The influence of EU renewable energy directive policy to Indonesian palm oil exports to some EU countries

Abstract

The objectives of this study are 1) to describe Indonesian palm oil export to some European Union (EU) countries and some export determinant variables, 2) to analyze the implementation of the EU renewable energy Directive (RED) as an instrument to guarantee that the traded products are environmentally friendly and sustainable, and 3) to analyze the effect of the RED on Indonesian palm oil exports. The effect of RED was estimated through the export function behavior of Indonesian palm oil to each selected EU country. The secondary data was used for period of 2000–2021. A simultaneous equation model using the 2SLS method was applied for the analysis. The research result implies that the 2003 Directive, and the rupiah real exchange rate have significant effect on Indonesian export to Spain, Italy and Germany. While the price of palm oil in the EU is significantly affected the Indonesian palm oil export to Italy and Germany, but not to Spain. The strengthening of the rupiah exchange rate caused a decrease in Indonesian palm oil exports to Spain but increased the exports of Indonesian palm oil to Italy and Germany, and also increased the palm oil prices in the EU market.