EU moves to remove palm oil in transport fuel; Malaysia hits back


Sanjit Das | Bloomberg | Getty Images

Workers gather harvested palm fruit at a palm oil plantation in Bukit Basout Estate, Perak State, Malaysia, on Wednesday, May 10, 2017.

The European Commission on Wednesday concluded that palm oil should be phased out from transport fuel due to environmental concerns, sparking a backlash from Malaysia, a top producer of the vegetable oil.

That conclusion came in the commission’s criteria for determining what crops cause environmental harm. That’s part of a new European Union law to boost the share of renewable energy to 32 percent by 2030 and determine what are appropriate renewable sources. The growing of oil palms, the commission found, results in excessive deforestation and its use in transport fuel should be phased out, Reuters reported.

EU governments and the European Parliament have two months to decide whether to accept or to veto the law.

Early Friday in Asia, Malaysia hit out at the European move.

Teresa Kok, Malaysia’s primary industries minister, slammed the decision, saying it’s based “on the politics of protectionism” and warning of retaliatory actions against European exports should the law be adopted.

In a statement opposing the European decision, Kok said it “highlights an unacceptable double standard by the European Commission — it failed to apply the same standard to soy bean oil.”

“Palm Oil produces eight times more oil than the US soy bean oil per hectare but the European Commission classifies soybean as ‘low risk’ for political reasons,” she said.

Palm and soybean oil, both edible oils, are viewed by the market as competing products. Soybean oil can also be used in biofuels. Top producers of soybean oil include the U.S., Argentina and Brazil.

The European decision is set to hurt the palm oil business at a time of wider concerns about demand.

The most actively traded palm oil contract — the global benchmark — on the Bursa Malaysia Derivatives Exchange slid 1.1 percent to 2,040 ringgit ($499.02) per metric ton by midday on Friday after hitting a four-month low earlier in the session over concerns about demand from top buyers India and China.

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