Using tariffs to incentivise sustainable palm oil

3 febrero 2022

Using tariffs to incentivise sustainable palm oil

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This briefing is also available in Bahasa Indonesia.

The European Union (EU) and Indonesia have been negotiating a Free Trade Agreement (FTA), known as the Comprehensive Economic Partnership Agreement (CEPA) since 2016. There have been eleven rounds of negotiations, but trade in ‘sustainable’ palm oil remains a stumbling block.

In parallel to the FTA negotiations with the EU, Indonesia concluded an FTA with the European Free Trade Association (EFTA) (Iceland, Lichtenstein, Norway and Switzerland), which came into force on 1 November 2021. This agreement gives preferential market access to sustainable palm oil.

This briefing looks at what can be learned from the process so far. It stems from a Fern commissioned study on lessons from the EFTA FTA. It provides a brief summary of the Indonesia-EFTA tariffs differentiation mechanisms for “sustainable” palm oil  and details Fern’s position on it. It also highlights the FTA’s inability to achieve effective forest and land governance reforms and explains why it does not mitigate the potential negative impacts on forests. 

For trade to support the global transition to a greener and fairer economy, EU trade policy needs to start from the position that production and consumption have to respect planetary boundaries. As such, the EU-Indonesia FTA cannot be beneficial whilst it focuses on increasing trade instead of bringing it to levels compatible with tackling the climate and biodiversity crises.

If the EU-Indonesia FTA goes ahead, the definition of sustainable palm oil should be negotiated in an inclusive and deliberative process so as to trigger action to decide and enforce forest and land governance reforms. At a minimum, the definition should respect any process agreed under the EU Regulation on deforestation-free products. 

Categoría: Briefing Notes

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