Adds Malaysia's reaction
A World Trade Organisation (WTO) panel said the EU must adjust its Renewable Energy Directive (RED II) because certain aspects of the act are inconsistent with WTO rules.
The decision was made in a claim brought by Malaysia against the EU concerning palm oil and oil palm crop-based biofuels in renewable energy consumption targets.
Palm oil was classified as a high indirect land use change (ILUC) risk feedstock in 2019, which means it is subject to a crop cap and must be phased out by 2030.
ILUC can occur when pasture or agricultural land previously destined for food and feed markets is diverted to biofuel production.
In a decision that can be appealed, the WTO found that the procedure used in identifying ILUC-risk criteria, among other things, "accords less favourable treatment to palm oil-based biofuel from Malaysia than that accorded to like products of EU origin", and "does not accord an advantage to palm oil-based biofuel from Malaysia that is accorded to like products imported from third countries".
The EU said it will "take the necessary steps to adjust the Delegated Act".
The Malaysian Ministry of Plantation and Commodities said it will "closely monitor the EU's changes to its regulations to bring it in line with the WTO's findings, and pursue compliance proceedings if necessary". The ruling "demonstrates that Malaysia's claims of discrimination are indeed justified", the ministry added.
