Palm Oil Creates “Economic Pie” To The European Union

Palm oil contributes  5.8 billion to The European Union (EU). Europe Economics, 2014

A study conducted by Europe Economics with a title Economic Impact of Palm Oil Import in the EU in 2014 states that the use of palm oil in the European Union (EU) has created a fairly large economic pie every year. In addition to its contribution to employment of 117,000 jobs, palm oil imports in 16 EU member countries contributed GDP of €5.8 billion. It also contributed to tax revenue of €2.6 billion. The largest economies of EU Member States; Italy, Spain, Germany, France, Netherland and Finland shared the bigger part of pie. These five countries have downstream industries that use palm oil namely oleo chemical industry, food industry and biodiesel industry.

Every year EU imported 6.4 million tons of palm oil from Indonesia and Malaysia. Approximately 40 percent of the imports are used for both biodiesel and electricity generation, whereas the remaining 60 percent is used for food, cosmetic ingredients and toiletries.

The use of palm oil for energy is part of the EU’s Energy Efficiency Directives (Directive 2009/28/EC) which determined that 20 % of the overall share of energy must be from renewable sources by 2020. The energy directives are part of the efforts to reduce greenhouse gas (GHG) emissions as EU has the highest region of GHG emissions in the world.

In order to achieve that target, EU must import vegetable oil including palm oil. In the EU, the production of vegetable oils such as rapeseed oil and sunflower oil is far from sufficient because most of it is used for food. Most of the land has been used to produce food thus it is no longer possible to expand the land to cultivate more rapeseed and sunflower.

EU Member States are facing the dilemma of food and fuels trade-off. To reduce GHG emissions they have to reduce consumption of fossil fuels and replace it with biofuel. Meanwhile to produce biofuel, they have to struggle with food. OECD (2006) estimates that if only 10 percent of fossil fuel consumption is replaced by biofuels, then the EU must convert 70 percent of its agricultural land to vegetable oil crops. This certainly is not an option. The only solution for the EU is to import vegetable oils including palm oil from other countries.

In other words, palm oil came as part of the solution to the food and fuels trade-off dilemma faced by the EU. If palm oil imports are stopped, the EU will face many problems such as rise in food prices, decrease of biofuel production, or unattained energy directive. The economic pie of palm oil is also going to vanish.

Even though palm oil is very important for the EU, it is also true that EU Member States often make it difficult for Indonesian farmers to do their job. Some of the NGOs who support Anti-Palm Oil movement received donation from EU member countries. French Ecology Minister even called for a Nutella boycott because it is made with palm oil. The EU government often collectively threatens to put super high import of duty on palm oil.

It is strange to see how EU has been behaving lately. Their statement does not always match with their action. It is a double standard!

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