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Report from
Europe
EU's deforestation-free regulatory proposal sparks
intense debate
Intense negotiations are ongoing as the draft EU law on
"deforestation-free" and "forest degradation-free"
products, published by the European Commission (EC) on
17th November last year, navigates the various stages of
the EU law-making process.
The draft law is planned to replace the EU Timber
Regulation (EUTR) while at the same time extending
regulations to a range of ¡°forest risk¡± agricultural
commodities, including beef, cocoa, coffee, palm oil and
soy together with derived products.
To become law the final text must be adopted jointly by
the European Parliament and the European Council of
Ministers. At this stage, drawing on views expressed by
Agriculture Ministers of Member States at their Council
meeting on 21 February there seems to be broad
endorsement across all EU member states of the law's
objectives and agreement that due diligence by producers
and importers placing regulated products on the EU
market should be the basis of the regulation.
On the other hand, there is a variation in views across
Member States on the details of the regulation, particularly
the definitions of "deforestation" and "forest degradation"
and the controversial proposal that the law should ban
commodities derived from land that is legally deforested
(i.e., as part of a nationally approved land use plan) as well
as illegally deforested.
There is also widespread concern across Member States
over the complexity of enforcement, the costs and
potential discriminatory consequences for smallholders
and SMEs and the impact on consumer food prices and
global competitiveness of European producers in the
global forest products and agricultural commodities trade.
The Agriculture Council meeting indicated that there is a
way to go before Member States reach consensus on this
legislation with some calling for more product specific
impact assessments to extend the assessment already
undertaken by the EC.
This process may take some time, despite the clear stated
priority attached to passage of the law by the current
French Presidency of the EU Council, which runs for the
first six months of this year.
France has expressed ambitions to adopt conclusions in
March while the European Parliament plans to adopt its
position before July. Time is of the essence for France's
Council presidency as it could be severely curtailed by
April¡¯s election when President Macron is expected to
seek re-election.
Further insights into the extent of EU-wide consensus on
the deforestation regulation will come when EU
EnvironmentMinisters discuss the proposal at their next
Council meeting on 17 March.
But as things stand, the original timetable set out by
France seems optimistic. The actual timing may well hinge
on the priority attached to the legislation by the countries
holding the subsequent six-month rotating presidencies,
the Czech Republic followed by Sweden.
Major implications for FLEGT VPAs
The implications of any potential delay in the EU reaching
some form of consensus on the new law, irrespective of
whether the EU eventually decides to adopt something
similar to the existing text, or to reject it altogether, are
significant for those tropical countries that are signatories
to existing FLEGT VPAs. There is now considerable
uncertainty over the future policy direction in the EU
raising concerns about a hiatus in implementation of
existing agreements.
The uncertainty is particularly problematic for Indonesia,
the only country to have achieved FLEGT licensing, and
which is looking to the EU to fulfil its obligations under
Article 13 of the VPA. This requires that the EU "shall
promote a favourable position" in the EU market for
licensed timber, including through "public and private
procurement policies that recognise a supply of and ensure
a market for legally harvested timber products; and a more
favourable perception of FLEGT-licensed products on the
Union market".
If the draft deforestation legislation is passed into law in
its current form, the scope for the EU to promote "a
favourable position" for FLEGT licensed timber in the EU
market would be constrained.
While the regulatory proposal includes a provision
declaring wood covered by a FLEGT license to have
fulfilled the legality requirement there is no provision for
FLEGT licenses to meet the "deforestation-free" or
"degradation-free" requirement.
This creates a situation whereby EU operators could reject
FLEGT-licensed timber on grounds that, while it is
entirely legal, it does not fulfil the EU¡¯s definitions of
"deforestation-free" or "degradation-free timber". Any
suggestion that FLEGT licensed timber may not meet
these definitions would contradict the EU¡¯s obligation to
promote ¡°a more favourable perception of FLEGTlicensed
products on the Union market¡±.
