Indonesia, the world's leading producer of palm oil, in 2019 requested an expert panel review of the EU restrictions.
The dispute panel has "found largely in favour of the European Union", a Geneva-based trade official told AFP.
"However, the panel found certain deficiencies in how the challenged measures had been prepared, published and administered," the official added.
The dispute concerns the EU Renewable Energy Directive of 2018 (RED II) which limited the eligibility of crop-based biofuels to count towards member states' renewable energy targets, and phased out the eligibility of palm oil-based biofuels altogether by 2030.
The EU has deemed that palm oil production is not sustainable.
A WTO dispute panel issued a similar ruling on the EU restrictions last year, in a complaint lodged by Malaysia.
Indonesia and Malaysia together account for most of the world's production of palm oil and palm oil-based biofuel.
Palm oil is a key ingredient in a wide range of products from food to cosmetics.
Environmentalists say it drives deforestation and species loss, with huge swathes of rainforest logged in recent decades to make way for plantations.
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