Proofs of sustainability question as schemes proliferate

Editor's note: A timely alert from the European Commision via ISCC, to avoid the problem of double-selling within the ISCC system and between ISCC and national mandates in Indonesia, Malaysia and others. The risk of inadvertent double-selling between ISCC and RSPO was already apparent several years ago. With the relative rise of non-certification traceablity (that has high pledges for "no deforestation, no peat, no exploitation") and shifts among big buyers to accept traceability, apparent preference for tracing to low risk and certified mills also raises similar questions. The jumble of certification rules and markets (including biofuels mandates) as well as non-certification B2B approaches gives rise to concerns with Proofs of Sustainability. The issue is likely to be led by mandatory sustainability (energy sector) while voluntary (non-energy) has had more latitude. Issues of multi-layering or multi-selling also arises in conservation areas and is being reviewed by the ISEAL Alliance with regard to say a conservation area for palm oil being used for logging business. Policy leakages abound in the complex world of sustainability. Note that EU politicians are already considering a single certification scheme.


ISCC System Update - 14 March 2017: Letter from the European Commission on the Issuing of Proofs of Sustainability. The European Commission recently sent a letter to all voluntary schemes recognized by the Commission. In this letter, the Commission clarifies that it is not allowed to count a batch of biofuel towards biofuel quotas in more than one EU Member State. To avoid the risk of such multiple counting it should not be possible under recognized voluntary schemes to issue Proofs of Sustainability (PoS) for deliveries or sales of sustainable biofuel, if the biofuel has already been used for any of the purposes of Article 17 (1) of the RED, including the fulfilment of a national quota obligation. This means, once a batch of biofuel has been counted towards a national biofuel quota it is not allowed to issue a PoS for the respective amount of biofuel. This is also not allowed if the PoS itself includes an explicit statement that the respective amount of biofuel was already used to fulfil a national biofuel quota.

On 9 Mar, European politicians backed (56 to 1) a non-binding report on sustainable palm oil (to be put to full House vote in April for phase-out from biofuel usage of deforestation producst by 2020 and a single certification scheme)... http://www.foodingredientsfirst.com/news/MEPs-Fight-Against-Unsustainable-Palm-Oil-Entering-EU-Market.html -- In her report  Konečná  calls on the European Commission to strengthen environmental measures to prevent palm oil-related deforestation and phase out the use of palm oil as a component of biodiesel by 2020. Products should also be able to be certified for the socially responsible origin of their palm oil. “I believe that the European Parliament should be very ambitious," she said. "There should not be any palm oil in biofuels." The environment committee votes on the report on 9 March. It will then be up to all MEPs to vote on it during an upcoming plenary session. http://www.europarl.europa.eu/news/en/news-room/20170306STO65231/palm-oil-the-high-cost-of-cultivating-the-cheap-vegetable-oil

