Indonesia is the world’s top palm oil producer, accounting for 44% of the total market and 52% of European market. Nationally, 42% of palm oil is produced by small-scale farmers working either in partnership with a company (plasma schemes) or independently. Palm oil contributes 22.9 billion USD of national foreign exchange annually, provides employment for more than 15 million workers, and provides the foundation for many national and global chemical and biodiesel industries. On the other hand, the expansion of oil palm plantations resulted in the conversion of 479,000 hectares in 2016-2017 alone, much of which was forested land. To date, 12 million hectares are under oil palm plantations across all of Indonesia.
In January 2018 the European Parliament adopted a 'Palm Oil and Deforestation of Rainforests’ report. This report provides the basis for motions to prohibit palm oil imports for biodiesel by 2021 as part of the reform of the Renewable Energy Directive (RED) II. The EU policy has the potential to jeopardize the livelihoods of 1.5 million households and threaten the emerging rural economy in Indonesia.
The Worst Scenario
The position of the EU is not altogether coherent across the member states. The interests of the European agricultural sector lie at the core of the political process, as palm oil competes with European grown rapeseed as a feedstock. Eastern European countries support the ban though they do not depend on palm oil. Nordic countries support open trade policy.