EU Trade Pact A Boon for Indonesian Palm Oil, But Deforestation Law Remains in the Way

Indonesian palm oil producers are confident that Jakarta’s upcoming trade deal with the European Union, or EU, can greatly bump up exports. However, Jakarta still has to overcome the bloc’s anti-deforestation law that restricts Indonesian palm oil’s entry.

Indonesia recently signed the substantive conclusion to its CEPA, short for Comprehensive Economic Partnership Agreement, with the EU. The agreement will have to undergo some lawmaking processes before the tariff eliminations can come into effect as early as 2027. Eddy Martono, the chairman of the Indonesian Palm Oil Association (Gapki), admitted Thursday that the so-called EU Deforestation-Free Regulation (EUDR) remained a major obstacle in Jakarta’s trade despite the freshly announced pact. The EUDR will require any imports of palm oil to prove that their products do not come from deforested land using geographical coordinates. Indonesia has repeatedly slammed the EUDR, citing that the stringent geolocation requirements will only burden smallholders.

“This highway [CEPA] is huge, but it has a complex new toll system, namely the EUDR. We cannot simply admire the open road; we must be ready to navigate it. This means we must be strategic, compliant, and ready to prove our capabilities. We implement governance. The EUDR is not just a rulebook, it is a challenge to our system. How do we respond? We fight facts with facts and standards with better standards,” Eddy told a palm oil conference in Bali.

Indonesia, the world’s largest palm oil supplier, needs to strengthen and promote its existing ISPO standards, according to Eddy. The ISPO, also known as the Indonesian Sustainable Palm Oil, is a mandatory certification for palm oil growers and producers which prove that their operations are environmentally and socially sound.

“We must strengthen ourselves, making ISPO certification not just a badge, but the global gold standard. This is more than just compliance; it’s about sovereignty and pride,” Eddy said.

As of September 2025, Indonesian palm oil production exceeded 43 million tons, up by 11 percent year-on-year. The country had exported at least 25 million tons of palm oil, resulting in $27.3 billion foreign exchange. Domestic consumption remained stable at 18.5 million tons, up from 17.6 million tons in the same period last year, Gapki reported.

The government reported that Indonesia-EU trade totaled $30.4 billion in 2024. Indonesia also registered a $4.5 billion surplus that year.

The EU has introduced a phasing-in period for the EUDR, postponing its implementation to end of 2025 for big and medium-sized enterprises. Micro and small businesses have time until June 30, 2026.

Tags: exports, Indonesia, European Union, palm oil, imports, EU Deforestation-Free Regulation, Indonesian Sustainable Palm Oil