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Palm oil smallholders and land-use change in Indonesia and Malaysia

Implications for the EU delegated act of the recast Renewable Energy Directive

Lately, the rhetoric has been heating up between the EU and palm oil-producing states like Malaysia and Indonesia. There is even talk of a "trade war", "neo-colonialism", a boycott of the EU and claims of willful EU impoverishment of large swathes of those countries’ populations. 

As the EU is wrapping up its process of revising its Renewable Energy Directive (RED II), Malaysia and Indonesia have launched a fierce campaign against EU proposals to reduce incentives to use palm oil-based biofuels under RED II. The main argument is that numerous palm oil smallholders would be thrown into poverty were such proposals to be enacted.

The European Commission has in a draft act, which was released last month and will be finalised this spring, largely given in to this pressure from Indonesia and Malaysia. Despite the fact that the Commission documents that palm oil production is endemically associated with deforestation and therefore classifies it as ‘high risk’, it proposes loopholes in its legislation that would subsidise potentially large volumes of palm oil on the European biofuel market. One of the proposals is that biofuels based on palm oil produced by so-called “independent smallholders” can be certified as “low risk” and therefore qualify for continued subsidisation. 

Rainforest Foundation Norway has therefore commissioned a report to review the current research evidence on independent smallholders in Indonesia and Malaysia. It focuses on the challenges in defining and counting different types of smallholders, the difficulties in certifying smallholders, the role of smallholders in frontier expansion and land-use change, and the relationship between palm oil development and rural poverty reduction. The implications of these issues are identified together with policy recommendations for the delegated act. 

Read the report ‘Palm oil smallholders and land-use change in Indonesia and Malaysia’ here.