Jakarta. Indonesia welcomed a recent ruling by the World Trade Organization or WTO on a palm oil-based lawsuit against the European Union (EU).

In 2019, Indonesia sued the EU at the WTO, calling that the European bloc’s climate policy -- the Renewable Energy Directive II (REDD II) -- as discriminatory. The RED II sees the EU phasing out palm oil-based biofuel by 2030 if they find they are at high risk of indirect land use changes (ILUC). Last week, the WTO panel issued a report, stating that certain aspects of the implementation and design of the policy were inconsistent with the WTO rules.

“We won the WTO lawsuit for palm oil[-based biodiesel]. So the world admits that Europe has been discriminatory to Indonesian palm oil. But this victory shows that Indonesia can fight and win,” Chief Economic Affairs Minister Airlangga Hartarto said in Jakarta on Friday.

“So the world has no choice but to accept. Biodiesel does not only come from rapeseed or soybean. But there are those that are based on crude palm oil [CPO],” Airlangga said.

The WTO panel report states that the EU had failed to conduct a timely review of the data used to determine which biofuels are high ILUC risk. The panel found fault in the EU’s design and implementation of what they considered to have low risk of ILUC. The panel also ruled that the tax incentives for biofuel used in France’s transportation system is discriminatory to palm oil-based biofuel. The EU only imposes tax incentives for soybean and rapeseed oil-based biofuel.

The panel ruling should be adopted by the WTO Dispute Settlement Body within the next two months unless the report is appealed. If adopted, the report will become binding between Indonesia and the EU. The European bloc intends to make some adjustments to the policy.

According to Airlangga, the recent ruling  is expected to affect the EU’s anti-deforestation regulation or EUDR. This policy mandates exporters to prove that their palm oil is free from deforestation before they can enter the European market. The EU, however, has postponed its implementation for large and medium companies to the end of this year. Micro- and small enterprises have time until June 30, 2026. Airlangga said that the postponement indicated the EU’s uncertainty.

The senior minister said that the biofuel ruling could add more force to Indonesia -- and fellow palm oil producing country Malaysia -- to beef up their fight against the EUDR. Airlangga said that the EUDR was discriminatory, while also citing that smallholders account for over 41 percent of the palm oil plantation in Indonesia. The recent developments are also expected to help speed up Indonesia’s trade pact negotiations with the EU, which had been going on for years.

“Hopefully, this can get rid of the [problems] that have been haunting the Indonesia-EU Comprehensive Economic Partnership Agreement [CEPA] negotiations. We hope we can wrap up the negotiations soon,” Airlangga said.