WTO Panel Delivers Mixed Ruling on EU, French Measures on Indonesian Biofuels
A World Trade Organization dispute panel on Jan. 10 delivered a mixed ruling in Indonesia's dispute against various measures imposed by the EU and its member states on palm oil and oil palm crop-based biofuels from Indonesia. The European Commission touted the ruling as a win, declaring in a press release that the panel "confirmed the overall WTO compatibility" of its "Renewable Energy Directive" legal framework.
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But even the commission noted that various aspects of the framework, including elements of the "implementation and design of an EU Delegated Act under the Directive," were found to violate WTO rules.
Indonesia challenged two main measures: EU restrictions on palm oil and oil palm crop-based biofuels imposed under the Renewable Energy Directive and an annual tax imposed by France payable by entities that release fuel for consumption within France, known as TIRIB.
The Renewable Energy Directive established a "common framework for the promotion of renewable energy in the European Union," setting binding targets for the overall share of energy from renewable sources in the EU's gross final consumption of energy in 2030. The regime also establishes rules on financial support for electricity from renewable sources, regional cooperation between member states and between member states and third countries and on guarantees of origin.
Part of the Renewable Energy Directive said that biofuels made from food and feed crops could only make up a maximum of 7% of the EU renewable energy targets. Another provision capped the contribution that high indirect land-use change (ILUC)-risk biofuels may make to meeting the target EU gross final consumption of energy from renewable sources in the transport sector.
The dispute panel found that Indonesia failed to establish that both the 7% limit and high risk cap were in line with the WTO's requirement "to use relevant international standards as a basis for technical regulations" and that "technical regulations are not more trade-restrictive than necessary to fulfill a legitimate objective."
Where the EU did slip up, however, concerned its administration of the high risk cap, the panel said. The ruling said the bloc erred "by failing to conduct a timely review of the data used to determine which biofuels were high ILUC risk, and because there are deficiencies in the design and implementation of the low ILUC-risk criteria." The panel also said the EU failed to notify the proposed 7% maximum share and the proposed cap "by having failed to organize a commenting process."
Generally, the panel said that the high risk cap "was a measure relating to the conservation of exhaustible natural resources that was made effective in conjunction with restrictions on domestic consumption or production" in line with WTO rules and was needed to protect "human, animal or plant life or health."
On the French tax measure, the panel said the provision violated WTO rules by "excluding palm oil-based biofuel from the group of qualifying biofuels." The exclusion of palm oil-based biofuel "resulted in the application of internal taxes to imported palm oil-based biofuel in excess of those applied to the like domestic rapeseed and soybean oil crop-based biofuels" and led to "dissimilar taxation" between imports and the "directly competitive or substitutable domestic" products, the decision said.