Rule changes put halt to Norway’s use of palm oil biodiesel

Numbers released on 6 May by the Norwegian Environment Agency show that only 2 million liters of palm oil biodiesel were burned in the country’s cars last year, a steep drop from 118 million liters the year before. The volume, which includes the palm oil by-product PFAD, is minuscule compared to the peak year of 2017, when 317 million liters were consumed. Soy biodiesel consumption remained low, down from 3 percent of biofuel sold in 2019 to 1.7 percent in 2020.

Changes in biofuel policy explain results

The turnaround follows two major changes made to the country’s incentive mechanisms by the government in 2020, which in effect stifle high deforestation risk biofuel feedstocks like palm oil and soy oil.

From July, the road tax exemption for biofuel supplied above the blending mandate threshold, which had been the main driver behind the extensive use of palm oil-based biofuel in Norway, was removed.

Not long after, the government announced that from January 2021, the maximum volume of crop-based biofuel used to achieve the blending mandate would be reduced from 10.1 percent to 6.5 percent. It was understood that due to technical and market factors, the move would stifle the use of higher-value palm oil-based renewable diesel used to comply with the mandate.

This premise has now been borne out by the volume numbers for 2020, with palm oil and its by-products representing just 0.4 percent of biofuels sold. This is in spite of the rule changes only being in force from the middle of last year. Market research conducted by Rainforest Foundation Norway this year suggests that the shift will be permanent, with little or no palm oil diesel being placed on the market in 2021.

Palm oil biofuels increase emissions and deforestation

Norway’s aggressive policies to reduce greenhouse emissions from road transport has seen the country take the global lead in electrification, the Parliament having decided on a national target that all new cars sold should be emission-free by 2025. In 2020, battery electric vehicles had a market share of 55 percent in the Nordic country.

It has now taken a lead in mitigating the unintended consequences of policies to promote the use of biofuels to reduce greenhouse gas emissions. As a cheap and readily available feedstock for biofuels, palm oil has been widely used in Europe. This is despite a large body of scientific evidence showing that burning palm oil for fuel is even worse for the climate than burning fossil diesel, as increased demand leads to the expansion of oil palm plantations at the expense of rainforest and carbon-rich peatlands.

“It is very promising that Norway has managed to turn the tide and halt the consumption of palm oil biofuel. Now the EU must follow suit.”

The recently published data on biofuel consumption in Norway also reveal that advanced biofuels now make up two thirds of the total. Advanced biofuels generally have a far better climate footprint than fossil fuels, palm oil and other food-based biofuels.

“Current biofuel policies around the world lead to massive deforestation and increased greenhouse gas emissions. Policymakers and industries must halt the use of high-deforestation risk feedstock for biofuels, like palm oil and soy, to ensure that biofuel policies don’t have an adverse impact on the climate and increase rainforest destruction,” says Nils Hermann Ranum, head of Rainforest Foundation Norway’s Drivers of Deforestation Program.

A growing number of EU countries have recently announced plans to phase out biofuel based on palm oil and soy respectively, but as yet there is no evidence of a drop in consumption in the EU. The most recent year for which data are available, 2019, saw a 7 percent increase from the year before, reaching an all-time high of 4.5 million tonnes of palm oil biodiesel consumed in the region. The EU is currently revising its Renewable Energy Directive (RED II), which includes biofuel incentives.

“It is very promising that Norway has managed to turn the tide and halt the consumption of palm oil-based biofuels. Now the EU must follow suit and propose a phase-out of palm oil and soy biodiesel from 2021”, says Ranum.