WTO confirms validity of EU climate-based actions in renewable energy dispute brought by Indonesia

A WTO panel confirmed the overall WTO compatibility of the RED II legal framework, albeit noting that certain aspects of the implementation and design of an EU Delegated Act under the Directive were inconsistent with WTO rules.

The EU intends to take the necessary steps to adjust the Delegated Act, as this was already required under EU law.

The measures disputed by Indonesia (DS593) concern measures taken by the EU under RED II on palm oil and oil palm crop-based biofuels, as well as certain related French measures. The measures establish renewable energy consumption targets for the EU transport fuel market and limit the use of food and feed crop-based biofuels in achieving these targets.

The Delegated Act which was found to be inconsistent with WTO law by the panel establishes the criteria to determine which food and feed-crop based biofuels have a high risk of increasing greenhouse gas emissions due to the changes in the use of land - such as deforestation - and allows for such crops to be certified as low risk in certain circumstances. The shortcomings identified by the panel will be adjusted under EU law.

Next steps

Unless the WTO panel report is appealed, it should be adopted by the WTO Dispute Settlement Body within the next two months (60 days). If adopted, the report will become binding between Indonesia and the EU. The EU will then take the necessary steps to respect its WTO obligations. The parties usually try to agree on a reasonable period of time for the defending WTO Member to comply. If this cannot be agreed, it will be decided by an arbitrator.

Background

RED II establishes renewable energy consumption targets for the EU transport fuel market. It limits the use of food and feed crop-based biofuels to achieve these targets, because such biofuels are seen as contributing to indirect land-use change. Indirect land-use change arises when a direct change in land use, such as from food to biofuel production, leads to indirect pressure to produce food elsewhere and results in forest being changed into agricultural land, for example. Food and feed crop-based biofuels can thus lead to increased greenhouse gas emissions, rather than emissions savings.

Indonesia challenged the classification of palm oil and oil palm crop-based biofuels as being at high risk of indirect land-use change and argued that the measures are discriminatory. The WTO dispute (DS593) was brought by Indonesia in December 2019. This was followed by consultations held at the WTO between the EU and Indonesia, which failed to resolve the dispute. A panel was established in July 2020.

A parallel WTO dispute on the same issue was brought against the EU by Malaysia (DS600). That dispute was heard by the same panel as heard DS593, with a report adopted by the WTO Dispute Settlement Body on 26 April 2024. The European Union and Malaysia are finalising discussions on the timing for compliance with this report.

For more information

WTO Panel Report (DS593) and Addendum

EU submissions and other documents of the case (DS593)

WTO Panel Report (DS600)

EU submissions and other documents of the case (DS600)

Dispute Settlement in the EU

Public link

Please use the above public link if you want to share this noodl on another website.