09/06/2009 (The Star Online) - THE issue on the Roundtable on Sustainable Palm Oil (RSPO) certified palm oil not being able to fetch a good premium price in Europe has become fodder for constant debate lately.

This came in the light of Europe’s continued dependency on palm oil as feedstock for food, oleochemicals as well as green energy to replace fossil fuels in the transport and energy sectors.

According to World Wildlife Fund’s (WWF) latest study, of the total production of about 1.5 million tonnes, less than 1% or 15,000 tonnes were purchased by consumers.

So why is the RSPO-certified palm oil getting such lukewarm response by European consumers despite meeting the sustainable standards and criteria which provides assurance that valuable tropical forests have not been cleared and that environmental and social safeguards have been met during production?

Is it due to the constant attack on the reputation of palm oil by non-governmental organisations and evironmentalists or the current global economic downturn putting a brake on the purchase of the higher priced RSPO-certified oil among European buyers?

It was reported that Indonesia planter PT Musim Mas spent about US$600,000 to certify its plantations and two palm oil processing factories in February while Malaysia-based local planters forked out between US$3 and US$8 per tonne of crude palm oil (CPO) produced for the RSPO certification.

When first introduced in November 2008, there was a big premium of US$50 per tonne of certified palm oil but now it has come down to about US$20 per tonne due to economic recessionary pressures.

Currently, the RSPO-certified palm oil is said to have a 10% premium over the uncertified palm oil. CPO is currently trading at RM2,500 to RM2,600 per tonne.

There were two main reasons buyers were not choosing certified palm oil. First, a drop in CPO demand amid the global economic crisis had pushed buyers to save money by dropping certified oil in favour of the cheaper alternative.

Second, buyers continued to sign up new contracts with oil palm plantation companies that have not been certified.

Industry sources blame the food and oleochemicals-based European manufacturers for being reluctant to buy up the higher premium certified palm oil.

On the other hand, more bioenergy companies in Europe, particularly those with power generation plants, were prepared and willing to pay higher premium for RSPO certified as they can offset part of the premium with the carbon credits.

Bioenergy business is expanding rapidly in Europe with palm oil set to remain a major feedstock given its availability and increasing sustainability focus among its producers.

WWF, one of RSPO’s initiators, will also assess the world’s major users of palm oil over the next six months and publish a Palm Oil Buyer’s Scorecard highlighting companies that support sustainable palm oil and exposing those that have not fulfilled their commitments.