Indonesia's biodiesel exports to Europe enter a new phase. The World Trade Organization (WTO) Panel's announcement - that the EU acted inconsistently with key aspects of the WTO Subsidies and Antisubsidies Agreement - marks Indonesia's victory in a dispute that dates back to 2023.

The decision announced on Friday (22/8/2025) is also an important momentum to prepare to enter the European market, which has been notoriously difficult to penetrate due to various layers of regulations and non-tariff barriers.

The dispute between Indonesia and the EU - known as Dispute DS618 - stems from the imposition of countervailing duties by the EU based on the assessment that the Indonesian government subsidizes biodiesel production through export duties, export levies, and reference pricing. As a result, Indonesia's biodiesel production suffered price distortions.

According to Trade Minister Budi Santoso, the WTO Panel consisting of representatives from South Africa, Mexico, and Belgium had several reasons to support Indonesia's position in the dispute.

First, the Panel rejected the EU's argument that the Indonesian government directed businesses to sell crude palm oil (CPO) to biodiesel producers at low prices.

Initially, the EU Commission argued that subsidies in the form of Indonesian government directives to businesses in the palm oil sector were aimed at providing raw materials at prices favorable to Indonesian biodiesel producers. With the WTO Panel's determination, Indonesia's CPO export duty and levy policies were deemed not a form of subsidy.

Second, the WTO Panel found that the EU Commission could not prove the threat of material injury to biodiesel producers in Europe due to Indonesian biodiesel exports. The European Commission has also ignored other factors that influence the dynamics of the biodiesel market in the region.

"Thus, the WTO Panel considers that the countervailing duties imposed by the EU on Indonesian biodiesel products are not based on objective evidence. This victory is also proof that the WTO is still relevant as a forum for resolving trade disputes," Budi Santoso said in a written statement received by SUAR, Friday (22/8/2025).

Following up on the announcement of the WTO results, Indonesia expects the EU to respect the WTO ruling and adjust its policies, so that Indonesia can restore the export performance of biodiesel products to Europe.

As the regulator, the Ministry of Trade is committed to using existing mechanisms, both legal and diplomatic, to ensure this victory is concretely implemented by the European Union.

Positive momentum for the industry

Catra de Thouars, Vice Chairman of the Indonesian Biofuel Producers Association, said he welcomed the WTO Panel's decision as a positive step and good news. This decision will be one of the ways for the national biodiesel industry to get justice in international trade.

The reason, according to Catra, is that for years, the Indonesian palm oil industry has faced various pressures in the form of negative issues related to socio-environmental impacts circulating abroad. Among them are black campaigns that damage the image of palm oil derivative products, including biodiesel.

"We would like to thank the Indonesian government, industry players, and legal experts for working together in the WTO proceedings. Without good collaboration, it would not have been easy for Indonesia to face the European Union in the biodiesel dispute. This decision is a new breath and enthusiasm for stakeholders because there are still other challenges such as EUDR(European Union Deforestation Regulation)," Catra said in a written statement received by SUAR, Monday (25/08).

After this decision, biodiesel industry players will still focus on the success of B40 biodiesel production and support the government's B50 preparations. "Of course, we are happy that there is a new market for Indonesian biodiesel exports as an effort to support Indonesia's foreign exchange exports," he added.

As a consequence of Indonesia's achievement in paving the way, industry players are gearing up to enter the European market. They have good reason to increase biodiesel production capacity for export.

Indonesian Palm Oil Association (Gapki) Chairman Eddy Martono underlined this, because even if proven not to be dumping, there is homework waiting for industry players to export. Namely, adjusting export opportunities with the need to fulfill domestic regulations.

"Indonesia's biodiesel exports to Europe are indeed very small, because there, European producers have also produced biodiesel from used cooking oil from rapeseed, sunflower seeds, and soybeans, in addition to CPO," said Eddy when contacted by SUAR, Monday (25/08).

On the other hand, Eddy reminded that Indonesian biodiesel producers will still try to meet the increasingmandatory biofuel production capacity. "The priority is still domestic needs first," he said.

Review is still needed

Despite the achievement of a diplomatic performance that is worthy of gratitude, this momentum should be used as an opportunity to re-evaluate the governance of the national biodiesel industry.

Industry compliance with sustainable palm oil standards, both those set by the Indonesian Government in the form of Indonesia Sustainable Palm Oil (ISPO), and the internationally applicable Roundtable on Sustainable Palm Oil (RSPO), in particular.

Executive Director of the Institute for Essential Services Reform (IESR) Fabby Tumiwa assesses that the Indonesian government's negligence in ensuring the fulfillment of sustainable standards is the background and loophole for the European Union to question Indonesia's biodiesel exports.

"We cannot generalize, but several studies have shown the existence of socio-environmental impacts due to Indonesian CPO production which according to them does not meet the standards. That is then also the background, although the current disputed case is different," Fabby said when contacted by SUAR, Monday (25/8/2025).

Furthermore, Fabby does not deny that the history of biodiesel production in Indonesia is closely related to the political motives of the government over the past 15 years, whose mission is to strengthen national energy security. The different policy approaches between the leadership of Susilo Bambang Yudhoyono and Joko Widodo have influenced the landscape of the national biodiesel industry.

"I once suggested that we limit blending to no more than 40%, because apart from being unsustainable, the implication could trap us in trying to develop other solutions because we are locked into using biodiesel. I think the government's plan to increase the blending to B50 should be reviewed," he added.

Ensuring the biodiesel industry's compliance with sustainability standards can be achieved, among other things, by making ISPO criteria a minimum prerequisite for producers.

"By setting clear regulations, in the form of a Presidential Decree or Presidential Instruction, the Indonesian government can certainly mitigate the social and environmental impacts that can be caused by the palm oil derivative industry," Fabby said.