The new EU regulation aims at halting the import of goods connected to deforestation.

6 minutes

Under the new rules, soy, beef, palm oil, timber, cocoa, coffee and some of their derived products (such as leather, chocolate and furniture) will be allowed to enter the EU market only if their production processes are not contributing to deforestation. Europe moves towards “deforestation-free goods”.

In the wake of the European Green Deal, on the 21st of November 2021, the European Commission launched a Proposal for a Regulation to curb EU-driven deforestation and forest degradation.

According to the latest data published by the WWF European Policy Office, the EU is the world’s second importer, behind China, of “embedded deforestation” and is responsible for 16% of deforestation associated with internationally traded commodities like meat, palm oil or soy. For the first time, recognizing its responsibility as a large consumer of forest- and climate-impacting commodities, the EU has set ambitious targets to eliminate deforestation and forest degradation from its supply chains and cut greenhouse gas (GHG) emissions. The new rules are expected to bring down biodiversity loss and reduce GHG emissions by at least 32 million metric tons a year (with potential cost savings of at least € 3 billion per year).

Although the logging industry remains a significant contributor to forest degradation and loss, the global top driver of deforestation is the conversion of forests to cropland or grassland for livestock grazing. In this regard, the Food and Agriculture Organization of the United Nations (FAO) estimates that pastures and monocultures were responsible for about 90% of forest loss during the period 2000-2018.

The draft proposal will thus complement and expand the existing EU regulations on timber products (EUTR and FLEGT) by improving their framework and extending their scope to further imported commodities linked with global deforestation and climate change. The list drawn up by the Commission covers six “relevant commodities”: soya, palm oil and beef – among the products with the highest embedded tropical deforestation imported into the EU – followed by timber, cocoa and coffee. The list further refers to products that contain or have been fed or made with relevant commodities (“relevant products”).

Between 2005-2017, Italy was the second-largest consumer of forest-risk commodities in the EU.  Indeed, Italy is heavily dependent on the import of raw materials for the production of high protein commodities such as soy and cattle. As reported by Greenpeace, in 2020 Italy was the EU’s third-largest importer of soybeans, with more than 48,000 tonnes imported from Rondônia (Brazil), and among the top five international importers of soybeans from Brazil. In addition, Italy is the main European importer of cattle from areas of the Amazon that have been illegally deforested for the production of Bresaola della Valtellina and canned meat. To better understand the role of Italy in the phenomenon of embodied deforestation, in 2020 Etifor published the report “Deforestation made in Italy“.

According to the new proposal of regulation, an enhanced traceability system will require operators to prove that products entering the EU market have not been sourced from land deforested or degraded after 31 December 2020, in addition to being legal by the producing country’s standard.

In addition to mandatory due diligence obligations, importers that place these commodities on the EU market for the first time will be required to collect the geographic coordinates of the plots of land where the commodities were produced. This will allow traceability by national authorities in EU Member States via “a digital system”. In case there is a non-negligible risk, companies will have to analyse and evaluate risks in their supply chain and perform risk mitigation measures (such as using satellite monitoring tools, field audits, capacity building of suppliers or isotope testing) to check the origin of the product. Compared to the EU Timber Regulation, the drafts also pledge stronger implementation of the law, for example by assigning direct responsibilities to EU Member States’ customs officials, and more detailed penalties for companies that breach the rules.

The due diligence obligations will be combined with a country benchmarking system put in place by the EU commission. This system will categorise countries based on the risk – low, medium or high – of producing goods linked to deforestation or not in compliance with the legislation of the producing country.  Products from countries categorised as “low risk” will result in simplified due diligence obligations, whilst increased scrutiny will be applied to commodities from high risk-areas.

Next to the EU’s commitment to reduce its land-use footprint, € 1 billion will be addressed to facilitate the protection, restoration and sustainable management of forests in the partner countries. In addition, the Commission will work on promoting trade opportunities for sustainable products and combating unfair competition from non-sustainable producers exporting to the EU market.

Most of the environmental organizations have welcomed the plan as “a major leap forward in the fight to protect the world’s endangered forests” as for the first time EU will attempt to regulate all products – included legally produced and not affected by illegal deforestation –  that pose a risk to nature. However, the same organizations blame the legislation for not covering key elements (yet). For instance, even though the Commission faced significant pressure from NGOs and the European Parliament, other products that have a proven negative impact on forests, like rubber, pork, poultry, and maize, are out of the legal scope. Similarly, it left out other fragile and highly biodiverse ecosystems supporting people’s livelihoods such as grasslands, peatlands, and wetlands. Environmental organisations have also criticised the omissions regarding Indigenous People’s rights and other human rights abuses. In addition, another potential hole identified by WWF concerns exemptions for commodities originating from so-called “low risk” countries. Experts say this could lead to loopholes as high-risk products may be transported through low-risk countries. In this regard, they claim that the low-risk category should be eliminated altogether and that due diligence procedures should be applied to all commodities from all countries.

Negotiations both in the European Parliament and among national ministers are expected to start during the French presidency of the Council of the EU in the first half of 2022. Etifor will closely follow and inform on developments.