Indonesia axes palm-oil levies

To support its farmers, Indonesia today (Wednesday) relaxed rules on palm-oil levies and its associated products following a drop in prices.

The world’s largest exporter of palm oil said it would not collect levies from palm exporters when prices fell below a threshold of US$570 per tonne.

The benchmark palm-oil contract in Bursa Malaysia hit its lowest level since August 2015 last week, as stocks of the vegetable oil continued to rise amid falling global demand.
But Malaysian palm-oil futures this week reversed the earlier losses, supported by strengthening crude-oil prices.

“The market is recovering after seeing a big slump. Crude oil is also better,” a trader Kuala Lumpur told Reuters.

The Elaeis guineensis tree grows in the equatorial regions with Malaysia and Indonesia accounting for almost 85 per cent of global palm-oil supplies.

Palm-oil prices are affected by crude oil, as the cooking oil is used to make biodiesel.
The sector is coming under increasing global scrutiny for its environmental consequences and, according to the WWF, every hour an area of rainforest the size of 300 football fields is cleared for palm oil to be grown on.

Norway is now set to become the first country to stop its biofuel industry buying palm oil.
The parliamentary decision, which is due to be implemented in 2020, has been welcomed by environmentalists as a victory in the fight to save rainforests, limit climate change and protect the orangutan, which is threatened by extinction.

There is an 85-per-cent loss of biodiversity in an ecosystem when plantations replace the world’s most biodiverse ecosystems. Tigers, rhinos and elephants are also losing habitats and becoming increasingly endangered or extinct.

Norway voted last year to stop its government purchasing the biofuel but the decision was not fully implemented as the authorities opted to rely on voluntary measures instead.

This week’s palm-oil vote won a larger majority, with government support, but it also covered the entire fuel market.

The Norwegian authorities were told by MPs “to formulate a comprehensive proposal for policies and taxes in the biofuels policy in order to exclude biofuels with high deforestation risk”.

Norway’s consumption of palm oil in fuels peaked in 2017 because of measures to reduce fossil-fuel use in transport.

Ominously for Malaysia and Indonesia, Norwegian environmentalists said the vote should encourage other countries.

“The Norwegian parliament’s decision sets an important example to other countries and demonstrates the need for a serious reform of the world’s palm oil industry,” said Nils Hermann Ranum of the Rainforest Foundation Norway.

Indonesia is now the world’s third-highest greenhouse gas emitter because cleared vegetation is regularly burned, choking southern Asean in haze.

The environmental consultancy Cerulogy and Rainforest Foundation Norway reported this year that under current biofuel targets, demand for palm oil would increase by six times over the next 10 years.

It estimated this would produce 7 billion tonnes of carbon-dioxide emissions over the next 20 years: more than the annual US emissions.

The EU has voted to phase out biofuels linked with deforestation and habitat destruction but not until 2030.

The gentle orangutan is becoming an international focal point. Picture credit: PXHere