The draft legislation provides one potential route out of
this dilemma, through the proposed country
benchmarking. The draft legislation enables the European
Commission to assess the risk of commodity-driven
deforestation and forest degradation by country and to
categorise each country (or sub-national region) as "low",
"standard" and "high risk".
Operators would be permitted to implement "simplified
due diligence" procedures excluding the requirement for
risk assessment and mitigation for all commodities from
countries assessed to be "low risk".
The far-reaching forest reform process undertaken as part
of the VPA should better position Indonesia to achieve a
"low-risk" status. However, according to the current draft
regulation, achieving such a status would require that
Indonesia demonstrates that no forest-risk commodities
with potential to enter EU supply chains derive from any
forest land cleared after 31 December 2020, irrespective of
whether the clearance is legal or illegal.
All timber products would also be required to meet a
definition of "degradation-free" which is regarded, even by
some governments of EU member states, to be highly
problematic and likely to conflict with national forest
policies.
While the EU and Indonesia may yet negotiate a way
around the looming roadblock for FLEGT licensed timber
created by the new regulation it is hard to escape the
conclusion that this ratcheting up of requirements only
five years after FLEGT licensing became operational is
not what Indonesia signed up for through the VPA, nor is
it likely to be viewed in Indonesia as an adequate return in
terms of a favourable position in the EU market after a
decade of forest reform.
The on-going negotiations around the new deforestation
regulation in the EU have implications for the recent
rebranding campaign for the SVLK standard, which forms
the basis for the FLEGT licensing system, as a sustainable
forestry standard.
The campaign developed by the Indonesian Ministry of
Environment and Forestry (MoEF) through a multistakeholder
process supported by the UK government has
the expressed aim to ensure that SVLK certification meets
the sustainability requirements of even the world¡¯s most
environmentally sensitive markets.
The SVLK rebranding is explicitly designed to address
increasing demand for sustainably produced timber
products and deforestation-free supply chains. It also
addresses the reluctance among the timber trade to
promote the concept of ¡°legal timber¡±, which is now
considered a basic requirement in regulated consumer
markets and not an add-on that should be specifically
promoted or highlighted.
Besides sustainability aspects, the Indonesian promotion
campaign intends to highlight the strengths of Indonesian
timber products identified through stakeholder
consultations in Indonesia and other research and surveys,
including trade surveys by the FLEGT Independent
Market Monitor, an ITTO project funded by the EU, in EU
countries and (until 2021) the UK.
To ensure that the market benefits of Indonesia's delivery
of FLEGT licensing after a decade of forest reform are not
lost during this period of uncertainty, there is a clear need
now for dialogue between Indonesia and the EU to resolve
potential differences of interpretation in relation to
definitions of deforestation, forest degradation and
sustainability.
FLEGT in relation to changes in wider EU policy
environment
All tropical timber supplying countries need now to
consider that the overall thrust of both the draft
deforestation law and FLEGT Fitness Check published by
the EC at the same time in November last year suggests
that the concept of FLEGT licenses and of VPAs focussed
on timber products may be dropped or substantially
amended.
In their place, the EU has indicated an intent to promote
broader Forest Partnerships to deliver on European Green
Deal priorities, particularly in relation to zero carbon, as
well as the EU¡¯s development cooperation objectives
including poverty alleviation and human rights.
With respect to VPAs the draft deforestation regulation
only states that "some VPA components might be
integrated where feasible and agreed by the partners into
specific cooperation programmes, like Forest Partnerships
or others to further support forest governance".
The political background to negotiation of the new Forest
Partnerships is also very different compared to when the
FLEGT VPAs were being negotiated in the decade
between 2007 and 2017. During that period, there was
strong emphasis on development and trade recognition of
forestry standards decided in the partner country through a
stakeholder consultation process.