EU’s Product Environmental Footprint (PEF) initiative: Fratini Vergano report

The EU’s Product Environmental Footprint initiative and the potential impacts on international trade
Trade Perspectives by Fratini Vergano, European lawyers,  Issue No. 20 of 6 November 2015 (via email); In relevant part, the Commission’s initiative intends to remedy to the following problems: (i) the lack of a common definition of ‘green product’; (ii) the unnecessary costs for businesses caused by the proliferation of footprint methods, as well as the impact on the free movement of products that such proliferation stands to have; and (iii) the lack of consumers’ trust in ‘green claims’ which, according to the Commission and the OECD’s “Environmental Claims – Findings and Conclusions of the OECD Committee on Consumer Policy” are “becoming more superficial and vague in their use of terminology”. The PEF has thus been conceived as a method to measure life cycle environmental impacts, based, according to the EU Commission, on existing LCA approaches and international standards. The PEF methodology requires that Product Environmental Footprint Category Rules (hereinafter, PEFCRs) be developed to allow comparison of environmental performances between similar products (i.e., products within the same ‘product category’, which is defined as group of products, including services, that can fulfil equivalent functions), and to ensure that environmental performance is quantified in the same way for similar products. The three-year pilot phase has been conceived....Pilots have been established in sectors such as information technology equipment, leather, photovoltaic electric generation and a range of food and drink products, such as pasta, olive oil, coffee, dairy, meat, fish and wine, inter alia. The PEFCRs resulting from the pilot phase will become the product rules valid under the PEF, to be used by all stakeholders in the sector in the EU or internationally who decide to measure the performance of their products based on PEF......
The TBT Agreement allows WTO Members to adopt measures that result in technical barriers to trade directed (inter alia) at the protection of the environment. However, it also requires that such technical regulations be non-discriminatory, be based on science and be not more trade-restrictive than necessary to achieve the legitimate objective sought..... The EU has already applied or proposed comparable classification and grading systems in sectors such as biofuels, with the establishment of default values for purposes of the calculation of greenhouse gas emissions savings under the Fuel Quality Directive and the Renewable Energy Directive and the  Indirect Land Use Change factors....it remains to be seen which factors will be considered for the determination of the PEFCRs, what will be the recommended or required use of the PEF and the PEFCRs (e.g., labelling, incentives, premiums), and whether any such future framework would result in better conditions of competition for certain products of domestic or foreign origin.

End product news & views (update 3a): A junk food free world? Italy campaign against palm oil in food products.

22 December: A junk food free world? Italy campaign against palm oil in food products.

Hold the Cookies, Save the Climate - Everyone knows meat is bad for the environment. But so is an ingredient commonly found in junk food. By Ruth DeFries; Imagine if eating packaged cookies and crackers were as socially unacceptable as smoking a cigarette. People would sneak to the balcony to tear open packages of Oreos. Travelers would slink into designated rooms to scarf down candy bars. “No junk food” signs would adorn the halls of public buildings. Waistlines, nutrition, and health care costs would all by improved by a junk food–free world. So would the climate, the rain forests, and the dwindling populations of wild orangutans in Southeast Asia...... The protests against palm oil have raised awareness about the damage that may be wrought by the world’s voracious appetite for cheap fat. They also bring up many thorny questions about the right path to a more equitable world, that has economic opportunities for all, and won’t destroy the planet in the process. Do the environmental costs of palm oil from Southeast Asia outweigh the damage from industrial farming of soybeans in the prairies of the Midwest? Should those countries with remaining stocks of rich, lush rain forests be obliged to forgo the benefits of developing their agriculture? With the push toward certification of sustainably produced palm oil, how can the millions of poor oil palm farmers afford to go through the expensive process to get certified? These knotty questions have no obvious answers. But one fact is clear. Whether it’s squeezed from soybeans or from the fruits of palm trees, oil in processed food is a losing proposition.... propositionhttp://www.slate.com/articles/technology/future_tense/2014/12/palm_tree_oil_and_the_environment_skip_the_cookies_to_fight_climate_change.html


A Comedian vs 14,000 Italian Jobs & 4 Million Small Farmers b IPPA, 15 December 2014
The latest anti-palm oil campaign (and anti-poor people) campaign to emerge from Fortress Europe has come from Beppe Grillo and his Movimento 5 Stelle, also known as M5S, an Italian political party (party in the literal sense, not political sense). M5S is calling for the outright banning of palm oil from food products in Italy.... People’s livelihoods are at stake....
http://palmoilfactchecker.org/2014/12/a-comedian-vs-14000-italian-jobs-4-million-small-farmers/

