European Commission Implementing Regulation 2019/2092 set import duties between 8 to 18%, additional to the Most-Favoured-Nation tariff. The EU argued that these countervailing duties were necessary because measures implemented by the Indonesian government — namely export duties and levies on biofuel feedstocks — effectively amounted to a subsidy.
By discouraging exports, these levies increased domestic supply and lowered feedstock costs for Indonesian biodiesel producers. Collected revenues were then channelled back into the domestic biodiesel blending scheme (administered by the BPDPKS, the Indonesian Palm Oil Plantation Fund Management Agency), further improving production cash flows and strengthening the EU’s case that Indonesian producers were benefitting from state support.
However, the recent WTO ruling found that the methodology the EU had previously used to class the export duty and levy as a subsidy was flawed. The WTO Panel recommended that the EU bring its measures into compliance with the Subsidies and Counterveiling Measures (SCM) Agreement. This is a bullish outcome for Indonesian biofuel exporters.
According to Reuters, Indonesia’s total exports of palm oil biodiesel plunged from 1.32 million kl in 2019, to 36,000 kl in 2020, and further down to 27,000 kl in 2024. Approximately half of the 2019 volumes are estimated to be for the European market.
The sharp drop-off is attributed not only to the duties but also RED restrictions on biofuels made from palm oil, which do not fall under RED Annex IX which lists approved feedstocks for advanced or waste-biofuels biofuels.
Biofuels from palm oil residue, namely palm oil mill effluent (POME) are also subject to similar duties. However, as a waste material POME is listed as an advanced feedstock under the RED Annex IX Part A. As such, there are stronger incentives to claim biofuels from POME, including double crediting in certain national renewable fuel schemes, which may overcome the disincentives from the EU imposed duties.
Looking at ISCC-verified volumes, this appears to be the case.
Note: we assume that most of POME-related production in Indonesia is destined for Europe, given its value to European markets that allow double counting (with few non-European markets offering similar incentives). Most POME certification, particularly export-related, occurs via the ISCC scheme.
Reported POME-based biodiesel and HVO (renewable diesel) imports increased almost 300% from 2021 to 2023. Unrefined POME also comprised large import volumes, even though the Indonesian government has placed levies on raw feedstock exports. In the same period, exports more than doubled. In 2023, raw POME comprised the majority (56%) of all POME exports.
In the medium term, we would expect only slight bullishness for palm oil biodiesels. While reduced duties should lower prices and improve demand, these feedstocks remain subject to eligibility restrictions under the RED. Caps for crop-based biofuels will continue to be the main bottleneck for importing raw feedstocks or biofuels from Indonesia and elsewhere.
It should also be noted that two key components of the EC’s Fit for 55 package, FuelEU Maritime and ReFuelEU Aviation, are stricter still: biofuels from crop feedstocks such as palm oil do not count towards targets at all.
With regards to POME, the removal of the duties should result in increased imports of POME biofuels relative to raw POME feedstock. The overall import of POME and derived biofuels from Indonesia is expected to accelerate, subject to supply restrictions. Particularly in the context of RED III transport targets effectively obligating marine and aviation fuel suppliers.
However, there have already been concerns raised over POME sustainability and possible fraud, with Germany already moving to exclude the eligibility of POME biofuels in their draft RED III implementation to prevent incentivising non-sustainable palm oil production. If other countries opt to follow suit, this could reduce appetite for POME biofuels in Europe, despite the expected reduction in import duties.
On 21 August 2025, multinational Unilever announced it would use biomethane from palm oil waste as part of its decarbonisation strategy for operations in North Sumatra, in partnership with biogas solutions provider KIS.
Rather than exporting the POME, or processing it into HVO or biodiesel, Unilever has opted to use anaerobic digestion to produce biomethane, which will be used to decarbonise its local palm oil operations, including transport via a biomethane-fuelled CNG fleet.
This presents an alternative to POME exports, keeping the environmental benefits of POME valorisation local while also creating domestic opportunities. This contrasts with exporting raw feedstock, where much of the value-adding and consequent benefits occur overseas, not to mention the cost and emissions associated with international freight.
In addition, local valorisation shields POME from some of the current scrutiny around the sustainability of the feedstock. Should European countries exclude POME-based biofuels in their national schemes following Germany’s example, the domestic circular economy via biomethane could offer a promising alternative.
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