As noted in a recent paper for the European Centre for
Development Policy Management (ECDPM), "By
focusing on legality as defined by the law in producer
countries rather than by imposing European standards,
FLEGT ensures respect for territorial rights and World
Trade Organization (WTO) rules, while avoiding
politically sensitive sovereignty concerns in partner
countries and thereby increasing the likelihood of their
participation in the FLEGT scheme."
This consensus-based approach was combined with a
positive trade incentive through provision of "green lane"
access in the EUTR and other commitments by the EU to
promote a favourable market position for FLEGT licensed
timber.
In contrast, discussions over the new deforestation law,
and negotiations towards the new Forest Partnerships, are
set within the context of an EU that is becoming "more
assertively defensive in its trade policy", according to
POLITICO, the independent EU-based policy news
organisation.
This is illustrated by a comment made by the French
Agriculture Minister Julien Denormandie in January, that
¡°Europe must impose its standards on others and not have
others¡¯ standards imposed on it.¡±
In this respect the draft deforestation regulation proposal
aligns closely with another ambition of the French
Presidency of the EU Council to ensure the introduction of
so-called "mirror clauses" in all EU trade agreements.
As a condition of agreement these would demand that
trade partners mirror the EU's own production standards
and not be allowed to undercut European workers through
laxer environmental rules.
The new deforestation proposal also aligns with the
proposal for a Carbon Border Adjustment Mechanism
(CBAM), published by the EC on 21st July last year and
another priority of the French Presidency. This mechanism
is seen as necessary to reduce the risk of European climate
policies leading to "carbon leakage". That is a rise in
offshoring of production of carbon-intensive goods outside
the EU, and re-importation of these goods to the European
single market.
The aim of the CBAM is that goods imported into the EU
should be covered by equivalent carbon pricing to that
applicable to production of the same goods within the EU,
under the Emissions Trading System (ETS).
While the ultimate objective is that there should be broad
product coverage in CBAM, for practical reasons, only the
five emissions-intensive, trade-exposed industries under
EU ETS are targeted in the current proposal: cement,
fertilisers, iron and steel, aluminium, and electricity
(CBAM goods).
Under the proposal EU importers must purchase CBAM
certificates, where one CBAM certificate will correspond
to one tonne of GHG emissions measured in the concerned
CBAM goods. In essence, the number of CBAM
certificates must be equal to the total embedded emissions
in the CBAM goods imported.
The proposal states that the Commission will consider a
broadening of the CBAM scope in terms of targeted
sectors, indirect emissions, transportation services and
downstream industries before 2026. Relevant to the forest
sector is that pulp, paper, and paperboard, are identified as
likely to be included in the next tranche of products.
In this wider context, the draft deforestation law can be
seen as a measure by the EU to prevent "carbon leakage"
in the agricultural and forest products sector. It's about
raising barriers to products considered to have inferior
environmental standards to those produced in the EU.
This is a different proposition to the FLEGT VPAs where
the objective was to support partner countries in ensuring
compliance with their own forest laws.
For the advocates of the new law, deforestation of any
kind in third countries is unacceptable, irrespective of
whether or not legally sanctioned. Nor is there scope for
the EU to actively promote products from third countries
inside the EU unless they explicitly contribute to
achievement of the EU's zero carbon goal.
Specific issues for tropical timber raised by draft EU
deforestation law
Some specific implications of the draft deforestation
regulation for supply of tropical timber and other forestrisk
commodities are explored in an article by Alain
Karsenty.
Karentyis a senior scientist at the French Agricultural
Research Centre for International Development (CIRAD),
published on the Mongabay environmental news site.
Karsenty highlights the implications of the 31 December
2020 cut-off date on deforestation which means that any
product derived from an area cleared before this date is
regarded as "deforestation-free". This date, much more
recent than the 2015 originally proposed by the European
parliament, effectively ¡°amnesties¡± a lot of recent
deforestation in large producing countries, such as Brazil.
