Argentina soybeans, not Canadian canola, most likely to fill the gap if the European Union rejects palm oil biodiesel
The European Union decision to ban palm oil biodiesel will not likely lead to an increase in canola oil biodiesel, says an oilseed trader.
Lawmakers approved a draft plan last week to ban the use of palm oil in biodiesel production starting in 2021.
The ban was being promoted by environmental groups concerned about palm plantations causing deforestation in places like Malaysia and Indonesia.
Palm oil is the second most popular biodiesel feedstock in the EU. Biodiesel manufacturers used 2.6 million tonnes of the oil in 2017, according to a report by the United States Department of Agriculture.
Nearly half of all the palm oil imported into the EU is consumed by the biodiesel sector. So, banning the product would leave a big void in the available feedstock.
But it is unlikely that void will be filled by canola oil, said Glen Pownall, managing director of Peter Cremer Canada.
Antidumping and countervailing duties the U.S. has placed on soybean biodiesel from Argentina has diverted that product to Europe.
“Ever since those have been imposed we’re just seeing a huge amount of biodiesel from Argentina move into Europe instead,” he said.
He believes banning palm oil biodiesel will create an opportunity in Europe for even more soybean biodiesel from Argentina.
Rapeseed/canola oil is the most popular biodiesel feedstock used in the European Union. Manufacturers used 6.2 million tonnes of the product last year.
But Pownall said it is expensive compared to other options such as soybean oil.
Canola biodiesel is popular because it is made from a locally grown oilseed and it performs better than soybean biodiesel in cold climates. But he thinks the EU is already maxed out on how much canola biodiesel it requires and there is little room for growth.
Brian Innes, vice-president of public affairs with the Canola Council of Canada, said it is premature to draw conclusions about how the palm oil ban will affect overall vegetable oil demand.
The draft policy requires agreement from member states and the European Commission before it becomes law.
“From what we understand, that’s a difficult process,” he said.
But Innes thought it was an interesting statement from EU politicians that they don’t want to continue using unsustainable, imported vegetable oil. That is because it doesn’t meet two crucial policy objectives.
“It must be good for the environment and it must help the domestic economy and in the case of palm oil it did neither one of those things,” said Innes.
He believes there could be an opportunity for canola oil in that respect because it does meet those objectives. It supports the EU’s farmers by providing a market for their biggest oilseed crop and it is a crop that meets the EU’s sustainability requirements.
A final decision on the proposed palm oil ban is expected in late 2018.
The European Parliament also voted to cap crop-based biofuels to 2017 consumption levels, which is no higher than seven percent of all transportation fuels. The proposed cap would be in place until 2030.
Pownall said that is a disappointing development.
“Everything is kind of going backwards for biofuels. We’ve had tremendous growth in that sector for so many years but now it seems to be plateauing,” he said.
That is a scary prospect because meal demand is growing by eight percent per year while oil demand is expanding at a much less torrid pace of 2.5 percent per year.
“We just keep putting more and more vegetable oils on the market and thank God for biodiesel. If it wasn’t for that, I think canola oil would be worth about half what it is today,” said Pownall.
Some groups were pleased with the European Parliament’s decisions, including Transport & Environment, a European non-government agency opposed to crop-based biofuels.
“Today’s Parliament vote sends a clear message to the biofuels industry that growth can only come from sustainable advanced fuels such as waste-based biofuels, not from food crops,” Laura Buffet, clean fuels manager at T&E, said in a news release.
“This compromise redirects investments into the fuels of the future and eliminates palm oil biodiesel, the highest emitting biofuel.”
T&E said crop-based biodiesel on average produces 80 percent more carbon dioxide emissions than the fossil fuel it is replacing and palm oil biodiesel is on average three times worse for the climate than fossil diesel. Biofuel organizations dispute those findings.
Government officials in Malaysia and Indonesia were not at happy with the EU’s decision, according to a Reuters story.
“This vote is very disappointing. It’s a black day for free trade. You are discriminating against palm oil,” Mah Siew Keong, Malaysia’s minister of plantation industries and commodities, said in the article.
“The EU is practicing a form of crop apartheid.”
The EU is Malaysia’s second biggest palm oil market next to India.