Testing green trade-related measures at the WTO: insights from EU – Palm Oil

This note deals with the EU – Palm Oil dispute, which was brought by Indonesia and Malaysia against the European Union’s (EU) biofuels regime and, more specifically, the sustainability criteria, which limit the potential contribution to the EU’s renewable energy targets of conventional crop-based biofuels in general, and of palm-oil-based biofuel in particular. EU – Palm Oil is significant as the first instance in which EU trade-related measures aimed at protecting the global environment have been tested in dispute settlement proceedings at the World Trade Organization (WTO). The note reviews the WTO Panel’s findings on two key issues, which were highly contentious in this dispute and are likely to have broader systemic implications for the WTO’s treatment of green trade-related measures – namely, the identification of the true regulatory objective(s) and the extraterritorial reach of the challenged EU measures. It is argued that, while the outcome of the EU – Palm Oil dispute may be welcome from an environmental policy perspective, it was a missed opportunity in legal terms inasmuch as the Panel failed to provide much-needed clarity on when and why trade-related environmental measures with extraterritorial reach are permissible under WTO law.