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Palm Oil in the EU Market: Issues and Challenges

www.cargill.com

POTS KL 2014

Marta Zuluaga Zilbermann

The EU landscape

Palm oil in the EU market: issues and challenges 2

MAIN ISSUES AND CHALLENGES FOR PALM OIL

Little knowledge and awareness by average consumer of the realities of palm oil coupled with negative media campaigns lead to negative perception

Issues relate to sustainability and/or health/nutritional aspects of palm

Debate happening at national and EU level

Concerns leading to industry and government commitments, product reformulation and ‘free of palm’claims in certain markets

Palm oil in the EU market: issues and challenges

Index

• Importance of EU market for palm oil • The EU: common institutions and decision-making process• EU Policy developments and impact on palm oil • National markets developments: focus on palm

3

Palm oil consumption

Palm oil in the EU market: issues and challenges 4

2012 2006 Consumption Change

India 7585 3074 147%

Thailand 1341 684 96%

Colombia 926 482 92%

Indonesia 6978 3711 88%

Nigeria 1805 1025 76%

USA 947 569 66%

EU27 6149 4447 38%

Pakistan 2039 1601 27%

China 6089 5449 12%

World TOTAL 52088 36972 41%

Source: OilWorld/FEDIOLFigures in 000 tones

The EU InstitutionsA NEW LANDSCAPE

Palm oil in the EU market: issues and challenges 5

Presentation Title-Date6

The European Union, what is it...?

28 member states…

Palm oil in the EU market: issues and challenges 7

The European Commission- promoting the common interest

Jean Claude JunckerPresident of the European Commission

The European Parliament- voice of the people

Martin Schulz, President of of the European Parliament

The European Council The Council of Ministers- Voices of the Member States

Donald Tusk, President of the European Council

8

With common institutions…

http://www.youtube.com/watch?v=d0diZ48_q7U

Palm oil in the EU market: issues and challenges

9

2014: a year of change…A new European Parliament

And a new European Commission...

Palm oil in the EU market: issues and challenges

How EU laws are made...

10

White paper/consultati

on

European Commission proposal

European Parliament 1st reading

Council of Ministers 1st reading

Second reading IMPLEMENTATION

Palm oil in the EU market: issues and challenges

EU policy developments and impact on palm oil

Palm oil in the EU market: Issues and challenges 11

EU Health and Nutrition agenda –food

- EU requirement to label botanical origin of vegetable oils and fats as from 13 December 2014

- EU Commission report on transfatty acids (TFA) by 13 December 2014

- EU Action Plan on childhood obesity to be implemented at national level: will cover reformulation and SAFA amongst other

- EU High Level Group on Nutrition & Physical Activity- EU SAFA objective - Target level for industry commitments: 5% reduction from current

levels by 2015, another 5% reduction by 2020

- Implementation taking place at national level

- European Food Safety Agency (EFSA) upcoming scientific opinion on 2-MCPD, 3-MCPD, 2-MCPD esters, 3-MCPD esters, and glycidyl esters. Will perform a risk assessment and look at the occurrence of these compounds in food products

Palm oil in the EU market: issues and challenges 12

13

Sustainability agenda overview-biofuels and food

• Strong drive of climate change agenda: EU heads of State recent agreement on climate change, renewable energy and energy efficiency targets post 2020

• Shifting focus towards harmonized analysis of environmental impacts (carbon, water, biodiversity, land use) of productson a life cycle basis (across all stages of supply including prior land use and consumer phase) and information to consumers

• Including analysis of impacts of EU consumption patterns on third country deforestation

• General push for:• More transparency and information to consumers • Better understanding environmental impacts of products • Drive for improvements along the chain

Palm oil in the EU market: issues and challenges 13

Biofuels

Palm oil in the EU market: issues and challenges 14

Current legislative framework • Fuel Quality Directive (FQD)- 6% greenhouse gas (GHG) reduction target

in carbon intensity of road transport fuels in 2020 • Renewable energy directive (RED)

• 20% renewable energy by 2020 • 10% renewable energy in transport by 2020

• comes attached with sustainability criteria around land use change (no sourcing from high conservation value land) and GHG reduction targets

Current debate - Indirect Land Use Change Legislative (ILUC) Proposal

- capping use of first generation biofuels (from agriculture raw materials)

