The European Commission on Tuesday (13 August) imposed countervailing duties of 8% to 18% on imports of subsidised biodiesel from Indonesia, saying the move aimed to restore a level playing field for European Union producers.

“The new import duties are imposed on a provisional basis and the investigation will continue with a possibility to impose definitive measures by mid-December 2019,” the EU executive said in a statement.

Last week Indonesia’s trade minister said he would recommend to an inter-ministerial team a 20%-25% tariff on EU dairy products in response to the EU targeting the country’s biodiesel, adding that he had asked dairy product importers to find sources of supply outside the 28-nation bloc.

The EU duties are another blow to Indonesian biodiesel producers after the bloc said in March that palm oil should be phased out of renewable transportation fuels due to palm plantations’ contribution to deforestation.

The European Commission, which coordinates trade policy for the EU, launched an anti-subsidy investigation in December following a complaint by the European Biodiesel Board.

It said its investigation showed that Indonesian biodiesel producers benefit from grants, tax benefits and access to raw materials below market prices.

The EU biodiesel market is worth an estimated €9 billion a year, with imports from Indonesia worth about €400 million, it said.

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.

Indonesian trade minister Enggartiasto Lukita said last week he had told Indonesia’s dairy importers to look for new suppliers outside Europe, and threatened to hike existing tariffs on EU dairy products, which currently range from 5-10%.

Indonesia Biofuels Producers Association (APROBI) Chairman M.P. Tumanggor told Reuters that companies impacted by the anti-subsidy duties will likely be forced to renegotiate their contracts with buyers in the EU and it may reduce 2019’s biodiesel exports.

“We initially targeted 1.4 million tonnes exports this year to Europe, that will not be reached,” Tumanggor said, adding that exports may only reach around 1 million tonnes.

He said the group is in consultation with the government to response to the duties decision by the EU.

Indonesian officials did not respond to requests for comment from Reuters on the countervailing duties decision.