15 December: ‘Free-from’ campaigns are illegal or deceptive and also unnecessary as of 13 December 2014

In Trade Perspectives by FratiniVergano - European Lawyers, Issue No. 23 of 12 December 2014 on Mandatory declaration of specific vegetable oils in food as of 13 December 2014: ..... By making it compulsory that the oil origin be specified (so that a consumer can make an informed choice in the selection of food products), a mere look at the list of ingredients will tell consumers whether a product contains a specific vegetable oil or not. ‘Free-from’ campaigns directly on the products packaging should, therefore, be seen not only as illegal or deceptive (as argued above), but also unnecessary as of 13 December 2014, since any consumer will be able to tell what vegetable oil is present or not in any food product. There will be no need to use these dubious ‘free-from’ campaigns in order to ‘help’ consumers make informed choices. Food producers remain entitled to make positive claims about the presence of specific products on in their products, if they believe that such label has marketing value and will be appealing to consumers, but negative labels must be better regulated and not allowed, unless they are permitted nutrition claims under the NHCR.... The growing use of these damaging negative labels in countries like France and Belgium must be brought to an end.  Authorities and commercial operators need to closely scrutinise the market and challenge these anti-competitive practices, when they contravene EU and Member States’ laws. The expectation is that EU authorities and EU Member States, while they impose costly new rules on producers, also ensure that consumers are not misled by astute marketing techniques that have no informative agenda, but simply aim at denigrating certain vegetable oils in order to promote others or to convince consumers that what is ‘free’ from a certain oil is a better product....


12 December 2014 evening: EU labelling campaign wanted to encourage sustainability, but a poll of Guardian readers points to many wanting to avoid palm oil?

source: https://image-store.slidesharecdn.com/179a662a-44d4-4460-b47d-2f76b6828a77-original.jpeg

EU labelling changes force industry action on palm oil, a new law is predicted to benefit the sustainable palm oil industry, but the question is whether consumers will care; From Saturday, 500 million consumers in Europe will become aware that palm oil is in their food. The EU law on food information to consumers (otherwise known as FIC) means that food stuffs can no longer get away with hiding ingredients under generic titles. Now ingredients will have to be exactly what it says on the tin, and sustainable palm oil could be a major beneficiary.... The palm oil debate is funded by the Roundtable on Sustainable Palm Oil. All content is editorially independent except for pieces labelled advertisement feature. Find out more here. http://www.theguardian.com/sustainable-business/2014/dec/12/eu-labelling-changes-palm-oil-consumer-change

Will new EU food labelling rules change your purchasing decisions on palm oil?
Poll: will seeing palm oil in a product's ingredients list change your decision to buy it?
by Jenny Purt theguardian.com, Friday 12 December 2014 12.41 GMT
http://www.theguardian.com/sustainable-business/poll/eu-food-labelling-change-palm-oil-purchasing-decisions-poll; comment: Michelle Desilets 12 December 2014 1:03pm: The motivation for the campaign to clearly label the kind of oil used in products had a great deal to do with encouraging manufacturers to ensure that the palm oil they use is sustainably sourced. Perhaps the poll could have been improved with an option of something along the lines of "I will seek products that use palm oil and are certified sustainable."

source: Guardian poll, 12 Dec 2014, 11pm Singapore time; but number of respondents not indicated

12 December 2014: health & sustainability link, reformulate petition, Iran reduces palm oil, "palm oil free" illegal?

Palm oil: Health and sustainability are linked in consumers' minds by FoodNavigator.com  - ‎Dec 4, 2014‎; "Palm oil is subject to several consumer concerns - its sustainability and health impacts in particular - but these need to be addressed together rather than separately, according to the European Palm Oil Alliance (EPOA)...." http://www.foodnavigator.com/Market-Trends/Palm-oil-Health-and-sustainability-are-linked-in-consumers-minds

Petition to limit palm oil attracts more than 50000 signatures; FoodNavigator.com  - ‎Dec 2, 2014‎  The petition, published on Change.org , says it opposes the use of palm oil on ethical, environmental and health grounds, and invites companies to reformulate using other non-hydrogenated vegetable oils or butter.

