DS-593: European Union — Certain measures concerning palm oil and oil palm crop-based biofuels

Summary:

Complainant: Indonesia
Respondent: European Union
Third Parties: Argentina; Australia; Brazil; Canada; China; Colombia; Costa Rica; Ecuador; Guatemala; Honduras; India; Japan; Malaysia; Norway; Russian Federation; Singapore; Korea, Republic of; Thailand; Turkey; United States

In 2018, the Renewable Energy Directive Recast (RED II) came into force in the European Union. RED II introduces measures to phase out biofuels which pose high risk significant GHG emissions from indirect land-use change (ILUC), which is defined as occurring where there is “cultivation of crops for biofuels, bioliquids and biomass fuels displaces traditional production of crops for food and feed purposes.”
The European Commission’s Delegated Regulation 2019/807 introduced pursuant to RED II laid down the criteria for determining high-ILUC feedstock and certifying low ILUC-risk biofuels, bioliquids and biomass fuels. Based on the criteria set by the EU biofuel measures in determining high ILUC-risk fuels, only palm-oil-based biofuels, which are usually imported, will be phased out by 2030 (unless certified as low ILUC-risk). By contrast, biofuels based on oil crops, which are more likely to be produced domestically in EU, such as sunflower or rapeseed, are not subject to the phase out.

On December 9, 2019, Indonesia brought a claim against the EU at the WTO. Indonesia claimed that certain measures imposed by virtue of RED II, including the criteria for determining the high ILUC-risk feedstock, and the sustainability and GHG emission savings criteria are discriminatory against palm-oil-based biofuels and are therefore inconsistent with their obligations in violation of
(a) Article 2.2 of the TBT Agreement as the measures at issue appear to create unnecessary obstacles to international trade in oil palm crop-based biofuels going beyond what is required for achieving a legitimate objective;
(b) Article 2.1 of the TBT Agreement as the measures at issue appear to discriminate among like biofuels of different origins, and between imported oil palm crop-based biofuels and like biofuels of EU origin;
(c) Article 2.4 of the TBT Agreement as EU appears to have failed to use relevant international standards as a basis for its technical regulations;
(d) Article 2.5 of the TBT Agreement as the EU appears to have failed, upon the request of Indonesia, to explain the justification for those measures in terms of Articles 2.2 to 2.4 of the TBT Agreement;
(e) Article 2.8 of the TBT Agreement, because by regulating trade in biofuels based on a description of an abstract and unsubstantiated high-ILUC risk concept instead of the performance of such biofuels;
(f) Article 2.9 of the TBT Agreement by adopting a technical regulation that has a significant effect on trade of other Members in circumstances where either a relevant international standard does not exist or the content of the technical regulation does not accord with a relevant international standard without the required publication and notification of that regulation and organising an adequate process for commenting;
(g) Article 5.1.1 of the TBT Agreement by preparing, adopting or applying conformity assessment procedures for certifying only oil palm crop-based biofuels as low ILUC-risk, the European Union appears to treat suppliers of oil palm crop-based biofuels from Indonesia less favorably than suppliers of like biofuels from other countries, in a comparable situation
(h) Article 5.1.2 of the TBT Agreement by preparing, adopting or applying conformity assessment procedures for certifying oil palm crop-based biofuels as low ILUC-risk, the European Union appears to create unnecessary obstacles to international trade;
(i) Article 5.2 of the TBT Agreement by failing to make available conformity assessment procedures for certifying oil palm crop-based biofuels as low ILUC-risk;
(j) Article 5.6 of the TBT Agreement by requiring certification that has a significant effect on trade of other Members in circumstances where either a relevant international standard does not exist or the content of the conformity assessment procedures does not accord with a relevant international standard without the required publication and notification of that certification procedure and organising an adequate process for commenting;
(k) Article 5.8 of the TBT Agreement by failing to publish promptly or otherwise make available the conformity assessment procedures for low ILUC-risk certification;
(l) Articles 12.1 and 12.3 of the TBT Agreement by failing to take into account, in the preparation and application of the technical regulations and conformity assessment procedures at issue, circumstances specific to the developing countries where palm oil and oil palm crop-based biofuel are produced, the European Union appears to have failed to ensure that those measures do not create unnecessary obstacles to exports from developing country Members;
(m) Article XI:1 of the GATT 1994 as the measures at issue appear to restrict importation of palm oil and oil palm crop-based biofuels
(n) Article I:1 of the GATT 1994 as the measures at issue appear to discriminate among like crops and biofuels originating in third countries;
(o) Article III:4 of the GATT 1994 as the measures at issue appear to discriminate between imported palm oil and oil palm crop-based biofuels and like products of EU origin; and
(p) Article X:3(a) of the GATT 1994 as by adopting the criteria laid down in Articles 3 to 5 of Delegated Regulation 2019/807, the EU appears to have failed to administer RED II in a reasonable, impartial and uniform manner.

The EU’s contention is that the measures are not in breach of its WTO obligations. EU has also submitted that the measures implemented are justified as they are intended to pursue EU’s legitimate policy objectives of climate change mitigation, environmental protection, preserving biodiversity, and ensuring energy security and sustainability.

At Issue: Whether EU’s renewable energy measures in respect of biofuels are discriminatory against palm-oil-based biofuels.