- Jakarta has filed for WTO retaliation after EU fails to correct palm discrimination
- Indonesia has made it clear that it’s supportive of the EU’s climate goals – but this is about adhering to WTO rules.
- The EU is also seeking to ban soybean from the EU’s renewables market, effectively meaning cutting most imports.
Indonesia goes to retaliation
Trade Minister Budi Santoso confirmed on 7 March that Indonesia has formally requested WTO authorisation retaliate against the EU’s failure to bring its palm oil and biofuel measures into line with the body’s panel ruling against the EU’s Renewable Energy Directive (RED).
Despite some press headlines, this isn’t a dramatic escalation by Jakarta; it’s exactly what the WTO rulebook calls for when a responding party doesn’t get their homework in on time.
Is the EU slow-walking compliance?
The RED measure doesn’t exist in isolation. The EU has spent over a decade finding new ways to block Indonesian palm biodiesel from its market, and losing at the WTO each time. Anti-dumping duties on biodiesel (DS480): Indonesia won. Anti-dumping on palm-derived fatty alcohols (DS442): Indonesia won. Countervailing duties on biodiesel (DS618), where the EU claimed Indonesia’s palm oil levies were trade-distorting subsidies: Indonesia won again last August, with the Panel finding the EU couldn’t even prove injury to its own producers.
And now DS593, where the WTO found that RED II’s ILUC criteria discriminated against palm oil biofuels.
That’s four consecutive rulings against the EU on palm oil trade measures. Each time Brussels loses one tool, it reaches for another. Indonesia is pursuing retaliation in this instance precisely because the track record shows that WTO rulings alone don’t change EU behaviour. But enforcement pressure might.
The EU confirmed it wasn’t ready
There’s no real ambiguity here. In its January 2026 status report, the Commission said publication of its amended low-ILUC rules was only “imminent.” At the DSB meeting on the deadline itself, the EU confirmed that public consultations had only just closed on 18 February and that formal adoption would come later. France’s palm oil fiscal exclusion, also found WTO-inconsistent, was still stuck in parliament.
The EU showed up to its own deadline — which was agreed with Indonesia — without having adopted, published, or enacted any of the necessary changes.
A retaliation request should theoretically create some additional pressure and not letting the EU off the hook for getting its homework done. It stops the EU’s slow internal processes from becoming the default compliance timeline, and it keeps Indonesia’s enforcement options alive.
The other key aspect is that the EU — like most nations — still on paper at least believes in the institution of the WTO. If Brussels shows unwillingness comply, it sends a signal it is walking away from the organisation. And this would be meaningful in the age of Donald Trump.
Discrimination, not climate
It’s well understood that the WTO Panel found that the EU discriminated against palm oil biofuels. The EU didn’t conduct the review its own rules required, and the low-ILUC certification system it set up was inoperable in practice for palm operators. Indonesia has never challenged the EU’s right to pursue climate goals and both the Panel and Indonesia acknowledged that right.
The issue here is applying those goals without unjustifiable discrimination between feedstocks.
It’s also worth noting that the Commission’s own January 2026 review has now proposed adding soybean oil to the high-ILUC risk list alongside palm oilThe move has drawn pushback from European soy growers and Brazilian industry groups and US growers who argue the methodology overstates soy’s deforestation footprint.
This confirms that the EU’s overarching objective could be to shut out imported crop-based biofuels from its market entirely.
IEU-CEPA is fine
Some have suggested that enforcement action could derail IEU-CEPA, which reached substantive conclusion of negotiations in September 2025. It shouldn’t. WTO retaliation is lawful, temporary, and reverses automatically on compliance. It’s the system working as intended, not a breakdown of relations.
Under DSU rules, the parties now have 20 days to negotiate compensation. If that doesn’t produce a result, Indonesia can seek DSB authorisation to impose countermeasures. The EU will likely challenge the numbers, triggering arbitration.
What’s possibly more at issue is the events of the past two weeks in the Gulf. The Iranian conflict has shown once again the fragility of Europe’s energy supply. Shouldn’t they be taking just about anything they can get?
Sure, biofuel prices tend to track fossil fuel prices, but if supply is the concern here, cutting any supply at all is a bad logic.