Any idea what is causing this visual error?

I have a skybox sphere with inverted normals of the mountains in the background. Any static mesh that overlaps with the skybox ends up with a white outline. Any idea what is causing this visual error and how I can remove it?

EDIT: Also found that going into unlit mode removes the white outline. So it’s likely connected to the lighting?

It is caused by lack of padding on color data in your texture.

I see multiple issues here. Your texture is white (emissive) around the mountain. Use black or maybe you can simply get away with multiplying your RGB with your alpha.

Translucent objects will always cause issues. My guess is, the white bleeding into your trees is actually the sky behind your mountain. Have a look at your scene depth under “Buffer visualization”, you will notice your mountain is missing. It actually gets drawn on top because it is translucent. Use masked blend mode for your mountain material. This will however cause a hard transition at the edges. You can use dithering on your alpha to get some transition and let temporal AA smooth it out.

However, I think the proper way to do this is to move your alpha compositing into the material in the skysphere drawing the clouds.