EU Acceptance of High iLUC Soy Creates Opportunities for Malaysian Palm Oil
Backstory: Germany’s Union for the Promotion of Plants and Protein (UFOP) called on European Union (EU) agricultural ministers and the European Parliament to prevent soyabeans being classified as a raw material associated with a high risk of indirect land-use change (iLUC).
EU powerhouse Germany struck down the EU Commission’s proposal to tag soy as high iLUC risk based on this argument.
“Soyabeans, peas and broad beans are the most important large-grained pulses in the EU and are gaining more and more importance as GM-free sources of protein, helping to extend crop rotations and contributing to security of supply,” UFOP said.
EU powerhouse Germany struck down the EU Commission’s proposal to tag soy as high iLUC risk based on this argument.
“Soyabeans, peas and broad beans are the most important large-grained pulses in the EU and are gaining more and more importance as GM-free sources of protein, helping to extend crop rotations and contributing to security of supply,” UFOP said.
MSPO certification shields palm oil industry, guarantees future of smallholders
It is absolutely amazing how the EU Parliament sold a story that soybeans are essential for food security in a situation which was only looking at the use of soy towards the EU’s renewable energy ambitions.
According to Biomass Magazine coverage of the news:
"Under the proposed calculations, both palm oil and soybean would surpass the threshold for high ILUC-risk feedstocks, according to a report filed by the USDA Foreign Agricultural Service’s Global Agricultural Information Network in April."
As it stands, palm oil is the only vegetable oil to be banned from the EU’s renewable energy program.
The palm oil-iLUC argument was a no-brainer as Europe does not grow palm oil. This made it easy for European industries and civil societies to demand that palm oil be exempted from the EU’s bioenergy subsidies.
Soybeans for biofuels is an entirely different animal as the Europeans grow soy. And rapeseed. Both soy and rapeseed are annual crops which means German farmers can switch between soy or rapeseed depending on which crop pays better.
The subsidies from the EU’s biofuels program pays handsome incentives which may be why UFOP is asking the EU to keep soy in the mix for biofuel subsidies even though the evidence against soy says different.
The difference here is that European NGOs including the ICCT are saying that soybeans are a poor choice for biofuels due to iLUC.
“There is strong scientific evidence that soy biofuels are linked to high greenhouse gas emissions from deforestation, particularly in South America,” said Chelsea Baldino, Fuels Program Lead at the ICCT. “The European Commission’s decision to phase out these biofuels is one of the most significant actions they could take to reduce greenhouse gas emissions from today’s road transport fleet—and a crucial step for aligning EU renewable energy policy with its climate objectives.”
The ICCT has a point which needs to be expanded on. The EU does not grow enough soybean domestically to meet the demands from feed and fuel.
FEFAC which represents the EU’s animal feed industry, had already warned of difficult consequences for European consumers under the EU’s other green ambition, the EUDR.
“The European Union relies heavily on imported soy for livestock, with around 76% to 90% of global soy used as animal feed. The EU imports about two-thirds of its high-protein feed requirements, and this reliance on overseas soy directly drives up prices for the European livestock sector.”
EU reliance on soy-based feed and fuel driving climate change
There is no doubt that EU demand for soy based feed and fuel have driven deforestation.
According to the report “Global soybean trade dynamics: Drivers, impacts, and sustainability” by Dailiang Peng et al.
“The global soybean harvested area increased from 23.82 Mha in 1960 to 136.90 Mha in 2024.3 However, the expansion of soybean cultivation has raised significant sustainability concerns, particularly in South America, where it has become a major driver of deforestation and habitat conversion, posing threats to global warming and biodiversity.”
This alarming fact on soybean’s role in deforestation had American groups coming to the defense of US soy farmers.
With the US as the top supplier of soy to the EU, US based group Clean Fuels Alliance America came up with ways forward for how the EU looks at soy and iLUC.
This is a simplistic view on US soy production which paints Latin American soy black due to deforestation but ignores the most damning contribution of soy farms to climate change in N2O.
