A World Trade Organisation (WTO) panel found that the EU must amend the delegated act for the 2018 renewable energy directive (RED II) in the multi-year dispute with Indonesia on oil crop-based feedstock restrictions.
Indonesia raised the dispute in December 2019, arguing that RED II violated WTO rules by discriminating against oil crop-based biofuels from Indonesia compared with oil crop-based biofuels from the EU. The dispute centred around the EU classification of palm oil and palm oil-based biodiesel at a high risk of indirect land-use change (Iluc).
Malaysia raised a similar case against the EU in January 2021, and the dispute was heard by the same panel as the Indonesian case. The panel found in March that the EU had to amend elements of the RED II delegated act.
The WTO upheld that the EU crop cap and high indirect Iluc cap and phase-out requirements under RED II are not violating international obligations.
But the WTO also found that the EU has violated agreements by not conducting a timely review of the data used to determine Iluc risk and failing to design the low Iluc-risk criteria to prevent arbitrary discrimination between countries which have the same conditions. The EU also did not comply with notification procedures or organise a commenting process, the panel found. The WTO recommended that the EU bring its measures into conformity with its international treaty obligations.
Indonesia also challenged the French palm oil feedstock ban. The WTO also agreed that the French ban violates the general agreement on tariffs and trade by applying internal taxes to imported palm-based biofuels but not to domestic rapeseed and soybean-based biofuels, despite being substitutable products.
The EU responded that it intends to take the necessary steps to amend the delegated act for the renewable energy directive to align with WTO rules. The panel report can be appealed for 60 days after publication, when it then should be adopted by the WTO dispute settlement body. The parties then agree on a reasonable time frame for the EU to comply with its obligations. In the EU response, it was unclear what measures may be taken to amend the French system to align with the WTO ruling.
