Oil major Total undermining French palm oil diesel law with doublespeak

A controversy has broken out in France over a tax exemption that threatens to undermine a new law aimed at reducing demand for palm oil diesel. The exemption is for palm fatty acid distillate (PFAD), a by-product of palm oil. Following intense lobbying by oil and gas multinational Total, the French customs authority changed its mind and classified PFAD as a residue, not direct palm oil. This way diesel made with palm-based PFAD can continue to benefit from environmental tax advantages. 

Environmental campaign groups are furious and have described the exemption as ‘a denial of democracy’. They challenged the decision in France’s Council of State, which has said it will give a ruling before the summer.

Biodiesel from palm oil contributes to deforestation and is three times worse for the climate than regular diesel, according to a European Commission study.

The French parliament voted in December 2018 and again in November 2019 to end all tax exemptions for biofuels made from palm oil, in order to remove incentives for the destruction of rainforests around the world, particularly in Indonesia and Malaysia. The French Constitutional Court rejected an appeal by Total and ruled this measure was constitutional. However, the country’s customs directorate ruled right before Christmas that PFAD is effectively a residue, and therefore counts as eligible for tax exemptions intended to benefit the environment.

Adding to the controversy is the fact that the French oil giant Total lobbied for PFAD to keep its tax-exempt status. Total wants to import 100,000 tonnes of PFAD per year for its ‘biorefinery’ near Marseille on the French south coast. Total says that using the waste from a product is part of the circular economy and should be rewarded with tax exemptions designed to encourage greater use of resources.

But environmental NGOs say allowing PFAD will undermine attempts to protect the rainforests being cut down for palm oil plantations. PFAD is considered a by-product of palm oil, and not a residue, by Germany, the UK, Sweden and Norway among others. Finland labels PFAD as a residue. It is home to state-backed Neste, the world’s largest biodiesel producer, which has a refinery in Singapore - conveniently located for Malaysia and Indonesia’s palm plantations.

Leading the NGO campaign against the PFAD exemption is Canopée, a French association fighting to stop deforestation. Its campaign coordinator Sylvain Angerand said: ‘During the palm oil refining process, palm fatty acid distillate is separated from pure palm oil by distillation. With Total looking to import large quantities of PFAD, this is creating an incentive for devastating destruction of Indonesian rainforests.’

Canopée has documentary evidence showing that the customs directorate agreed last June to exclude PFAD from the list of biofuels that can receive tax incentives because it’s a palm oil product. Following strong lobbying by Total, on 19 December the same Customs authority published a new document countering the June decision, allowing the oil multinational to benefit from tax incentives when making biodiesel with PFAD.

Jérôme Frignet of Greenpeace France said: ‘This is quite simply a denial of democracy. The parliamentarians were very clear in their decisive vote in November. They voted against a financial loophole that would benefit biofuels made from palm oil – that is the term they used, and that quite obviously includes PFAD.’

T&E’s Laura Buffet said: ‘The EU has recently decided to stop any tax incentives or policy support to palm oil diesel because of the huge impact on deforestation worldwide. PFAD is palm oil by another name. The French government should follow the European Union decision and remove this loophole introduced by the Customs Authority.’

New Austrian government says No to palm oil diesel

The coalition agreement for Austria’s new conservative/green government contains a commitment to phase out biofuels with a negative environmental impact, including palm oil. The commitment is phrased as wanting ‘as quick an exit from harmful fuels as possible’, but contains little detail. The revised EU Renewable Energy Directive offers governments the chance to accelerate the phase-out of biofuels with a high indirect land-use impact, particularly palm oil.