However, it also potentially penalises those low
deforestation countries like Gabon that may want to
develop a larger agricultural area in the future.
Karsenty also notes the impact of the choice of FAO¡¯s
definition of a forest as a minimum area of 0.5 hectares
with 10% tree cover. This is a very broad definition which
is out of step with many countries that have adopted a
minimum threshold of 30% tree cover. The difference in
definition has potential to create significant trade tensions.
Karsenty explains, "by setting a threshold of 10% to define
zero deforestation products, commodities considered legal
in the country of origin (whose conversion may have
involved an ecosystem with, for example, 20% cover) will
be unacceptable to the EU, and, in principle, will not be
allowed to be imported".
Overall, Karsenty suggests that "the idea of having only
one definition of forest for all countries¡ and all biomes,
poses a problem of realism. It would be more appropriate
to examine things on a case-by-case basis, and even biome
by biome, since some countries have several forest
biomes".
Karsenty goes on to discuss the far-reaching implications
for tropical timber products of forest "degradation" being
included alongside deforestation. He comments that the
"definition of degradation is rather unclear" and that
"avoiding degradation implies, by some definitions,
maintaining the original species composition, age structure
or distribution rate of a forest stand. All of which are
changed by selective logging, even if controlled and
certified".
Furthermore, the draft regulation specifies that forestry
operations must not result in ¡°loss of biological or
economic productivity¡± or damage ¡°the complexity of
ecosystems¡±, criteria that will be difficult to interpret.
Karsenty suggests that "few operations will be able to
claim to meet them fully".
Finally, Karsenty comments on the implications of the
benchmarking proposals which, when combined with the
lack of recognition for certification systems.
Another feature of the draft regulation is that it will create
significant barriers for producers in some tropical
countries. According to Karsenty, "The criteria for
comparison should be deforestation rates, production
trends for commodities at risk of deforestation, national
policies, quality of governance, etc.
While this approach makes sense, it may discourage
importers against sourcing from countries such as
Cameroon, Cambodia or the Democratic Republic of
Congo, given the effort they will have to make in terms of
guarantees.
"By not wanting to trust 'zero deforestation' certifications
to declare the product 'negligible risk', the Commission
will penalise 'clean' producers in contexts of 'difficult
governance'. This is tantamount to collective punishment",
says Karsenty.
EU Member States raise reservations about new
deforestation law
At the EU Agriculture Council meeting on 21 February,
twenty-six Member State Agriculture Ministers (excluding
France who Chaired the meeting) each made a statement
setting out their position on the draft law on
"deforestation-free" and "forest degradation-free"
products.
While all were broadly supportive of the objectives and
generally in favour of the due diligence approach set out in
the draft, many Member States raised so-called "scrutiny
reservations" on the entire text. In other words, there is
some way to go before the Council reaches any sort of
consensus on a final text.
The statements revealed that leading supporters of the
existing text, or for an even more wide-ranging regulation,
were Germany and the Netherlands. The strong support of
France can also be assumed given the priority attached to
passage of the law during the French presidency. Spain
and Italy were also generally supportive, but more
cautious in urging a general need for flexible and gradual
implementation.
The most explicit critiques came from Sweden - who
specifically rejected the notion that the law should boycott
products from legal deforestation - and Finland who
argued more on practical lines that there was a need for
flexibility allowing some scope for legal deforestation for
legitimate land use zoning/management purposes. Finland
said the proposed 2020 retroactive deadline for forest
conversion was "extremely problematic".
Alongside these two countries, several other Eastern and
Southern European countries (Czech Republic, Italy,
Latvia, Portugal, Romania, Slovakia, Slovenia) raised
objections to the definitions of deforestation and forest
degradation in the law, pointing out there was no
international agreement on what these terms implied. Italy
noted, succinctly, "degradation in respect to what?"
Portugal and Cyprus said the degradation definitions were
not appropriate to fire affected forests.
