Trase urges EU to reject last minute amendments to deforestation regulations

The EU deforestation regulation (EUDR) aims to prevent products associated with deforestation entering the EU market. At its heart is a three-tier benchmarking system to classify commodity-producing countries (and parts thereof) as low, standard or high risk. The system will enable enforcement authorities to target checks on products from high-risk countries and allow regulated companies to undertake simplified due diligence for products from low-risk countries.

The EPP group in the European Parliament has proposed several amendments including one to introduce a further category of “no risk” for countries that would not need to fulfil the deforestation-free criteria or submit a due diligence statement. This means that they would not need to provide information on the geographical location where the products originated. However, they would still need to demonstrate that the products were legally produced, as well as providing basic information about the product type, quantity and its supplier or trader. Confusingly, they would also have to be able to prove that the products are “free of forest degradation”, though this is only relevant to the deforestation criteria that products would be exempted from for no risk countries, not the legality criteria. Checks by enforcement authorities on products from “no risk” countries would be limited to 0.1% of regulated companies.

Under the amendments approved by a very narrow margin in the European Parliament last week, countries would qualify for the “no risk” category provided that three criteria are met: 1) the area of forest coverage in the country has remained stable or increased compared to 1990; 2) it has signed the Paris Climate Agreement and international conventions on human rights and preventing deforestation; 3) enforced regulations on preventing deforestation and forest conservation at national level are strictly implemented in full transparency and monitored.

Lack of scientific rigour

The EPP justifies its amendments on the grounds that countries with stable or increasing forest areas are of “negligible or non-existent” risk of deforestation under the EUDR and that a simplified set of requirements would “encourage sustainable practices and reward responsible sourcing”.

This attempted justification does not stand up to even a cursory level of scientific scrutiny.

In fact, the first criteria of net forest area is an extremely poor indicator of the presence of deforestation and degradation. Data from the Food and Agriculture Organization’s Global Forest Resources Assessment shows that countries can have a stable or net increase in forest area but still have widespread deforestation or forest degradation. For example, both Vietnam and Thailand have seen net increases in forest area since 1990, and yet both have significant levels of deforestation linked to the expansion of agricultural commodities.

Trase data consistently shows that deforestation is highly concentrated within countries and that variability in deforestation within countries is often much higher than that between countries. As such, an overall net increase in forest cover can easily mask significant levels of deforestation and forest degradation. For example, while Europe’s forest area is increasing overall, its old growth forests, which make up only 3% of the total forest area, are at significant risk of deforestation.

Legal uncertainty

Applying the net forest area criteria could lead to 25 of the 27 EU member states being classified as “no risk” and could be seen by other producer countries as a protectionist measure, further fueling criticism that EUDR is a unilateral measure being imposed on countries outside the bloc. The EPP has stated that it has not checked whether its proposals would breach World Trade Organization (WTO) rules. This raises significant concerns as it creates legal uncertainty to companies, investors and stakeholders, and may ultimately undermine the integrity of the risk-benchmarking system and the effective implementation of the EUDR.

The second criteria on international conventions provides little, if any, guarantee that relevant products and commodities are deforestation free and legally produced. The recent Forest Declaration Assessment found that the world remains off track to reach the goal agreed at COP26 of halting and reversing deforestation and forest degradation by 2030. Globally, 6.37 million hectares of forest were permanently lost in 2023 and regional deforestation targets were missed in almost all tropical regions.

The third criteria on enforced regulations on preventing deforestation and forest conservation are strictly implemented in full transparency and monitored is unlikely to be met by many countries including member states. For example, in recent years the EU has ruled that Estonia, Poland, Slovakia, Sweden and Romania have not adequately implemented existing forest conservation regulations.

Significant loophole

The benchmarking system within the EUDR already provides a simplified due diligence procedure for countries (or parts thereof) classified as low risk to provide incentives and target enforcement efforts. However, by still requiring operators to submit a due diligence statement and collect relevant information including the geolocation data, it provides safeguards against the risk of laundering and circumvention. In contrast, the EPP amendment provides a significant loophole and makes it much more challenging for competent authorities to identify laundering and enforce the regulation effectively.

Given the subjectivity of the proposed criteria, their lack of scientific rigour and the risk of inconsistencies with WTO rules, Trase strongly recommends that the EU rejects all of the proposed amendments to the EUDR. Instead, all stakeholders should make the best use of the one-year delay in the implementation of the regulation proposed by the European Commission to further develop the guidance, partnerships and finance needed for the EU to play its part in achieving a successful transition to deforestation-free commodity supply chains.