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The European Union said recently that it will comply with a World Trade Organization ruling on its renewable energy policy, which Indonesia had accused of discriminating against palm oil-based biofuel.
In 2019, Indonesia, the world's largest palm oil producer, filed a case against the European Union at the WTO over the bloc's policy known as the "Renewable Energy Directive II". Under this policy, the EU plans to phase out the use of palm oil-based biofuel by 2030 if evidence indicates a significant risk of causing "indirect land-use change" (ILUC).
ILUC refers to the conversion of agricultural land previously used for food production into biofuel production, which pushes farmers to grow their crops elsewhere and indirectly leads to higher emissions. Just two weeks ago, a three-member WTO panel found that the EU had failed to conduct a timely review of the data used to determine which biofuels pose a significant risk of causing ILUC.
"The EU will take the necessary steps to fully comply with the panel's report," Stefan Michatti, deputy head of the EU delegation to Indonesia, told reporters in Jakarta on Thursday. Michatti acknowledged that the report called on the EU to make certain adjustments to the policy, saying: "We will agree on a timeframe to do so."
Michatti declined to comment further when asked whether the EU would appeal the ruling on palm biodiesel. If the WTO panel's report is not appealed, the organisation's Dispute Settlement Body will adopt the document within the next two months. Once adopted, the report will become binding on both Indonesia and the EU.
When the ruling was first issued, the European Commission said it would make the necessary adjustments in response to the shortcomings identified by the panel in the policy.
Separately, Indonesia's Coordinating Minister for Economic Affairs, Airlangga Hartarto, said the ruling could give Indonesia and fellow palm oil producer Malaysia added leverage in their fight against the EU Deforestation Regulation (EUDR). That is a separate policy requiring companies wishing to access the European market to prove that their palm oil does not come from deforested land.
Data from the Indonesian Palm Oil Association show that Indonesia's annual exports of the key commodity to the EU can reach millions of tonnes. However, Indonesian palm oil exports to the EU fell from 4.1 million tonnes in 2022 to 3.7 million tonnes the following year.
Indonesia and the EU are engaged in ongoing litigation at the WTO. The organisation previously sided with the EU in a dispute in which Europe accused Indonesia of violating WTO rules by banning exports of unprocessed raw nickel. Indonesia has appealed that ruling, but the WTO's Appellate Body remains inactive to this day, leaving the case in limbo.
Source: Al Mal Forum