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Abstract Biofuel use is increasing throughout the European Union. This increased use has raised some concerns about the environmental impact of these fuels. Of particular concern is palm oil, a biofuel derived from palm trees in tropical regions. This paper analyzes the many claims about palm oil's harmful environmental impact and finds them seriously flawed. In addition the paper analyzes questions of economic growth and development related to palm oil that are overlooked by the critics of palm oil. Policymakers and the public, concerned about greenhouse gas (GHG) emissions from industrial use, have been seeking alternatives to carbon-rich fuels such as coal. Biofuels have emerged as an attractive alternative because they generate far fewer greenhouse gases than conventional fuels. As a result, many countries throughout Europe are eager to use palm oil and other biofuels for their electricity generation and transportation systems. Palm oil is a low-energy and low-fertilizer crop that offers much higher yields per hectare than other oil crops. Furthermore, if the energy obtained by the residuals in the production process is used properly, the energy balance of palm oil production is much more favourable compared to other biofuels. Overall, palm oil turns out to be much more efficient than other oil crops and therefore offers significant advantages within the context of GHG savings. Contrary to some recent campaigns and the perception among some European citizens, deforestation associated with oil palm plantings is much less significant than postulated. Indeed, the European Commission is considering classifying palm oil plantations as forests due to the excellent crown cover they provide in the regions they are established. Furthermore, biodiversity in oil palm plantations is much higher than in most monocultures in the EU. The EU Renewable Energy Directive is discriminatory from the outset and the GHG saving values and their interpretation are based on wrong assumptions and faulty calculations. For example, under the Directive biofuel producers in the European Union are permitted to claim higher GHG savings than biofuel producers outside the EU. This is protectionism and clearly in violation of established international trade laws. It is particularly problematic since any reasonable emissions budgeting comparison shows that palm-derived biofuel is less carbonintensive than those produced elsewhere, including Europe. The EU should reshape its policies towards palm oil, conduct objective and nondiscriminatory calculations regarding the GHG emissions saving values and support palm oil imports from developing countries rather than restricting them. Together with certain initiatives to further enhance energy efficiency and to protect precious habitats combined with strategies to strengthen property rights and encourage efficient land use and successful strategies of agricultural development, this would not only prevent political conflicts and trade disputes in conjunction with the issue of palm oil but also foster economic growth and development, reduce poverty and -not least -contribute to the ambitious GHG emissions savings goals on a fair and reasonable basis.