- Adding ILUC factors to the GHG saving profile of biofuels

Future - Political direction on 2030 climate change and renewable energy targets

just agreed - Uncertain future for biofuels

-European Commission defining environmental criteria and guidelines for calculating environmental profile (carbon, water, biodiversity, etc) of food & feed products – discussion on policy options in 2016. Policy may come in 2018

-Voluntary excercise at industry level on same: The EnviFood Protocol

-EU starting to study impact of EU consumption patterns on 3rd country deforestation – possible Deforestation Action Plan 2015

Food and feed

Palm oil in the EU market: issues and challenges 15

DG Environment Study on Deforestation

http://ec.europa.eu/environment/forests/impact_deforestation.htm

Palm oil in the EU market: issues and challenges

Some policy recommendations included in the study:- Extension of biofuels

sustainability criteria to food

- Extend FLEGT (forest sustainability system) to other commodities

- Mandatory labelling of the forest footprint of (food) products

- Increase import tariffs/attach sustainability criteria to commodities associated with deforestation

16

-EU Action Plan on Deforestation

-Increased scrutiny around tropical crops: soy and palm

-Draft Communication on Sustainability of the Food System

-Draft Methodology for Sustainability Criteria for Key Food Commodities

-More focus around Resource Efficiency: waste and water

Upcoming EU initiatives in the pipeline..

Palm oil in the EU market: issues and challenges 17

National markets developments: focus on Palm

18 Palm oil in the EU market: issues and challenges

Industry behaviour Alliances

Palm oil debate Europe

• Refiners & PO producers aligned in EPOA, focus on PO and health

www.palmoilandfood.eu• Trade organisations aligned in

ESPOAG (European Sustainable Palm Oil Advocacy G )

• International manufacturers often committed to use CSPO only by 2015

• Palm oil free labelling: increase in 2013

• Main focus is on sustainabiity• Generally consumer little awarenes of what palm oil is

• Health and sustainability issues closely linked

• increased political debate on health aspects of palm oil

• High influence of France, Belgium and Norway

• Increased debate on guidelines SAFA intake

Debate Intensity

Health

Sustain-ability

Source:EPOA

stable - potential riskcriticalhighly critical

Palm oil issues in Europe

Source:EPOA

Palm oil in the EU market: issues and challenges 20Source: EPOA

Debate focused on health or sustainabilityat local level

Palm oil debate differs per country

driven by SUSTAINABILITY -

increased focus on

HEALTH – use of palm oil free labeling

Low attention to either

SUSTAINABILITY or HEALTH aspects

HEALTH aspects widely

discussed – use of palm oil free

labelling

Low attention –Main focus on

SUSTAINA-BILITY and quality issues

Debate Intensity

Health

Sustain-ability

Source: EPOAPalm oil in the EU market: issues and challenges 21

22

Main developments at Member State level…

Source: EPOA

Sweden (and rest of Scandinavian countries): Sustainability main issue. Nutrition becoming very prominent

UK: no major public debate on palm oil’s impact on health and nutrition. Sustainability is main issue

Germany: Health related aspects discussed within limited circles. Main focus on palm oil sustainability

Palm oil in the EU market: issues and challenges 22

23

Main developments at Member State level…

Source: EPOA

Belgium: Sustainability was main topic up to 2012. Since 2013 debate has switched to health and nutrition due to regulatory activities

France: Focus is slightly more on nutrition but sustainability is still quite prominent. The two issues often discussed together

The Netherlands: Sustainability is the main issue. Attracts lots of media attention

Palm oil in the EU market: issues and challenges 23

Current players in Europe

RSPOSustainabili

tyPO supply chain

EPOANutritionLipid

nutrition scientists

ESPOAGSustainabili

ty + nutrition

EU politicians & regulatory

European Palm Oil Alliance

European Sustainable Palm Oil Advocacy Group

Round Table on Sustainable Palm Oil

France / Belgium

Norway (SwedenDenmark)

Germany/UK

EU

consumers, & local stakeholders: local politicians, regulatory &policy makers, retailers, NGO’s

EU trade organisations

Members RSPO, Incl. retailers

Outside EU: Main PO producing countries

Focus regions

24

Source: EPOA

25 Palm oil in the EU market: issues and challenges

Outreach campaigns