Indonesia-EU Biodiesel Dispute: WTO Rules in Favour of Indonesia
The World Trade Organization (WTO) ruled in favour of Indonesia in a case against the European Union (EU) involving shipments of palm oil-based biodiesel. The case started in 2019 after the EU decided that palm oil-based diesel is not considered a biofuel due to its link to deforestation. As such, its use in transport fuel across the EU would need to be phased out between 2023 and 2030.
While the WTO found fault in the way the EU prepared, published and administered its biodiesel measures, and was also found giving less favourable treatment to Indonesian biodiesel than to similar products of EU origin (such as rapeseed or soybean-based biofuels), or imported from third countries, it does not mean Indonesia should expect to see strongly rising biodiesel exports (to the EU) in the future. And, as such, it might not necessarily help to speed up Indonesia’s long-drawn trade pact negotiations with the EU (called IEU-CEPA).
After all, the WTO also stated that the underlying logic of EU measures to limit greenhouse gas emissions was lawful and that the EU has a reasonable basis to label palm oil-based biodiesel as "high risk". The WTO published its ruling on 10 January 2025.
The Indonesian Palm Oil Entrepreneurs Association (GAPKI) estimates that biodiesel exports to the EU will not necessarily increase despite Indonesia being considered the one to have won the WTO battle. GAPKI Chairman Eddy Martono said his side is waiting for the government's next steps after this decision. For example, will there be new talks and negotiations between the Indonesian government and the EU, or not?
Moreover, biofuel shipments to the EU still need to carry the “low ILUC” label. Low ILUC biofuels are defined as those produced from feedstocks that avoid displacement of food and feed crops through improved agricultural practices or through cultivation of areas not previously used for crop production. Most biofuels produced in Indonesia don't carry that label, and therefore biodiesel exports from Indonesia to the EU have been low so far (and there are no grounded expectations for a steep rise in the near future).
The EU has 60 days to revise its biofuel policies so that these policies become in line with the WTO ruling. However, in case the EU files an appeal, then the case will not be concluded anytime soon.
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