In a long-awaited decision, a World Trade Organization (WTO) dispute panel sided with the European Union over Malaysia concerning regulations affecting palm oil-based biofuels.

The dispute, initiated by Malaysia in 2021, contested EU measures restricting the eligibility of biofuels for renewable energy targets.

Despite the ruling largely in the EU’s favor, the panel highlighted deficiencies in how the EU’s measures were prepared and administered. The WTO’s 348-page report, released on its website, delves into the details of the case.

While palm oil remains a crucial ingredient in various products, including food and cosmetics, environmental concerns over deforestation have led to reduced usage in Europe. However, its utilization in biofuels has been on the rise.

Indonesia, another major palm oil producer, has a separate case against the EU pending at the WTO. Together, Indonesia and Malaysia account for the majority of global palm oil and biofuel production.

Both countries initiated dispute consultations with the EU, challenging measures they deemed inconsistent with WTO agreements. Malaysia specifically contested a renewable energy law in Lithuania, which had been amended to align with EU rules.