“Nitrous oxide (N₂O) accounts for over two-thirds of the greenhouse gas footprint in soybean production. Despite requiring no synthetic nitrogen fertilizer, soybeans naturally emit N₂O through soil microbe breakdown of organic matter and root nodules, making this emission footprint surprisingly high and a target for agricultural reduction.”
The United States Environmental Protection Agency reported that 75% of the United States nitrous oxide emissions came from its agricultural sector.
Why does nitrous oxide emissions from soy matter in fighting climate change?
According to the United Nations Environment Programme (UNEP):
"Nitrous oxide is approximately 270 times more potent than carbon dioxide in terms of warming the planet, and currently responsible for approximately 10% of net global warming since the industrial revolution. Primarily emitted from agricultural practices such as the use of synthetic fertilizers and manure, N₂O is the third most significant greenhouse gas and the top ozone-depleting substance still being released into the atmosphere."
Nitrous oxide emissions are most concerning as the EU’s favorite source of biofuels derived from European rapeseed is also linked to emissions which should have raised red flags on its use as a biofuel.
In the EU, winter rapeseed cultivation drives high nitrous oxide (N₂O) emissions due to heavy nitrogen fertilization and nitrogen-rich crop residues. Direct emission factors range from 0.51% to 2.54% of applied fertilizer. These emissions largely offset the climate benefits of rapeseed-based biodiesel.
This is the same crop rotation that UFOP sold to the EU Parliament as part of their protein security argument.
What is worse about rapeseed-based biodiesel emissions is the fact that it could be contributing to the death of tropical forests from the Amazon to Southeast Asia.
According to the IPCC:
"While tropical forests act as massive, natural carbon sinks, rising temperatures force the soil to release more carbon dioxide than the ecosystem sequesters."
Malaysian expert Ir Qua Kiat Seng raised other questions when the news broke that the EU could forgive the iLUC impact of soy.
“The EU’s indirect land‑use change (iLUC) methodology has long penalized palm oil, while crops like soybeans are treated more leniently. UFOP’s recent objection to classifying soy as high‑iLUC highlights the inconsistencies Malaysia should challenge.
- Methodological bias: Palm oil is assumed to drive deforestation, while similar risks in soy are overlooked.
- Land efficiency ignored: Oil palm yields 4–10× more oil per hectare than soy or rapeseed.
- Sustainability dismissed: Malaysia’s MSPO certification enforces traceability and safeguards.
- Trade equity at risk: Selective treatment may breach WTO non‑discrimination principles.
- Double standards: If soy deserves exemption, palm oil merits equal reconsideration.”
Malaysia should press for a methodological review of iLUC that applies consistent, evidence‑based criteria across all commodities. Fairness, efficiency, and sustainability demand nothing less.”
Qua Kiat Seng’s challenge to the EU decision to continue using soy for biofuels came on the heels of the Dutch recognition of Malaysia’s sustainability certification for palm oil which has made a pledge to exclude deforestation from its supply chain.
The opportunity for Malaysian palm oil in RED lll
EU Parliamentarians have obviously forgotten that they have a trade agreement with palm oil powerhouse Indonesia.
The EU’s decision to allow the continued use of soy in its renewable energy program could come with a hefty price tag according to Transport & Environment.
“The EU previously won a WTO trade dispute against Indonesia and Malaysia that allowed the EU to keep a phase out of palm oil biofuels - of which Indonesia and Malaysia are the world’s biggest producers - provided it took a scientific and consistent approach to what it considers high deforestation risk feedstocks. This condition will now not be met as a result of today’s vote, leaving the EU open to litigative action from these palm oil powerhouses.”
One can hope that Malaysia will not jump on this EU blunder on biofuels and take the quick cash grab for the sake of fighting climate change.
It may provide a short term glee for Malaysia to be proven right that its palm oil is sustainably produced but it does not help the long term needs of the EU and Malaysia to manage food and fuel resources.
