Indonesia has filed a World Trade Organization lawsuit against the European Union over plans to phase out palm oil-based biofuel for cars, the trade ministry said.

The action could escalate a trade dispute between Indonesia -- the world's top palm oil producer - and the EU, which plans to end its use of biofuels by 2030, citing concerns over widespread deforestation caused by the sector.

The EU earlier imposed duties on imports of subsidised biodiesel from Indonesia saying it was needed to level the playing field for its producers.

In response to what it called "discriminative" policies against its key palm oil exports, Indonesia said it filed a complaint with the WTO last week.

"Indonesia officially sent a request for consultation on December 9, 2019 to the EU as the initial step for the lawsuit," Trade Minister Agus Suparmanto said in a statement Sunday.

Neighbouring Malaysia, the world's second-biggest palm oil producer, has also threatened WTO action against the EU.

Indonesian Palm Oil
Indonesia has accused the European Union of discrimination against its palm oil exports Photo: AFP / Mohd RASFAN

Teresa Kok, the minister overseeing Malaysia's palm oil sector, told AFP on Monday that she will head to Europe in March, and a challenge will not be filed until after then.

She said she wanted to try to convince European officials to change course on her trip.

"I want to give my trip a chance and see whether I can avoid filing the case at the WTO," she added.

Palm oil is the world's most widely used vegetable oil and a key ingredient in a wide range of products from food to cosmetics.

But environmentalists say it drives deforestation, with huge swathes of Southeast Asian rainforest logged in recent decades to make way for palm plantations.

Iman Pambagyo, Indonesia's director general for international trade negotiations, said Jakarta had previously tried other bilateral avenues to reach an agreement, without success.

"We need to assert Indonesia's stance on EU policy," Pambagyo said, referring to the WTO complaint, and adding that he hoped for a "best solution".

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