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Report from
Europe
EU considers future of illegal logging and
deforestation policy
During June 2017, two large conferences in Europe
addressed policy issues in relation to deforestation and
illegal logging. The conferences reaffirmed the EU＊s
continued political commitment to trade related policy
measures in response to concerns about illegal logging and
deforestation.
The conferences also highlighted developments in EU
policy on issues such as sustainable forest certification and
green procurement with significant implications for future
development the European market for tropical wood
products.
The first conference, the ※Illegal logging Update
Meeting§, is a regular annual event hosted by Chatham
House in London.
The second conference was organised by the European
Commission (EC) to present an evaluation and future
work plan for the EU Action Plan on ※Forest Law
Enforcement Governance and Trade§ (FLEGT).
The EC meeting also included discussion of the potential
for another EU action plan to address wider causes and
solutions to deforestation 每 such as pressure from
agricultural commodities and carbon financing.
FLEGT update.
The EC＊s own evaluation estimates public expenditure of
Euro 900 million on the FLEGT Action Plan, mainly
derived from the EC budget, in the ten years of its
operation prior to 2014. That figure is now likely to
exceed Euro 1 billion.
Most of the money has been spent on support for FLEGT
Voluntary Partnership Agreements (VPAs) with tropical
countries which aim to develop legality licensing systems
for all wood exported from partner countries.
The EU Timber Regulation (EUTR) was introduced in
March 2013 primarily to give a market incentive for
tropical countries engaged in the VPA process 每 FLEGT
licenses are given a ※free pass§ through the due diligence
requirements of EUTR.
At the meeting in Brussels in June, EC officials were
candid about the progress of the FLEGT VPA process,
noting that the results have been mixed so far. Seventeen
tropical countries which together account for over 80% of
global tropical wood exports, have either signed or are
involved in negotiations towards a VPA. However, only
one 每 Indonesia 每 has so far issued FLEGT licenses.
Progress varies widely in other partner countries. In some
- like Congo, Ghana, Guyana, Honduras, and Vietnam -
negotiations are very active. In others - like Côte d'Ivoire,
Cameroon, the Central African Republic, DRC and
Malaysia - negotiations have stalled or are proceeding
only very slowly. There is considerable variation in the
willingness of government authorities and industry in
partner countries to engage in negotiations or to commit
their own resources.
EC officials speaking in Brussels acknowledged that the
development of licensing procedures has been
considerably more complicated than first envisaged.
However, they were also keen to emphasise that, even in
the absence of licenses, there have been broader and
potentially more significant benefits of the FLEGT process
in many partner countries, notably relating to stakeholder
participation and benefits-sharing and in legislative reform
and capacity building.
EU takes a more nuanced approach to FLEGT
The experience gained from the FLEGT process to date,
and growing awareness of the diverse needs and
expectations of different tropical countries, is encouraging
the EC to take a more nuanced approach to the FLEGT
process.
At the Brussels conference, EC officials said that in
practice, negotiation of a VPA requiring implementation
of a comprehensive legality licensing system for all
exports into the EU is not necessarily the most appropriate
tool for all tropical countries.
While no country will be ＆a priori＊ excluded from the VPA
process in the future, decisions by the EU to begin
negotiations with additional tropical countries will be
based on careful assessment of a range of factors such as
the level of political will, recognition of the rule of law,
and institutional capacity in the partner country, together
with the current and potential future level of trade with the
EU.
EC officials noted that it may be necessary to establish and
formally acknowledge an extended preparatory phase for
some tropical countries where requirements for a full VPA
are not met.
Options other than a full formal VPA may also be
considered to deliver FLEGT objectives in some countries,
for example specific forest sector support programmes,
FLEGT structured-dialogues, and as a component of wider
free trade engagements.
However, it was also stressed that the EU would retain the
existing policy of only allowing EUTR due diligence
checks to be by-passed by importers if the imported timber
is accompanied by a FLEGT license.
FLEGT shortcomings
Speaking at the Brussels conference, EC officials
acknowledged weaknesses in the FLEGT process even in
countries where negotiations have been progressing.
Specifically, it was noted that there needs to be more focus
on improved monitoring of VPA impacts, reporting of
activities, better understanding and more effective
handling of domestic and informal markets in tropical
countries, and wider engagement with the private sector.
