¿Has intentado declarar la variable en su lugar?
DELIMITER $$
CREATE TRIGGER `co05_test`.`ins_lineItem`
BEFORE INSERT ON `co05_test`.`my_table`
FOR EACH ROW
BEGIN
DECLARE newLineItem INT;
SELECT
lineItem + 1 into newLineItem
FROM my_table
WHERE batch = NEW.batch
ORDER BY lineItem DESC
LIMIT 1;
SET NEW.lineItem = newLineItem;
END$$