Indonesia welcomed a ruling by the World Trade Organization in a case against European Union on palm oil-based biodiesel, expecting the bloc to adjust its regulations to comply with the ruling.

The world's largest palm oil producer Indonesia brought the case to the WTO dispute body in 2019 after the EU decided that palm oil-based diesel would not be considered a biofuel due to its link to deforestation and its use in transport fuel would be phased out between 2023 and 2030.

Indonesia argued that the EU is using climate issues as a pretext to implement protectionist trade measures.

"The Indonesian government welcomes the WTO panel decision ... We hope that in the future, other trading partner countries will not implement similar policies that have the potential to hinder the flow of global trade," Trade Minister Budi Santoso said in a statement late on Thursday.

The three-person panel ruled last week that the underlying logic of the EU measures to limit greenhouse gas emissions was legitimate and that the EU had a reasonable basis to designate biodiesel from palm oil as "high risk".

However, the panel found fault in the way the EU had prepared, published and administered its measures, such as by not having a timely review of data to determine high risk and not meeting certain transparency obligations.

The EU was also found giving less favourable treatment to palm oil-based biofuel from Indonesia than accorded to like products of EU origin or imported from third countries.

The Indonesian trade ministry said that EU will be compelled to adjust its policy to comply with the ruling, adding that Indonesia will closely monitor EU's regulatory changes to meet with the WTO body's recommendations.

The EU embassy in Jakarta did not immediately response to a request for comments.