unite”, which claim to be representing the plight of small-scale palm oil farmers, have been exposed as being funded by government agencies charged with promoting palm oil.
The United Kingdom has recently found itself in the cross-hairs of this ecopolitical dispute. Malaysia has offered the UK a promising post-Brexit trade deal on the condition that it breaks with current European Union policy on the palm oil trade. Painting this as a “historic opportunity”, Mahathir Mohammed is clearly capitalising on the UK’s weakened diplomatic position. In many ways, however, it would be short-sighted of the British government to pass up this opportunity. It is naïve to believe that boycotting palm oil in the West will make the issue just go away; Malaysia is already preparing a back-up export relationship with China. Moreover, signing this trade deal would allow the UK to keep continued pressure on sustainability advances in the Malaysian palm oil industry. It would also, however, serve to further widen the already cavernous schism developing between the UK and the EU.
Understanding the palm oil industry is therefore not as simple as some would have us believe. While evocative adverts featuring orangutan orphans paint the issue as ethically black or white, the political reality of this natural resource is highly contentious and Britain’s decision on how it approaches future trade relationships with Malaysia will be a significant diplomatic marker.
Indeed, how the government responds to the Malaysian proposal could set a precedent for UK-trade deals in the post-Brexit era. The Malaysian Government will certainly not be the last to attempt to cement their own trade interests using Britain’s post-Brexit instability.