The Malaysian government is taking legal action against the European Union’s restrictions on palm oil-based biofuels with the World Trade Organization (WTO), The Straits Times reported on 1 July.

Plantation Industries and Commodities Minister Mohd Khairuddin Aman Razali said the EU’s renewable energy directive (RED) ‘restricts free trade practices’.

“The policies adopted by the EU in the Delegation Regulation under the European Union Renewable Energy Directive II have created unreasonable restrictions on Malaysia’s sustainability efforts,” he was quoted by The Straits Times as saying in a statement.

The world’s second largest palm oil producer would be challenging the EU via the WTO’s dispute settle mechanism, he said.

Last year, the European Commission passed a law to phase out the use of palm oil in transport fuel between 2023 and 2030, The Straits Times said, after concluding that its cultivation resulted in excessive deforestation.

Palm oil's biggest producer Indonesia had challenged the law at the WTO in December, claiming the bloc's restrictions were unfair.

As a sign of solidarity and to show its commitment to address the ‘anti-palm oil campaign’, Khairuddin said Malaysia would act as a third party in Indonesia's WTO case.

Meanwhile, Indonesia’s Tempo newspaper quoted the Netherlands foreign affairs minister Stef Blok in February as saying that his country supported sustainably-produced palm oil and did not back the EU’s blanket ban on its use to produce biofuels.

Along with Indonesia, Tempo reported, that the Netherlands had signed a memorandum of understanding in September 2019 focused on the joint production of sustainable palm oil.

Blok had been quoted as saying sustainable palm oil production was the only way to overcome the dispute and had acknowledged that many Indonesian independent farmers that solely relied on palm oil had been heavily hit.

Together Indonesia and Malaysia produce 85% of the world's palm oil.

Although the EU’s consumption of palm oil in food had been in steady decline, its use as a biofuel had increased, The Straits Times reported.