Having come all this way to earn the acknowledgement of the Netherlands that Malaysian palm oil is fit for the EUDR, the best way forward for Malaysia is to adopt the same argument used by Donau Soja to justify the use of soybean oil as a renewable fuel.
That Malaysian palm oil is not the driver of global deforestation.
That "the current classification does not demonstrate a credible causal link between the use of Malaysian palm oil in biofuels and land-use change elsewhere."
Published July 2026. CSPO Watch
According to Biomass Magazine coverage of the news:
"Under the proposed calculations, both palm oil and soybean would surpass the threshold for high ILUC-risk feedstocks, according to a report filed by the USDA Foreign Agricultural Service’s Global Agricultural Information Network in April."
As it stands, palm oil is the only vegetable oil to be banned from the EU’s renewable energy program.
The palm oil-iLUC argument was a no-brainer as Europe does not grow palm oil. This made it easy for European industries and civil societies to demand that palm oil be exempted from the EU’s bioenergy subsidies.
Soybeans for biofuels is an entirely different animal as the Europeans grow soy. And rapeseed. Both soy and rapeseed are annual crops which means German farmers can switch between soy or rapeseed depending on which crop pays better.
The subsidies from the EU’s biofuels program pays handsome incentives which may be why UFOP is asking the EU to keep soy in the mix for biofuel subsidies even though the evidence against soy says different.
The difference here is that European NGOs including the ICCT are saying that soybeans are a poor choice for biofuels due to iLUC.
“There is strong scientific evidence that soy biofuels are linked to high greenhouse gas emissions from deforestation, particularly in South America,” said Chelsea Baldino, Fuels Program Lead at the ICCT. “The European Commission’s decision to phase out these biofuels is one of the most significant actions they could take to reduce greenhouse gas emissions from today’s road transport fleet—and a crucial step for aligning EU renewable energy policy with its climate objectives.”
The ICCT has a point which needs to be expanded on. The EU does not grow enough soybean domestically to meet the demands from feed and fuel.
FEFAC which represents the EU’s animal feed industry, had already warned of difficult consequences for European consumers under the EU’s other green ambition, the EUDR.
“The European Union relies heavily on imported soy for livestock, with around 76% to 90% of global soy used as animal feed. The EU imports about two-thirds of its high-protein feed requirements, and this reliance on overseas soy directly drives up prices for the European livestock sector.”
EU reliance on soy-based feed and fuel driving climate change
There is no doubt that EU demand for soy based feed and fuel have driven deforestation.
According to the report “Global soybean trade dynamics: Drivers, impacts, and sustainability” by Dailiang Peng et al.
“The global soybean harvested area increased from 23.82 Mha in 1960 to 136.90 Mha in 2024.3 However, the expansion of soybean cultivation has raised significant sustainability concerns, particularly in South America, where it has become a major driver of deforestation and habitat conversion, posing threats to global warming and biodiversity.”
This alarming fact on soybean’s role in deforestation had American groups coming to the defense of US soy farmers.
With the US as the top supplier of soy to the EU, US based group Clean Fuels Alliance America came up with ways forward for how the EU looks at soy and iLUC.
- Prioritize risk-based certification that can respond quickly to deteriorating protections
- Support jurisdictional approaches that align economic incentives with conservation at regional scales
- Recognize that institutional stability matters more than snapshot assessments of carbon intensity
This is a simplistic view on US soy production which paints Latin American soy black due to deforestation but ignores the most damning contribution of soy farms to climate change in N2O.
“Nitrous oxide (N₂O) accounts for over two-thirds of the greenhouse gas footprint in soybean production. Despite requiring no synthetic nitrogen fertilizer, soybeans naturally emit N₂O through soil microbe breakdown of organic matter and root nodules, making this emission footprint surprisingly high and a target for agricultural reduction.”
The United States Environmental Protection Agency reported that 75% of the United States nitrous oxide emissions came from its agricultural sector.
