New EU law could cut palm oil exports from Indonesia by 30%

A new EU law coming into force on December 30 has caused concern in Indonesia’s palm oil industry. Eddy Martono, head of the Indonesian Palm Oil Association (GAPKI), told the Financial Times that the law could cause chaos if implemented without delay.

As required by the European Union’s anti-logging regulation (EUDR), importers under the new rules will have to ensure that their products did not contribute to deforestation in exporting countries and that the raw material production process complied with ESG regulations. Martono warned that the industry is not ready for such significant changes and called for the law to be delayed until 2026. Some coffee, cocoa, rubber and palm oil crops are at risk of being banned from importation. Martono fears that without proper consultation between the EU and its trading partners, palm oil exports from Indonesia to the EU could drop by 30%.

The regulation will come into force on December 30, 2024 for operators and large traders. Large companies must comply immediately, while smaller companies have until July 2025. Non-compliance can result in turnover penalties of up to 4%. Martono criticized the lack of meaningful consultation with union officials, which he believes has created widespread uncertainty.

Malaysia has consistently taken active steps to ensure that the environmental sustainability of its palm oil industry meets European standards and deforestation regulations, said Plantations and Commodities Ministry  secretary-general Datuk Yusran Shah Mohd Yusof. However, he expressed concern that Malaysia’s palm oil sector was still falling under the EUDR, which could affect the country’s reputation despite Kuala Lumpur’s strict environmental standards.

He said this could lead to a reduction in exports to the European Union, which is the main market for palm oil. He also emphasized the important role of palm oil in global food security due to its high productivity, wide range of applications and ability to improve food preservation.

Malaysia had previously committed to stop establishing new oil palm plantations in forested areas to support and maintain the current forest cover of 54%. As more than 80% of the palm oil produced in Malaysia is exported, oil certification is critical to the industry and the country’s budget.

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Tags: EU, palm oil, restrictions, Indonesia