Indonesia Confident About Winning EU Lawsuit on Palm Oil Biofuel

World’s largest palm oil producer Indonesia is confident about winning its biofuel lawsuit against the European Union (EU) while saying that the ongoing dispute will not affect the negotiations on the long-awaited trade pact with the 27-membered bloc.

In 2019, Indonesia filed a World Trade Organization (WTO) lawsuit against the EU, claiming that the bloc’s Renewable Energy Directive II was discriminatory. The RED II sees the EU phasing out palm oil-based biofuel by 2030, claiming that such products might be at high risk of indirect land use changes (ILUC). The EU alleges that biofuel production might take place on cropland previously destined for food. This can lead to farmers extending the production of agricultural land into areas with high carbon stock such as forests, potentially negating the emission savings from biofuel use. The biofuel may be exempt from the limitations if the palm oil is classified as low-risk of ILUC.

Although the WTO panel has yet to issue a report on this palm oil biofuel lawsuit, Indonesia has high hopes of claiming a victory.

“We have some disputes with the EU at the WTO. The DS592 is on nickel, while the DS593 is on palm oil. We are confident about winning the palm oil dispute. Just you wait,” Deputy Trade Minister Jerry Sambuaga told reporters in Jakarta on Thursday.

News agency Deutsche Welle reported that the EU imported 6.3 billion euros (approximately $6.9 billion) worth of palm oil and palm oil products in 2021, most used for biofuels. Indonesia and Malaysia represented 44.6 percent and 25.2 percent of those imports, respectively.

Last year, the WTO ruled in favor of the EU in a dispute over Indonesia’s ban on unprocessed nickel export. Indonesia immediately lodged an appeal, which remains to be reviewed to this day due to a lack of a functioning appellate body. Amidst these WTO lawsuits, Indonesia has been trying to close a trade deal with the EU since 2016.

“Dispute and a trade agreement are two different things,” Jerry said while adding that the lawsuits had “no impact” on the negotiations.

Both sides are aiming to wrap up the overdue Indonesia-EU Comprehensive Economic Partnership Agreement (CEPA) negotiations in 2024. The 17th round of the talks is slated to take place next month, according to Djatmiko Bris Witjaksono, the ministry’s director general for international trade pacts.

“The next round is sometime around February, … but such talks take time. We hope that we can finish it by this year,” Djatmiko told the press later that day.

Tags: palm oil, biofuel, lawsuit, Indonesia, EU, European Union, WTO