Why does nitrous oxide emissions from soy matter in fighting climate change?
According to the United Nations Environment Programme (UNEP):
"Nitrous oxide is approximately 270 times more potent than carbon dioxide in terms of warming the planet, and currently responsible for approximately 10% of net global warming since the industrial revolution. Primarily emitted from agricultural practices such as the use of synthetic fertilizers and manure, N₂O is the third most significant greenhouse gas and the top ozone-depleting substance still being released into the atmosphere."
Nitrous oxide emissions are most concerning as the EU’s favorite source of biofuels derived from European rapeseed is also linked to emissions which should have raised red flags on its use as a biofuel.
In the EU, winter rapeseed cultivation drives high nitrous oxide (N₂O) emissions due to heavy nitrogen fertilization and nitrogen-rich crop residues. Direct emission factors range from 0.51% to 2.54% of applied fertilizer. These emissions largely offset the climate benefits of rapeseed-based biodiesel.
This is the same crop rotation that UFOP sold to the EU Parliament as part of their protein security argument.
What is worse about rapeseed-based biodiesel emissions is the fact that it could be contributing to the death of tropical forests from the Amazon to Southeast Asia.
According to the IPCC:
"While tropical forests act as massive, natural carbon sinks, rising temperatures force the soil to release more carbon dioxide than the ecosystem sequesters."
Malaysian expert Ir Qua Kiat Seng raised other questions when the news broke that the EU could forgive the iLUC impact of soy.
“The EU’s indirect land‑use change (iLUC) methodology has long penalized palm oil, while crops like soybeans are treated more leniently. UFOP’s recent objection to classifying soy as high‑iLUC highlights the inconsistencies Malaysia should challenge.
- Methodological bias: Palm oil is assumed to drive deforestation, while similar risks in soy are overlooked.
- Land efficiency ignored: Oil palm yields 4–10× more oil per hectare than soy or rapeseed.
- Sustainability dismissed: Malaysia’s MSPO certification enforces traceability and safeguards.
- Trade equity at risk: Selective treatment may breach WTO non‑discrimination principles.
- Double standards: If soy deserves exemption, palm oil merits equal reconsideration.”
Malaysia should press for a methodological review of iLUC that applies consistent, evidence‑based criteria across all commodities. Fairness, efficiency, and sustainability demand nothing less.”
Qua Kiat Seng’s challenge to the EU decision to continue using soy for biofuels came on the heels of the Dutch recognition of Malaysia’s sustainability certification for palm oil which has made a pledge to exclude deforestation from its supply chain.
The opportunity for Malaysian palm oil in RED lll
EU Parliamentarians have obviously forgotten that they have a trade agreement with palm oil powerhouse Indonesia.
The EU’s decision to allow the continued use of soy in its renewable energy program could come with a hefty price tag according to Transport & Environment.
“The EU previously won a WTO trade dispute against Indonesia and Malaysia that allowed the EU to keep a phase out of palm oil biofuels - of which Indonesia and Malaysia are the world’s biggest producers - provided it took a scientific and consistent approach to what it considers high deforestation risk feedstocks. This condition will now not be met as a result of today’s vote, leaving the EU open to litigative action from these palm oil powerhouses.”
One can hope that Malaysia will not jump on this EU blunder on biofuels and take the quick cash grab for the sake of fighting climate change.
It may provide a short term glee for Malaysia to be proven right that its palm oil is sustainably produced but it does not help the long term needs of the EU and Malaysia to manage food and fuel resources.
Having come all this way to earn the acknowledgement of the Netherlands that Malaysian palm oil is fit for the EUDR, the best way forward for Malaysia is to adopt the same argument used by Donau Soja to justify the use of soybean oil as a renewable fuel.
That Malaysian palm oil is not the driver of global deforestation.
That "the current classification does not demonstrate a credible causal link between the use of Malaysian palm oil in biofuels and land-use change elsewhere."
Published July 2026. CSPO Watch