A particularly critical need was identified to ensure SMEs
are adequately consulted and involved during the
development of licensing systems. The licensing system
offers both challenges and opportunities for smaller
operators and their engagement is central to success.
On the one hand, in many countries, smaller operators tend
to be those most dependent on informal sources of timber
supply and licensing procedures may therefore greatly
reduce their access to raw material.
On the other hand, because FLEGT licensing must be
applied to all operators, irrespective of size, it demands
capacity building and the development of innovative new
mechanisms for legality assurance that could improve
smallholders access to international markets.
EU debates changing context for VPAs
In considering the future of VPAs and the wider FLEGT
Action Plan, EC officials at the Brussels conference said
they needed to take account of the changing market and
policy context. It was noted that the EU＊s relative weight
in the global timber trade has fallen considerably since the
Action Plan was first initiated in 2003, due both to the
financial crises in Europe and the rapid growth in
emerging markets.
EC officials also noted that concerns surrounding illegal
logging are not limited to tropical countries, and that an
important focus of future FLEGT-related dialogue will be
with other timber-supplying countries like Ukraine,
Belarus, and Russia.
At the same time, there have been major developments in
other policy initiatives notably, in 2015, agreement of UN
Sustainable Development Goal 15 (SDG 15) to halt global
deforestation by 2020, and the Paris Agreement which
places efforts to tackle deforestation and promote
sustainable forestry at the heart of global carbon
mitigation measures.
EC officials particularly emphasised the potential to link
future evolution of the FLEGT Action Plan to the EU＊s
External Investment Plan (EIP) which covers countries in
both Africa and the EU＊s ※neighbourhood§ such as
Ukraine and Belarus.
The EIP aims to encourage private investors to contribute
to sustainable development in these countries, for example
by providing guarantees for investments and loans to
entrepreneurs and companies with viable business
proposals meeting social needs in sectors traditionally
regarded as higher risk. With a contribution of Euro 4.1
billion from the EC, the EIP is expected to leverage more
than Euro 44 billion of investments by 2020.
Indonesia calls for strong focus on FLEGT market
promotion
Indonesia was a key focus of discussion at both the
Chatham House meeting and the Brussels conference in
June as participants were keen to hear about market
impacts of FLEGT licensing during the first six months of
operation.
In a presentation to the Chatham House meeting, Putero
Parthama of the Indonesian Ministry of Environment and
Forestry (MEF) reported that the FLEGT licensing
framework now extends to 25 million hectares of forest
and 3400 manufacturers in Indonesia.
Nearly 23,000 FLEGT licences were issued for shipments
into the EU between 15 November 2016 and 31 May
2017, the leading destinations being Netherlands (5,009),
UK (4,088), Germany (3,752), France (2,166), Belgium
(2,152), Spain (1,429) and Italy (1,304).
Mr Parthama noted that while there have been teething
problems during the first few months of operation, the
licensing system is now working well. To date, there have
been 95 cases of license infringements reported by EU
import authorities involving 79 of 848 exporters that have
sold products into the EU.
Most infringements have been for minor technical issues 每
such as the license being printed on the wrong paper or a
failure to complete all sections of form. However there
have been a few potentially more serious cases, for
example involving submission of invalidated licenses or
products listed on the license not matching the actual
content of the consignment.
While progress has been made on the supply side, Mr
Parthama said that it＊s not yet possible to report any strong
positive developments on the demand side.
He noted that there is no sign yet of a price premium for
licensed products and that international buyers typically
still request other forms of certification. He emphasised
that there is much work to be done to explain the role and
value of the licensing system in the EU and other export
markets.
This message was reinforced in the presentation to the
Chatham House meeting by Robianto Koestomo of
APKINDO. Comparing Indonesian monthly trade data
during the period immediately before and after
implementation of the licensing system, Mr Koestomo
observed that Indonesian plywood exports to the EU had
yet to register any change in response to FLEGT licensing.
Mr Koestomo said that ※FLEGT products are still not
widely known§ and expressed concern that FLEGT
licensed products may be subject to greater costs and
scrutiny at the EU border compared to non-licensed
products. He called on the EC to do more to ensure that
FLEGT licensed products have greater access to the EU
market than non-licensed products.
Rudiyanto Tan of Samko Timber provided a more upbeat
commentary on the immediate market impact of FLEGT
licenses in his presentation to the Chatham House meeting.
Samko Timber procures 95% of timber supply, comprising
falcatta and rubberwood, from private and community
owned plantations, mainly in Java.
