Members of the European Parliament have voted to reject an EU regulation that would have seen soy biofuels lose their classification as a renewable fuel by 2030, a move that campaign group Transport & Environment (T&E) says could expose the EU to more than $5.6bn a year in retaliatory trade sanctions.

According to a letter sent to MEPs by Energy Commissioner Dan Jorgensen, the reversal risks leaving the EU liable to penalties from Indonesia and Malaysia for failing to meet a legal obligation to update its laws on deforestation-risk biofuels.

The EU had previously prevailed in a World Trade Organization (WTO) dispute against the two countries, which had challenged the EU’s phase-out of palm oil biofuels — of which Indonesia and Malaysia are the world’s largest producers. The ruling permitted the EU to maintain the phase-out, on condition that it applied a scientific and consistent approach to assessing high deforestation-risk feedstocks. T&E claims that this condition will no longer be met following the Parliament’s vote, potentially opening the door to litigation from both countries.

Cian Delaney, biofuels campaigner at T&E, said: “This decision comes after relentless, targeted lobbying from the bioenergy and agriculture industries, so they can continue to use deforestation-driving soy to make biofuels. Soy is one of the world’s leading causes of deforestation and land clearance. Considering it as a sustainable alternative to fossil fuels is a gross underestimation of the impact its cultivation has on the environment, climate and food security.”

According to T&E research, land dedicated to soy cultivation in Brazil now exceeds the total area of most European countries, which it notes has devastating effects on the Amazon rainforest and the Cerrado savannah.

T&E is calling on national governments to phase out soy from national renewable energy targets ahead of any EU-level mandate, noting that France, the Netherlands, Denmark and Belgium have already done so.