Can Europe save the forests without job loss in Malaysia?
KUALA LUMPUR, MALAYSIA>> The European Union’s upcoming ban on imports linked to deforestation has been hailed as a “gold standard” in climate policy: a meaningful step to protect the world’s forests, which help remove planet-killing greenhouse gases from the atmosphere.
The law requires traders to trace the origins of a head-spinning variety of products — beef and books, chocolate and charcoal, lipstick and leather. To the European Union, the mandate, set to take effect next year, is a testament to the bloc’s role as a global leader on climate change.
The policy, though, has gotten caught in fierce crosscurrents about how to navigate the economic and political trade-offs demanded by climate change in a world where power is shifting and international institutions are fracturing.
Developing countries have expressed outrage — with Malaysia and Indonesia among the most vocal. Together, the two nations supply 85% of the world’s palm oil, one of seven critical commodities covered by the European Union’s ban. And they maintain that the law puts their economies at risk.
In their eyes, rich, technologically advanced countries — and former colonial powers — are yet again dictating terms and changing the rules of trade when it suits them. “Regulatory imperialism,” Indonesia’s economic minister declared.
The view fits with complaints from developing countries that the reigning international order neglects their concerns.
The palm oil dispute also encapsulates a central tension in the economics of climate change: the argument that lower- and middle-income nations are being compelled to bear the cost of ruinous environmental shifts caused mostly by the world’s wealthiest nations.
“We’re not questioning the need to fight deforestation,” said Nik Nazmi Nik Ahmad, Malaysia’s environment minister. “But it’s not fair when countries that have deforested their own land for centuries, or are responsible for much of our deforestation, can unilaterally impose conditions on us.”
In addition, many government officials, industry representatives and farmers contend that the European Union’s rules are really a form of economic protectionism, a way to shield European farmers who grow competing oilseed crops like rapeseed or soybeans.
The European Union’s law, which was passed last year, bars products that use palm oil and other commodities like rubber and wood that come from forestland that was converted to agriculture after 2020.
Proving compliance could turn out to be complex and expensive for vast numbers of small suppliers.
In Malaysia and Indonesia, the prime minister and president said the livelihoods of their citizens were threatened. They jointly vowed to combat what they called “highly detrimental discriminatory measures against palm oil.”
The concerns have been echoed by anti-poverty advocates and even some environmentalists.
“A lot of people are going to be caught flatfooted when this kicks in next year,” said Pamela Coke-hamilton, executive director of the International Trade Center, a United Nations agency created to help poor countries build wealth through trade.
Most small farmers don’t even know about the looming ban, let alone how to prove their compliance, Coke-hamilton said.
In a week of interviews with The New York Times at plantations in the Malaysian state of Sabah on the island of Borneo, not a single small farmer had heard of the deforestation rules.
“They’re going to get kicked out of the market,” which could further harm the environment, Cokehamilton said. “We know deforestation is linked to poverty.”
Endless rows of oil palms
In recent decades, the world’s appetite for the viscous red oil has exploded. Roughly half the products on supermarket shelves contain palm oil.
The bulk of it comes from multibillion-dollar corporations, which have gulped up miles and miles of land.
Across Sabah, oil palms stretch as far as the eye can see. The landscape is picturesque. But compared with the riotous diversity of a rainforest, the columns — like brigades of upright feather dusters — can become as monotonous as elevator music.
Smallholders — defined in Malaysia as farmers who own fewer than 40 hectares, or nearly 100 acres — grow 27% of the country’s oil palms.
The palm oil gold rush has helped reduce rural poverty, build wealth from exports and create jobs. Roughly 4.5 million people in Malaysia and Indonesia work in the industry, according to the World Economic Forum.
For a while the oil was even promoted as environmentally friendly, a “supercrop.” One acre can produce four to 10 times as much oil as the same area of soybeans, rapeseed or sunflowers.
But environmental benefits accrue only if existing cropland is converted to oil palms. Instead, producers clear-cut or burned pristine rainforests and peatlands to make way for crops. The elimination of these precious carbon sinks released titanic amounts of greenhouse gases into the atmosphere, unleashing an environmental catastrophe.
Malaysia lost nearly onefifth of its primary tropical forest between 2001 and 2022, according to the World Resources Institute. Habitats for thousands of species, including orangutans, sun bears and pygmy elephants, were destroyed, putting some animals in danger of extinction.
Environmental watchdogs like the World Wildlife Fund and a wide range of industry players and multinationals teamed up in 2004 to create the Roundtable on Sustainable Palm Oil, a voluntary organization that set standards to reduce destructive practices.
But critics maintain that while there have been improvements, voluntary agreements alone could not preserve and restore the world’s forests. A report from the European Parliament concluded in 2020 that self-policing “should only be complementary to binding measures.”
The European Union introduced exactly that. To ensure that any product sold in the 27 countries of the bloc could be traced back to its source, the legislation demands that nearly all producers who cultivate palm oil, coffee, cocoa, cattle, soybeans, rubber and wood map the precise borders of their farmland to show that the commodities are not linked to deforestation.
It is up to exporters to prove that the rules were followed at every point along the supply chain.
To many Malaysians, though, the European Union’s mandate reflects a deep misunderstanding. Tracing each fat, acornshaped bunch of fruit to a small farm in remote areas is much more complicated than lawmakers in Brussels realize, smallholder groups say.
Hard-to-trace sources
Smallholders mostly sell to traders, dealers and collectors — layer upon layer of middlemen who end up mixing together bunches of palm oil fruit from hundreds of plantations.
Tracing is further complicated because the dealer, wary of competition, “doesn’t want to tell the mill where all his suppliers come from,” said Reza Azmi, executive director of Wild Asia, a nonprofit based in Malaysia that works with smallholders to improve environmental practices.
Smaller independent producers and traders could get squeezed out, expanding the reach of agribusinesses.
“What we’re hearing in Sabah,” Azmi said, “is that independent mills are looking to sell to big corporate guys because they don’t have resources to make sure of compliance.”
Olivier Tichit, director of sustainability for Indonesia’s Musim Mas Group, one of the world’s largest integrated palm oil companies, said the group bought fruit from up to 1 million smallholders.
“If one is not compliant, you have to exclude the entire mill,” he said, adding that his company will “take no risks.”
The European Commission, according to a spokesperson, “is committed to providing all the necessary support to make sure that smallholders are fully prepared for the change in rules.” The bloc has pledged 110 million euros to provide technical and financial support.
Farmers with fewer than 10 acres can use a smartphone to map their land. “GPS coordinates can be generated easily and for free,” an EU primer explains.
But critics insist that mapping farms and then verifying the data is much more complex, time-consuming and expensive, not to mention plagued by a lack of documented land titles and other complications.
In Malaysia, government officials complain the European Union’s law ignores the licensing and deforestation rules that the country already has. Since Jan. 1, 2020, all growers and businesses have been required to be certified by the Malaysian Sustainable Palm Oil board. The standards match many set by the European Union, although there is no requirement for geolocation mapping.
The effort has had some success. In its annual 2022 survey, the World Resources Institute found that Malaysia was one of the few places where deforestation did not get worse.