Written by Carmelo Ferlito, CEO of Center for Market Education
First published in Free Malaysia Today on 22 September 2020

In 2016, I went back to my home country, Italy, for a longer period than usual. Forced to watch Italian TV again, I was quite stricken by a pretty unique fact: at the end of their advertisements, the most popular Italian snack brands were proudly announcing that their products did not contain palm oil. Similarly, at the supermarket, the label “senza olio di palma” (without palm oil) was displayed on the packaging. This was not the case five years earlier, in 2011, when I left Italy for Malaysia.

By living in Malaysia, I became familiar with the fact that the majority of the population uses palm oil daily and supermarket shelves are filled with big palm oil bottles. Despite remaining a strong fan of olive oil for my personal consumption, the use of different oils in different cultures did not bother me. The proud refusal of palm oil in Italy, thus, ignited my curiosity. People began refusing palm oil on the accusation of it being a source of cancer, but there is little evidence to support it. It actually consists mostly of saturated and monounsaturated fats, with small amounts of polyunsaturated fats which makes palm oil a good choice for cooking.

The controversy, however, moved onto “green territory”, with oil palm being under the spotlight because of deforestation and threats to biodiversity. European green movements were able to obtain a European Union (EU) palm oil ban which is particularly harmful to Malaysia, its second-largest producer. What green activists and EU policy makers could not predict was that Malaysia decided to halt the negotiations for the Malaysia-EU free trade agreement, with commercial consequences much deeper than the palm oil issue.

It is not the first time the EU allowed “green feelings” rather than sound scientific arguments and a balanced analysis of the trade-offs to set the policy agenda. For example, egg producers were given 2012 as a deadline to convert their farms into cage-free facilities partly because green activists said hens were unhappy living in cages. That particular claim, by the way, is not supported by solid scientific evidence.

Circling back to oil palm, Malaysia moved forward with its production standards and implemented the Malaysia Sustainable Palm Oil (MSPO) certification, which some EU policymakers have recognised as one of the four main palm oil certification schemes. The Malaysian effort walks together with a rising number of voices, within the EU, against the ban.

The two main reasons why the ban should be reconsidered are: 1) negative effects on deforestation and 2) economic damages to developing nations. As warned by Vicente Lopez Ibor Mayor (former EU energy adviser) and by the journal Nature, a palm oil ban means that demand will switch to oil seeds, which use up far more land and energy than palm oil (four to ten times more), putting the Amazon under a bigger threat of deforestation. Furthermore, in a trade-off analysis we should ask if there is any better alternative and it seems that oil palm alternatives are ecologically more harmful.

Additionally, the ban is a threat to commercial relations between the EU and developing countries, which will be hurt by protectionist measures. There is serious doubt that environmentalism is used as a shield in order to promote European protectionism.

What we need is not a ban, but better regulation. MSPO goes in this direction. Le Monde Diplomatique argued that such certification can push towards the emergence of clean biofuels and Malaysia is well-placed in this sense.

Bjorn Lomborg, former director of the Danish government’s Environmental Assessment Institute, also frequently argued that green policies need to be economically sustainable and not driven by ideological considerations. To properly pursue an eco-sustainable path, the best weapon we have is innovation which can be incentivised by schemes like the MSPO, because such schemes introduce a regulatory framework for better production processes, while bans and taxes force supply and demand to meet on alternative grounds which, in this case, seem to be worse than oil palm.

Prosperity is our second weapon; only a prosperous nation can afford to protect itself against ecological threats. And the key to prosperity is liberty where free trade is a crucial element. In the framework of liberty, ideas flourish and can be turned into innovation and growth, making developing nations better equipped to face environmental threats. A commercial war, by harming,in particular,developing nations, goes precisely in the opposite direction.