Products offered by the company include plywood, LVL
and decking, around 70% for the domestic market and
30% for exports. The supply base for Samko Timber is
highly fragmented, comprising between 200,000 to
300,000 farmers, which has been a significant obstacle in
efforts to achieve FSC and PEFC certification.
Mr Tan is hopeful that FLEGT licenses will now offer an
opportunity for the company to increase exports.
The feedback he has had from EU customers on the
license has been good, noting that it had provided
reassurance that wood is not illegally harvested, eased the
lengthy explanations required about the legality of
Indonesian wood exports, and is reducing costs to clients
by saving time and streamlining due diligence paper work.
However, Mr Tan also noted that FSC and PEFC are still
the preferred option for many clients and few accept that
FLEGT licenses offer the same level of assurance.
He encouraged the Indonesian licensing authorities to
collaborate with FSC and PEFC to harmonise auditing
procedures and thereby reduce costs of certification to
Indonesian operators.
EU demand side measures
At the Brussels conference, the EC restated their firm
commitment to supporting improved market access for
FLEGT licensed timber in the EU. The main mechanism
to achieve this is through implementation of the EUTR a
process which, according to EC officials will remain an
※over-riding priority§ of the EU.
The EC reported that all EU Member States have now
implemented enforcement sanctions regimes in line with
their EUTR obligations and have begun checking
compliance by EU operators.
It was also noted that several legal actions have been
initiated against EU companies for alleged failures in their
due diligence systems, although so far only in a few
Member States including Netherlands, the UK, Germany
and Sweden.
The EC emphasised that the effectiveness of EUTR should
not only be assessed by the number of court cases. More
important is the extent to which it motivates behavioural
change, which depends on a range of measures in addition
to sanctions.
The EU is implementing a wide-ranging EUTR
compliance and assurance strategy, which includes
continuous upgrade of guidance documents, development
of an information exchange platform between
implementing authorities in the EU member states, and
direct support for collection and communication of
information on legal frameworks in producer countries and
on best-practices in due diligence.
EC officials acknowledged that there continue to be
enforcement challenges, notably strict limits placed on
public expenditure in the EU since the financial crises.
However, this is also encouraging regulatory innovation
and a focus on ※smarter risk-based approaches§.
Furthermore, there is strong support for EUTR from the
private sector in Europe. Trade associations and individual
companies are actively working alongside regulatory
authorities to improve compliance. For example, both
enforcement authorities and large retailers concerned
about the risk of prosecution now regularly test the species
content of ※high-risk§ products using DNA and isotope
analysis alongside more traditional methods.
An active programme of impact monitoring is also
underway. An analysis of EUTR compliance in the private
sector, to focus particularly on SMEs, has been
commissioned by the EC and is due to be undertaken in
the next 12 months. This is an addition to the work by the
FLEGT Independent Market Monitor (IMM), funded by
the EC and hosted by ITTO, to assess the impact of
FLEGT licensing on trade.
EU government procurement
Alongside EUTR, discussion with government officials
from various EU Member States at the Brussels
conference highlighted their concern to ensure that, where
possible, FLEGT Licenses are recognised alongside FSC
and PEFC labels as sufficient evidence of ※legal and
sustainable§ timber in government procurement policies.
Unfortunately, this is not something that can be imposed at
EU level. While EU Directives for public procurement
provide opportunities for recognition of licenses by public
authorities in the EU, responsibility for this area of policy
is with national governments.
At present, only three Member States 每 the UK,
Luxembourg and Denmark 每 recognise FLEGT licenses
alongside FSC and PEFC. There are now calls to extend
this recognition to other Member States, particularly
Germany, the Netherlands and Belgium which already
have detailed green procurement policies and have been
active in excluding anything other than FSC and PEFC
certified wood from government contracts.
Global co-ordination of demand-side measures
In addition to encouraging demand for licensed timber in
the EU, the EC also hopes to encourage similar demand in
other parts of the world. Regulations imposing legality due
diligence requirements on timber traders have been in
place in the US and Australia for several years.
Japan＊s Clean Wood Act came into force in May this year.
South Korea will enforce similar regulations from March
2018. The timber legality assurance systems (TLAS)
developed as part of the FLEGT VPAs should assist
conformance to import requirements in all these countries.
