EU ban on palm oil could be canola boon

The pending ban is being challenged by the main palm oil-producing nations and could get ‘watered down’

Opinions differ on whether the European Union’s pending ban on palm oil-based biodiesel represents a big market opportunity for Canadian canola exporters.

In January, the European Parliament voted to ban the use of palm oil biodiesel by 2030 because it leads to deforestation in Malaysia and Indonesia.

Palm oil biodiesel production will be capped at 2019 levels and then starting in 2023 it will gradually be phased out until it is eliminated in 2030.

Some say the new policy stance represents a huge opportunity for EU rapeseed producers and Canadian canola exporters.

The EU consumed 17 million tonnes of biodiesel in 2019. Rapeseed/canola oil was the top feedstock accounting for 5.8 million tonnes of that fuel, according to data provided by Sofiproteol, the financing subsidiary of the Avril Group, one of the major oil and protein producers in the EU.

The next largest contributor was palm oil, which accounted for 2.7 million tonnes directly and another 2.5 million tonnes indirectly via hydrotreated vegetable oil.

That is 5.2 million tonnes of palm-based biodiesel production that will eventually have to be replaced by alternative feedstocks and the only current viable options are rapeseed oil, soybean oil, sunflower oil, used cooking oil and tallow.

Rabobank released a report in 2018 that forecast that rapeseed oil and soybean oil will be the “likely winners.”

The report said the palm oil void would likely be filled by a combination of increased EU rapeseed production, greater canola seed and canola oil imports, additional soybean and sunflower oil imports and increased biodiesel shipments from countries like Argentina.

Brian Innes, vice-president of public affairs with the Canola Council of Canada, is skeptical of reports touting the potential for surging canola exports to the EU.

“It is not our expectation that pulling out palm means great additional demand for canola,” he said.

Innes said the EU biofuel market is driven by government policies and the expectations of European citizens.

“We do not see the European public accepting major changes in the make-up of their biofuels,” he said.

“We’re not seeing an appetite to drastically increase the amount of Canadian canola that goes into biofuel.”

Innes said there is strong interest from the European Union and its citizens to incorporate new technologies and feedstocks into the biofuel mix.

That includes feedstocks such as algae, forest waste and captured methane.

“Those technologies are in their infancy but there is a strong public and political interest in incorporating those technologies into the fuel system,” he said.

Innes also noted that Indonesia has launched a World Trade Organization complaint against the EU for what it considers to be a discriminatory policy.

The WTO recently announced it is establishing a dispute panel to hear the complaint. Eighteen other countries have reserved the right to participate in the proceedings including Malaysia, the other main palm oil producing country.

While Innes said it is impossible to predict the outcome of the WTO challenge, it is reasonable to assume that the EU’s existing policy of effectively banning palm oil biodiesel may get watered down over time.

“Policies evolve and it could be the case that some palm is allowed as this issue works through the WTO and the European Union and its members adapt,” he said.

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