WTO rules on renewable energy dispute

A WTO panel has ruled in a dispute brought by Malaysia (DS600) against measures taken by the EU under RED II concerning 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. They limit the use of food and feed crop-based biofuels in achieving these targets, because such biofuels are considered to have negative overall impacts on climate change.

The panel confirmed the overall WTO compatibility of the RED II legal framework, but noted that certain aspects of the implementation and design of an EU Delegated Act under the Directive were inconsistent with WTO rules. This Delegated Act 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 matters identified by the panel are, to a very large extent, required anyway to be adjusted under EU law. 

The EU intends to take the necessary steps to adjust the Delegated Act. 

A parallel WTO dispute (DS593) brought by Indonesia, heard by the same panel, was suspended for a duration of two months at the request of Indonesia with effect from 5 March 2024. 

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 Malaysia 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. 

The suspended case will remain suspended until 6 May 2024, unless Indonesia asks the panel to resume its work faster or to extend the suspension. If the suspension lasts for more than 12 months, the authority of the panel will lapse and the case will be terminated.

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. 

Malaysia 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 was brought by Malaysia (DS600) in January 2021. 

This followed consultations held at the WTO between the EU and Malaysia, which failed to resolve the disputes.  

The proceedings in the joined WTO dispute brought by Indonesia (DS593) in December 2019 were suspended on 5 March 2024 for a duration of two months at Indonesia’s request. 

For more information 

WTO Panel Report (DS600)

EU submissions and other documents of the case (DS593)

EU submissions and other documents of the case (DS600)