Furthermore, many of the VPA countries are themselves
becoming much larger importers of timber products. The
TLAS implemented in Indonesia and Peninsular Malaysia,
and planned for development in Vietnam, all include
requirements for legality verification of imports as well as
domestically harvested timber.
The EC is also engaged in a dialogue with China, both to
support the development of timber legality assurance in
China＊s provinces and to explore options for trade
measures giving greater recognition to verified legal
timber in China＊s huge market. The EC is considering
organising a large international conference next year to
move forward these various trade initiatives.
※Zero-deforestation§ policies demand innovation in
certification
The need for innovative approaches to demonstrate
sustainability of ※forest-risk§ commodities was a key
theme of the discussion in Brussels on how to address
causes of deforestation other than illegal logging.
This discussion originated with an EC study from 2013
which considered just how much, and in what ways,
European consumption of resources is contributing to
deforestation.
Working through the numbers, the report attributed only
200,000 hectares of total global deforestation of 232
million hectares between 1990 and 2008 to the EU's
imports of wood products.
This compares to 8.7 million hectares attributed to EU
imports of agricultural cash crops and livestock products.
The study highlighted that policy measures in consuming
countries targeting only the wood trade - whatever their
merits in improving environmental and social performance
in other areas - can play little or no role to prevent or slow
deforestation.
The study led the EU to commit, in the Seventh
Environmental Action Plan, to consider an Action Plan on
Deforestation and Forest Degradation. It also encouraged,
in December 2015, the Amsterdam Declaration towards
eliminating all deforestation from European commodity
chains by no later than 2020.
The Declaration, which was endorsed by the governments
of Denmark, France, Germany, the Netherlands and the
UK, places a strong emphasis on more responsible privatesector
management of supply chains and trade.
The Amsterdam Declaration parallels the New York
Declaration on Forests released at the UN Climate Summit
in 2014 which has encouraged 415 companies to make
more than 700 public commitments to address ※embodied
deforestation§ in their supply chains for four ※forest risk§
commodities; palm oil, soy, cattle and timber.
These commitments, alongside the UN SDG 15 on
deforestation, are focusing minds on methods of verifying
sustainability for a wide range of ※forest-risk§
commodities which are cost-effective, equitable and not in
conflict with one another. It makes no sense, for example,
to require tough standards for sustainable timber
production if weaker standards are recognised for
※sustainable§ palm oil, cocoa or soy.
This would send out mixed signals and could even
encourage more conversion. Furthermore, a lot of
commercial cash crops in the tropics derive from
smallholders and frameworks need to ensure these
operators are not excluded from certification frameworks.
At the Brussels conference, a potential solution to these
various challenges was identified in so-called
※jurisdictional certification§.
Frances Seymour, who chaired the conference, has been a
keen advocate of this approach in her role as a Senior
Research Fellow at the World Resources Institute, and she
argued cogently that it should be given serious
consideration in future forest policy development.
The aim of ※jurisdictional certification§ would be to link
implementation of corporate commitments to efforts to
reduce deforestation at the scale of political jurisdictions -
districts, states, provinces, or even entire countries.
Multiple stakeholders〞including companies as well as
government agencies, smallholders, indigenous and civil
society groups〞would come together to agree on goals
for better land-use, and how to achieve them.
Performance standards (such as ※no deforestation§ and ※no
exploitation§) would be then applied at the scale of entire
administrative units rather than at the level of individual
farms, plantations, or concessions. All ※forest-risk§
commodities from that region would then be recognised as
※sustainable§.
※Jurisdictional certification§ would better accommodate
competitive interactions between land-uses than existing
certification systems that focus on single commodities. It
would be much more equitable for smallholders and the
chain of custody would be greatly simplified as products
need only be identified to region of origin rather than to
individual management unit.
The jurisdictional certification concept could integrate
well with the EU＊s FLEGT licensing approach 每 which
can be regarded as a type of national-level jurisdictional
certification. There should also be opportunities for
linkage of this form of certification to payments for ecosystem
services such as carbon storage and watershed
protection.
There are many obstacles to widespread adoption of this
approach. Many operators, service providers, and NGOs
have invested heavily in existing certification frameworks
and may resist moves perceived to undermine their market
position.
However, the EU＊s June conferences at least highlighted
that there is growing recognition of the limitations of
existing certification frameworks and of the need to find
innovative solutions that more effectively target
deforestation and are more equitable for small nonindustrial
forest operators and smallholders.
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