The low-ILUC loophole could allow business-as-usual palm oil imports for biodiesel in Europe

The European Commission’s recast Renewable Energy Directive to 2030 (RED II) includes a provision to phase out the contribution of biofuels produced from feedstocks that are high-ILUC risk by 2030. By February 1, 2019, the Commission must provide specific criteria for classifying high- and low-risk indirect land use change (ILUC) biofuels under the Directive.

There is strong evidence that palm oil should be classified as a high-ILUC feedstock, which we explain in our working paper on high and low ILUC definitions. However, even if a feedstock such as palm oil is labelled as high ILUC, individual producers of that feedstock could still qualify as low ILUC, likely through a third-party certification scheme. Thus, the intention of limiting high-ILUC feedstocks through a phase-out could be undermined if requirements for achieving low ILUC certification are not robust.

The RED II defines low-ILUC biofuels as those produced from feedstocks that avoid displacement of food and feed crops, either through improved agricultural practices or the cultivation of areas not previously used for crop production. To be effective, low ILUC certification needs to ensure the production of that feedstock for use in biofuel is truly additional to what would have occurred compared to a business-as-usual scenario (that is, a scenario where there was no low ILUC certification of the feedstock for biofuels). This concept is known as additionality. If a feedstock that would have been produced in a business-as-usual scenario is credited as low ILUC, it is diverted from being used in food, feed, and other materials, pushing production of the feedstock for these uses onto other land, causing ILUC.

The provision in the low ILUC definition referring to improved agricultural practices implies that additional feedstock production due to yield improvements could qualify as low ILUC. But yield improvements already occur in a business-as-usual scenario. We estimated that around 3 million tonnes of palm oil per year could be produced due to business-as-usual yield increases in 2030. Without additionality requirements, all of that palm oil could qualify as low ILUC. 

The second provision in the RED II low ILUC definition, which refers to the cultivation of unused land, could also support business-as-usual production of palm oil. Specifically, it could credit palm production that has expanded onto unused land that would have been used anyway for food and feed. Palm is a rapidly expanding industry, and roughly 20% of recent palm expansion has occurred on what would qualify as “unused land” without high carbon stocks. Assuming the same kind of expansion trends in the future, in 2030, around 5 million tonnes of palm oil would be produced using this land alone, without bringing any additional unused land into production.

Together, these 8 million tonnes of palm oil per year could qualify as low ILUC in 2030 without any actions being taken to reduce ILUC. This amount of business-as-usual palm oil that could be allowed into EU biofuel production is double the 4 million tonnes used in European biofuel in 2017. There is no point in restricting high-ILUC crops if we let the low ILUC provision become a loophole, allowing business-as-usual crop production.

There is a real opportunity to support producers of truly low-ILUC palm oil with a robust low ILUC certification program. Such a program must include strict additionality criteria that does not allow crediting of business-as-usual production. For example, if one can demonstrate that unused land would have remained unused in a business-as-usual scenario, a project to grow palm oil on this land would not cause displacement and could thus be certified as low ILUC. In Indonesia and Malaysia, degraded land that has been colonized by the invasive Imperata grass is difficult to cultivate and likely would meet this criteria. A large amount of palm could potentially be grown on this land without displacing production of the feedstock for food, feed and other materials. If the Commission can get its low ILUC criteria right, this provision could make a positive difference in improving crop production without becoming a giant loophole in the RED II.