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EU's environment committee calls for phase-out of palmoil, soybean-based biofuels by 2023

19 May 2022 2:18 pm
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Mumbai, 19 May (Commoditiescontrol): While deliberating over the Renewable Energy Directive, the environmental committee of the European Parliament, has called for a phase-out of biofuels products derived from palm and soy by early next year. These are crops that often lead to land use changes, including deforestation.

The changes to food and feed-crop biofuel standards were passed by the committee, to limit the use of biofuels in transportation, and most importantly, the current food-price spikes.

Prices of palm oil and soybean have soared to record levels. Soybean oil prices soared to a record high on Friday as Indonesia's decision to effectively ban exports of palm oil heightened concerns about already depleted global supplies of alternative vegetable oils.

Soybean oil prices on the Chicago Board of Trade rose to a peak of 83.21 cents per lb on Friday, up 4.5 percent on the day and a record high, before pulling back to 81.42 -- still a record for the most actively traded futures contract. Prices have now risen by almost 50 percent so far this year.

Palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange trades at 6,089 ringgit ($1,383.55) a tonne. It had scaled above 7,100 ringgit in April.

The United Nations food agency reported earlier this month that food prices had jumped nearly 13 percent in March to a new record high.

On Tuesday, the Committee voted to make substantial policy changes, to both how the union subsidizes biomass, and how it counts emissions from burning it. The policies change if passed by the full Parliament, will likely have major consequences. The main aim is to introduce effective policy changes which will bring about the desired benefit for the climate through lesser use of biomass like wood pellets as renewable energy and subsidizing its use.

A phase-out plan of palm and soybean-based biofuel was set out in 2018 when the EU's Committee has voted to approve a set of new clean energy laws for 2030, outlining plans to increase the bloc's use of renewable energy and ban the sale of high-emission biofuels made from palm and soybean oil.

It was agreed then, that the soybean and palm oil portion of the legislation states that such fuels cannot grow above each country’s 2019 consumption levels and should gradually decline from 2023 onwards until reaching nil percent in 2030.

The EU is the world's largest biodiesel producer, and palm oil accounted for 18 percent of the total feedstock used to make the fuel after rapeseed oil (38 percent) and used cooking oil (23 percent) in the bloc.

The use of palm oil in making biodiesel received a setback last June, as EU member states are required to turn the bloc's updated green energy targets under the Renewable Energy Directive II (RED II) into national legislation.

Under the RED II directives, which will be in effect from 2021-2030, biodiesel made from palm oil and soybean oil has been categorized as at a high risk of causing deforestation and emitting more greenhouse gasses than the use of fossil fuels.

Germany, the largest producer of biofuels in the bloc, has said it will phase out palm oil-based biodiesel by January 2023.

The EU is the third-largest buyer of palm oil after India and China and imports about 5 million mt to 6 million mt in a year.

Indonesia and Malaysia -- which account for about 85 percent of the world's palm oil supply -- are currently challenging the EU RED II directives at the World Trade Organization, arguing that the policy unfairly targets palm oil while favoring European feedstocks like rapeseed oil.

(By Commoditiescontrol Bureau: +91-22-40015505)

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