Regulatory Reform

Palm Oil – Fueling Economic Growth in the Developing World

In a decision that could have serious economic implications for Indonesia, Malaysia and other countries located within the narrow global band where oil palm is grown, the Environmental Protection Agency (EPA) has issued an initial ruling to restrict the importation of palm oil for use as an accepted biofuel.  The EPA is accepting comments on this ruling from stakeholders, and ALEC’s International Relations Task Force is among those to urge the agency to reverse its decision.  Our submission can be found here EPA Palm Oil Submission March 2012 .

The EPA contends that palm oil does not meet the greenhouse gas (GHG) reduction threshold (20 percent) mandated by the Agency’s renewable fuel standard program, and places palm oil’s GHG savings at 17 percent.  As the EPA’s assessment is based on data that is easily manipulated and somewhat arbitrary, the EPA’s decision is likely motivated more by old-fashioned protectionism than by science.  GHG savings figures from sources as varied as Germany’s Friedrich Schiller University and Dutch biofuel company Nestle Oil range from 38 percent to 52 percent GHG savings – well in excess of the 20 percent mandated by the EPA.  Imported palm oil has competed effectively against US-grown biofuels derived from corn and soy, giving American energy consumers a highly efficient and less expensive option to round out their choices.

Free markets and limited government are among ALEC’s guiding principles and we have long opposed protectionism whether it “protects” American interests or those of our trading partners overseas.  Free markets have the power to propel economic growth globally just as surely as protectionism can destroy a country’s economic prospects – especially in developing nations like the ones that produce palm oil.  In September 2010, President Obama launched a Comprehensive Partnership with Indonesia, the largest producer and one of the largest exporters of palm oil.  This is an initiative that ALEC supported with its own resolution in support of the President’s efforts in the months before the official launch.  As there is no compelling environmental justification for the EPA’s decision, it is inconsistent with the President’s emphasis on strengthening cooperation with this vital geostrategic nation as well.

Palm oil producing countries are fighting back against protectionism throughout the world.  The Malaysian and Indonesian governments have expressed concerns that the European Union has enacted trade barriers against palm oil imports to protect its domestic rapeseed industry, in violation of World Trade Organization (WTO) law.  We should not be surprised if the United States finds itself subject to a similar WTO complaint if the EPA’s decision stands.

The EPA’s decision on palm oil is a trade barrier masquerading as sound environmental policy and should be reversed.  Including palm oil as an accepted biofuel will benefit energy consumers, the environment and nations in the developing world that can grow their economies by exporting this efficient and sustainable biofuel.

In Depth: Regulatory Reform

In his first inaugural address, Thomas Jefferson said that “the sum of good government” was one “which shall restrain men from injuring one another” and “shall leave them otherwise free to regulate their own pursuits of industry.” Sadly, governments – both federal and state – have ignored this axiom and…

+ Regulatory Reform In Depth