Iran decreases palm oil imports due to health concerns by Trend.az  - ‎Dec 9, 2014‎; "Iran has decreased the importation of palm oil due to health concerns, ISNA news agency reported on Dec. 9. The country imported 7.415 million metric tons of palm oil in the first eight months of the current Iranian calendar year (March 21-November 21 ..." http://en.trend.az/iran/business/2341891.html

'Palm oil free' products could face legal challenge, say lawyers by FoodNavigator.com  - ‎Dec 3, 2014‎ 
“However, in the absence of evidence that a specific oil represents a risk to consumer health, inclusion of “no palm oil” claim front of label unjustly singles palm oil out and places emphasis on the absence of palm oil in the product in a manner that ..." http://www.foodnavigator.com/Policy/Palm-oil-free-products-could-face-legal-challenge-say-lawyers

Nash: Belgium's label against palm oil illegal by Yahoo Malaysia News  - ‎Dec 3, 2014‎ 
“We acknowledge this FIC regulation, but we reject the 'No Palm Oil' defamatory connotation in front-of-pack labels,” said Zulkifli..." https://my.news.yahoo.com/nash-belgium-label-against-palm-152732843.html


10 December: EU FIC regulation boost sustainability but not mass reformulation

"Food Information for Consumers (FIC) regulation is due to come into force across the EU on December 13, and with its requirement to identify specific vegetable oils on ingredient lists.... The palm oil industry had feared that the rules would lead to mass reformulation, as manufacturers responded to perceived consumer concerns about palm oil's sustainability and health effects. However this has not happened, the EPOA (European Palm Oil Alliance) says..."There has sure been a stagnation of palm oil use over the past three or four years, but it's not been the big drop that some had feared" (EPOA's Margaret Logman) said..... (FEDOIL's Nathalie Lecocq) pointed out that oils have a specific function that can't always be replicated. "It would be a mistake to think we need to get rid of one oil because it is imported," she said.... some palm oil producers have also said that the FIC regulations have spurred manufacturers to source more sustainable palm oil...."
http://www.foodnavigator.com/Policy/FIC-vegetable-oil-labelling-rules-have-not-led-to-mass-reformulation-says-EPOA

Indonesia biodiesel - a tepid first tender

From Khor Reports's Palm Oil Newsletter #6 Jan/Feb 2014

A tepid tender

Indonesia’s biodiesel program is getting off to a slow start. Palm oil biodiesel players do not seem to like the “below gas oil benchmark” and the depot-delivered price offered. Below benchmark pricing means that palm oil prices may end up being higher than the selling price of biodiesel and sellers pay (often high) transport costs to the depots (interviews, Nov 2013). Thus, “Pertamina (the national oil company) received bids representing only 18% of the biodiesel tender target of 6.6m kiloleters (for two years supply).” Most producers were unable to bid competitively, with the “price below MOPS (Mean of Platts Singapore) – or MOPS minus alpha – although data over the past four years revealed that biodiesel price has mostly traded above MOPS… (Thus, DBS says) expect the participation rate to remain low for the next biodiesel tender” (Kontan & DBS Research, 2 Jan 2014). Depending on spreads of palm with gas oil prices, exports may prove more attractive.

Dorab Mistry said that Indonesia’s move to increase blending (alongside Malaysia and Brazil; while the USA and the EU balks) will be a “game changer” for palm oil demand. Indonesia upped its biodiesel blend in subsidized fuel from 7.5 to 10% in September 2013 and expanded its 2014 mandate to non-subsidized fuel and industrial users. Biodiesel capacity may jump to 8.8 (by end-2015) from 5.6 million kiloliters (in 2013; Biofuel Producers Association). Mistry says “domestic mandates for biodiesel in Indonesia and Malaysia will work as long as palm prices remain competitive with Brent crude… Between July and October, the spread between palm and gas oil was enough to create an additional monthly biodiesel demand of 100,000 to 150,000 tonnes.” About 6.34 million tonnes of palm oil may be processed into fuel in 2013 (Oil World; Bloomberg.com, 14 Nov 2013).

