An Indonesian worker handles palm oil seeds at a plantation in Pelalawan, Riau province on Sumatra island. Photo: AFP/ Adek Berry
Indonesia's protectionist ban on palm oil exports has caused a spike in global prices of the commodity. Photo: AFP / Adek Berry

The European Union’s policy on imports of crude palm oil (CPO) amounts to discrimination against Indonesia, denigrating oil-palm cultivation while shrugging off the environmental damage done by other biofuel crops.

That said, there is no doubt that the Indonesian palm-oil industry is far from trouble-free, suffering from corporate malpractice and lax enforcement, while creating significant – and costly – damage to the environment.

The European Parliament passed legislation last January setting 2020 as the deadline for banning all imports of CPO destined for conversion to biofuels. That amounts to 40% of the 4.2 million tons of CPO Indonesia exported to the EU’s 28 member states last year.

Indonesia objected to the plan, arguing that palm-oil products make a significant contribution to the country’s economy. Jakarta has called on the EU not to discriminate against palm oil, even hinting at a retaliatory trade war that would rebound on French plane-maker Airbus, which has 112 jetliners now operating in the country and with more than 300 more on order with Indonesian carriers.

The latest negotiations resulted in a delay in the ban until 2030.

Globally, the main crops that contribute directly or indirectly to deforestation include soybeans, maize (corn), oil palm, rice and sugarcane. According to an EU report released in 2013, the largest cause of deforestation is livestock, with oil palm well down the list.

Biofuels in the EU do not come only from palm oil but also from rapeseed, sunflowers and soybeans. Banning palm-oil products but allowing other sources of biofuels that cause large-scale deforestation is a discriminatory policy.

Global standards

The Roundtable on Sustainable Palm Oil (RSPO) was established to develop and implement global standards for sustainable palm-oil production. The organization was established in 2004 in Switzerland to set clear ecological and ethical standards for palm-oil production, and its members include top companies such as Unilever, Cadbury’s, Nestlé and Tesco, as well as palm-oil distributors such as Cargill and ADM.

RSPO is a certification system that aims to guarantee that palm-oil production for international markets does not harm the environment, violate human rights, mistreat workers, or conflict with community interests.

According to RSPO Criterion 2.3, “land use for oil palm does not diminish the legal rights, or customary rights, of other users, without their free, prior and informed consent.” Yet palm-oil companies in Indonesia often conflict with local communities over land grabs. In agrarian conflicts last year, several people were killed or injured and hundreds were arrested as they tried to defend their land.

An investigation by Dhandy Dwi Laksono, an Indonesian journalist, found that many companies buy oil palm from outfits that collect smallholder farm produce but do not follow RSPO standards – for instance, spraying plants without a mask or respiratory filter. Setting high standards is all well and good, but if they are weakly enforced, they won’t go very far.

A major problem in Indonesia is regular forest fires due to expansion of oil-palm plantations. According to a report by the World Bank, based on data supplied by the Indonesian government, the costs related to man-made fires were approximately double the economic contribution of plantation expansion in 2015.

Apart from the environmental problems caused by deforestation, as a result of these fires, schools have to be closed, outdoor business activities are difficult, airports and flights are disrupted, and respiratory infections increase, while the government bears additional costs of smoke control or creating artificial rain.

Therefore, when calculating the real value of Indonesia’s palm-oil industry, these costs must be taken into account, and not just the export value of palm-oil products.

Alek K Kurniawan is an independent journalist base on Indonesia. He has studied international law at Andalas University; and regional development at Indef School of Political Economy. He can be contacted via e-mail at