WTO Panel Says EU Renewable Energy Measures Are Compliant, Notes Issues in Implementation
A dispute settlement panel at the World Trade Organization on March 5 found that the EU's measures on palm oil and oil palm crop-based biofuels issued under its Renewable Energy Directive are generally compatible with the bloc's WTO commitments, but that elements of the policies violate global trade rules. The panel also weighed in on similar French and Lithuanian measures on the relevant products.
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The European Commission applauded the ruling, but noted that "certain aspects of the implementation and design of an EU Delegated Act under the Directive were inconsistent with WTO rules." The commission said the "Delegated Act" lays out the criteria to find which food- and feed-crop-based biofuels have a high risk of boosting greenhouse gas emissions due to changes in land use and allows for the crops to be certified as low risk in certain situations.
"The matters identified by the panel are, to a very large extent, required anyway to be adjusted under EU law," the commission said, adding that the EU "intends to take the necessary steps to adjust the Delegated Act."
The dispute was brought by Malaysia, which challenged "specific rules for the calculation of EU member State's final consumption of energy from renewable sources in respect of biofuels from food and feed crops." The rules impose limits on the contribution that these biofuels can make to various consumption targets.
In particular, the EU set a 7% maximum on the share of biofuels made from food and feed crops and also capped the contribution that "high [indirect land-use change]-risk" biofuels can make. The bloc also gradually decreases the contribution that "high ILUC-risk" biofuels "may be counted as making to meeting EU renewable energy targets." The Renewable Energy Directive additionally said that biofuels made from "high ILUC-risk" feedstock are not included in the cap or phase-out if they are certified to be "low ILUC-risk" biofuels.
Malaysia also challenged an annual French tax payable by entities that release fuel for consumption with a French territory and a Lithuanian law "transposing EU rules on ILUC."
The dispute panel found that the 7% maximum share and high ILUC-risk cap and phase-out "were technical regulations within the" Technical Barriers to Trade Agreement, and that the high ILUC-risk cap and phase-out were measures pertaining to the "conservation of exhaustible natural resources that is made effective in conjunction with restrictions on domestic consumption or production."
However, the panel said the EU illegally administered the high ILUC-risk cap "by failing to conduct a timely review of the data used to determine which biofuels are high ILUC risk, and because there are deficiencies in the design and implementation of the low ILUC-risk criteria, which results in arbitrary or unjustifiable discrimination between countries where the same conditions prevail."
The EU also failed to provide notification of the proposed 7% maximum share and ILUC-risk cap and phase-out measures and failed to organize a commenting process for the measures, the panel said.
As for the French measures, the panel said the exclusion of palm-oil-based biofuel from the group of qualifying biofuels violated WTO commitments because it 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-based biofuels." Additionally, Malaysia failed to make a prima facie case against the Lithuanian measures, the panel said.