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WTO panel orders EU to change biofuels policy

On 5 March, a World Trade Organisation (WTO) panel has ruled that the EU’s policies of employing indirect land use change (ILUC) methodology to ban palm oil biofuels needs to be changed. A so-called Delegated Act was found to be discriminating against palm oil produced in Malaysia.

In response, Malaysian Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani (picture) commented:

“This ruling from WTO demonstrates that Malaysia’s discrimination claims are justified. This vindicates Malaysia’s pursuit of justice for our biodiesel traders, companies and employees. (…) The EU has agreed to comply with the WTO ruling before it can impose restrictions in accepting Malaysia’s palm oil biofuels.”

He thereby added that Malaysia had won key parts of its dispute with the EU over the EU’s renewable energy directive, known as RED II, as legal challenges had furthermore also been successful against French measures, pointing out that a three-member panel had ruled that several measures undertaken by the EU and France were “inconsistent with WTO rules”.  Particularly, he explained, restrictions like the “high ILUC risk cap” and “phase-out” regulations violated trade agreements aimed at preventing unnecessary trade barriers, as the panel had furthermore noted that other similar products available in the EU were not subject to the same restrictions. “The EU and France must now bring their measures into conformity with their WTO obligations,” he commented.

An analysis by Reuters on the other hand maintains that the WTO panel merely accepted Malaysia’s complaints over how the measures had been prepared, published and administered, however highlighting that the EU will now need to make adjustments to its policies.

Malaysia’s government was in particular disattisfied with the EU approach, given how NGOs like Global Forest Watch have been lauding the country’s efforts in the fight against deforestation, which is at the heart of the EU’s concerns. Last year, the NGO reported a sharp reduction in forest loss. This follows achievements whereby some 83% of palm oil refining capacity operated under a ‘No Deforestation, Peat and Exploitation (NDPE)’ commitment. Further government efforts include a cap imposed by the government to restrict the area for oil palm at 6.5 million hectares in 2023 and new forestry laws enacted in 2022 to sharpen penalties for illegal logging.

Separately, in a sign of goodwill, Malaysia’s prime minister Anwar has reiterated his call to resume Malaysia-EU free trade negotiations, after this had been frozen in 2023.


Copyright picture: By Yusttw – Own work, CC BY-SA 4.0,