Indonesia intends to challenge an EU directive on renewable energy at the World Trade Organisation (WTO), arguing the plan to curb the use of crops that cause deforestation will unfairly target palm oil, a senior Indonesian official told Reuters.
The world's top producer of the oil is also reviewing its relations with the European Union over the issue and urging other Southeast Asian nations to defer plans to upgrade EU ties, said Mahendra Siregar, special staff at the foreign ministry.
The EU directive, known as RED II, aims to stop the use of crops that cause deforestation in transportation fuel by 2030. Environmentalists blame a rapid expansion of Indonesian palm plantations for a massive clearance of forests that were home to endangered tigers, orang-utans and elephants.
A challenge from Indonesia on the policy would escalate its efforts to safeguard sales to its second-biggest palm oil market. The EU accounted for around 15 per cent of Indonesia's total palm exports of more than $15 billion last year.
Siregar said palm oil will be labelled a "high risk" crop - indicating its potential to result in deforestation - in an act attached to RED II due to be issued in early February. Indonesia will challenge both RED II and the act at the WTO's dispute settlement body after it is issued, he said.
The WTO body can order members to remove any trade barriers if it finds that the policies breach free trade rules.
A government document outlining Indonesia's stance on the EU policy and reviewed by Reuters said the method used to assess "Indirect Land Use Change" (ILUC), which aims to measure the risk of unintended carbon emissions, was not internationally recognised and not applicable in a tropical region.