Indonesia Faces Challenges with CPO and Derivatives Due to EU’s Deforestation Ban

Palm Oil Magazine
Doc., JAKARTA – In the coming years, Indonesia is expected to encounter significant challenges regarding the sale of crude palm oil (CPO) and its derivative products. Of particular concern is the European Union’s (EU) official ban on importing products associated with deforestation, making it difficult to sell CPO in the EU market. However, the EU should acknowledge its own responsibility for the actions of certain importers involved in logging activities.

To address this issue, the EU has implemented measures to prohibit companies from selling coffee, cow meat, soybeans, chocolate, rubber, and certain CPO derivatives that are linked to deforestation within the continent. Companies are now required to publish a statement of due diligence, demonstrating that their entire supply chain is free from contributing to forest destruction before they can sell their products in the EU. Failure to comply with the act will result in substantial fines. Producers and traders have been given 18 months to adhere to the regulations, while small-scale companies have been granted 24 months to adapt.

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Non-compliant companies may face fines amounting to 4% of their turnover in EU countries. The European Commission estimates that the act will protect a minimum of 71,920 hectares (278 square miles) of forests annually, which is equivalent to 100,000 football fields.

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World Bank predicted the act could reduce carbon emission globally about 31,9 million metric ton per year or equal to carbon emission in Denmark in 2021. The implementation of the act would have something to do with the countries where forests were highly cut off. In fact, EU consists of 27 countries. German, French, Italy, and Netherland are parts of EU. Some countries have high economic progress in the world.

As quoted from World Resources Institute and Global Forest Review, in 2002 to 2020, Indonesia was categorized as four big country within the biggest tropical forest cut off in the world. Indonesia was in the second rank after Brazil within the biggest tropical forest cut off that laid about 9,7 million hectares. Palm oil plantations for specific, that were too late in forest regions, laid about 3,2 – 3,4 million hectares. Until now there is no solution of the issue. In short, Indonesia is not free from deforestation though the government has tried to postpone deforestation every year.

If the free-deforestation act is really implemented, Indonesia would potentially get losses because CPO demands in the 27 countries would be decreasing and even stop if stakeholders have no certificate of free deforestation. (*)

By: Pramono Dwi Susetyo/ Worked at Ministry of Environment and Forestry

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