While Indonesia’s expanding biodiesel program offers new demand for its rising production, the road is not smooth with an unfavourable price formula. We reiterate our concern that key producer economies may lack the fiscal room to sufficiently subsidize biofuels, while political will vacillates.
EU biofuels update: Its governments failed to agree on the level of biodiesel usage. In September 2013, the European Parliament voted for a 6% cap on biodiesel to prevent an EU requirement that at least 10% renewables in transportation energy in 2020. (Bloomberg cited in AmResearch, 16 Dec 2013). Also, “EU policy makers rejected plans to push biofuel suppliers to report increased greenhouse-gas emissions” so there is now an “indefinite delay on ILUC (indirect landuse change)” (Bloomberg.com, 12 Dec 2013).

Khor Reports blog note: The results of a new tender are due soon. Industry talk is that Wilmar bid at MOPS plus. Big sellers are facing off with a big buyer's price formula?

Look out for Khor Reports' Palm Oil Newsletter #6, Jan/Feb 2014! This article is a sneak preview article from this issue (delayed in publication process)

Biofuels policies: EU & US cool while Indonesia boosts

In early September, the European Union (EU) fixed a 6% limit on the use of crop-based biofuels in ground transport; cutting back the previous requirement that at least 10% of energy for road and rail transport should come from renewable sources by 2020. This caps the potential for increased demand. In the longer-term, analysts say that this may reduce the EU’s imports of biodiesel. The USDA’s outlook for EU biodiesel consumption is +1.1% from 11.9 bill liters in 2013F to 12bil liters in 2014F, with imports forecast +5.9% from 1.7bil to 1.8bil liters respectively.   USDA estimates EU biodiesel refining capacity at 24.5 bill liters in 2011, with utilization only at 45% (AmResearch, 19 Sep 2013). The EU states agreed to impose punitive duties on biodiesel imported from Argentina and Indonesia; provisional tariffs were in place in May and by end November, duties of EUR217-246 / USD296-336 and EUR122-179/USD166-245 per tonne apply respectively. Both will challenge the duties (reuters.com, 23 Oct 2013).

“The negative development in EU is expected to be mitigated by positive developments in Indonesia. Recall that Indonesia raised the blending rate for biodiesel to 10% from 7.5% this month. B10 will be imposed on industrial users this month while B20 will take effect for power plants starting from January 2014.  In line with this development, Biofuels Digest reported that PERTAMINA will hold a tender this week to buy 6.6 bill litres of palm-based biodiesel for its requirements in the coming two years. National production is roughly 5.6 bill litres annually from 25 different producers” (AmResearch, 19 Sep 2013). 

Reuters reports (11 Oct 2013): “In a leaked proposal that would significantly scale back biofuel blending requirements next year, the U.S. Environmental Protection Agency (EPA) says the blend wall - the 10% threshold of ethanol-mixed gasoline that is at the crux of the lobbying war - is an "important reality." The agency's rationale for a cut in the volume of ethanol that must be blended echoes an argument the oil industry has been making for months: the U.S. fuel chain cannot absorb more ethanol. Few retailers are able to sell ethanol blends beyond the 10% maximum, or willing to take the legal risk that comes with it, they argue. The words will cut deep for proponents of biofuels. They have argued for years that the blend wall is largely a fiction constructed by an oil industry that doesn't want to cede any more share of a shrinking U.S. gasoline market.” The volume of corn-based ethanol will be reduced by 800 mill gallons to about 13 bill gallons versus the law’s required 14.4 bill gallons for 2014F. The EPA proposal has to be approved by the White House Office of Management and Budget.  This would not be positive for biofuels and it could result in excess supplies of corn; the USDA expected about 33.8% of US corn to be used for ethanol in 2013F/2014F (AmResearch, 14 Oct 2013).

Could this presage a lower blending of soybean oil in US biodiesel? Could there be a similar “blend wall” in biodiesel to impinge on higher blend rates in palm producing countries? Their political-economic situations are likely different enough from the US for a strong implementation push. In which case, a question remains: when will the legal risks of higher blends by covered?

Source: Khor Report's Palm Oil Nov/Dec 2013, Issue 5 (released)