KUALA LUMPUR - Malaysia on March 6 said it will closely monitor how the European Union responds to a World Trade Organisation (WTO) ruling that supported the bloc’s stance that palm oil-based biodiesel should not count as a renewable biofuel, but sought changes in how it implemented that decision.

A WTO adjudicating panel, in its first ruling related to deforestation, on March 5 rejected Malaysia’s claims against the EU decision. But the panel accepted its complaints over how the measures had been prepared, published and administered.

The EU will need to make adjustments but need not withdraw its measures following the WTO ruling.

The Malaysian government will monitor any changes to the EU’s regulations to bring it in line with the WTO’s findings and pursue compliance proceedings if necessary, Plantations and Commodities Minister Johari Abdul Ghani said in a statement on March 6.

Malaysia, the world’s second-largest producer of palm oil, has described the EU’s renewable energy directive as discriminatory. In 2021, it asked the WTO to examine the rules restricting the bloc’s use of palm oil-based biofuels.

Under the regulations, palm oil-based fuels can no longer be considered as renewable transport fuel and are to be phased out by 2030, as the EU has determined that palm oil cultivation resulted in excessive deforestation.

Mr Johari said the WTO report found fault with the EU’s rules on indirect land use change to ban palm oil biofuels, and with the bloc’s approach to notifying and consulting with other economies when introducing new trade measures. “This ruling from the WTO demonstrates that Malaysia’s claims of discrimination are indeed justified,” he said, adding that the government would continue to defend the interests of palm oil biofuels industry players against trade barriers. REUTERS