Paralleling objections to the EC's recent efforts to develop
a new Forest Strategy, Finland suggested that the existing
draft did not go far enough in endorsing the value of
active, multifunctional and sustainable management of
forests to supply a range of renewable products that can
substitute for non-renewable and more energy intensive
products.
Eastern European countries (e.g. Czech Republic,
Bulgaria) were prominent in raising objections to the costs
involved, emphasising both the special challenges for
smallholders and SMEs, and the complexity of
enforcement processes. Estonia observed that lessons
needed to be learnt from EUTR which in practice had
failed to effectively remove illegally harvested wood from
EU trade.
With respect to geolocation data, Finland raised questions
about the potential discriminatory effect on small
operators of requiring such data, while Greece questioned
whether this approach was at all practicable.
There was not universal acceptance of assertions in the
EC's impact assessment that costs would be manageable.
There was a call (Austria, Denmark, Estonia) for more
detailed sector specific impact assessments to better test
these assumptions, and for phased introduction of the law
to avoid overburdening operators and regulators in the
early stages.
Romania and Portugal were concerned the regulation
might raise costs of essential raw materials for EU
agricultural producers and undermine their global
competitiveness, notably by restricting supply to soy for
animal feed.
Several countries (Sweden, Estonia, Greece) questioned
the compatibility of the draft text with EU WTO
obligations. Estonia pointed out that in order to avoid
problems with WTO, the benchmarking of countries and
regions would have to be carried out through an
"internationally recognised risk assessment methodology".
A number of countries explicitly called for more time and
wider consideration by sectoral and legal experts to
consider the full implications. Hungary concluded with the
comment that "quality [of the regulation] is more
important than the prompt conclusion of the negotiations".
Industry and NGOs post conflicting statements on the
new deforestation law
Various interest groups in the EU are now making known
their views on the draft legislation. Particularly farreaching
objections are raised in a joint statement by
COCERAL, FEDIOL, and FEFAC, representing the EU
grain and oilseed trade and animal feed industry.
The three organisations suggest that "the design of the
approach and several provisions of the proposed
Regulation will have serious negative consequences
without any real added value to meeting the objective of
deforestation-free supply chains".
These range from supply shortages in the EU, leading to
high prices and challenging the EU food and feed chain
competitiveness, to a minimal impact on deforestation due
to lack of leverage and incentives to transform practices on
the ground, particularly as it will lead to "exclusion of the
majority of smallholders and certain mills supplied by
smallholders from supply chains".
COCERAL, FEDIOL, and FEFAC jointly propose that
traceability requirements be adapted to the specificities of
the different commodities instead of a one-size-fits-all
approach and that they "be inclusive of smallholder
farmers and compatible with local laws, instead of
requiring filing geolocation coordinates".
The three organisations also suggest that operators should
"not be guided by an inaccurate country benchmarking"
but should instead be responsible for their own risk
assessment and mitigation "verified by audits and
controlled by competent authorities". They suggest that
"Not only would the country benchmarking approach lead
to shifting sourcing from high-risk areas to low-risk areas,
a trade distortion which penalises sustainable actors in
high-risk areas, but it would also imply disengagement
from high-risk areas, which need most engagement and
sustainable transformation".
For the timber importing industry, the European Timber
Trade Association (ETTF) and the German Timber Trade
Association (GD Holz) issued a statement suggesting that
"the concrete definition of the impact site (geolocalisation)
cannot be implemented in many cases".
The two timber trade associations felt that the approach
adopted in the EUTR which requires an annually updated
risk assessment for each supplier was more appropriate.
They also noted "a particularly important point is that the
duty of care should not be extended to larger dealers, but
should remain with the first distributor, i.e. the importer,
as usual".
GD Holz and ETTF also raised concerns about the
definition of "deforestation" and "degradation", suggesting
that the regulation "must ensure that orderly forest
management according to state laws is the basis for legal
logging" and that "sustainable forest management in the
supplier countries must not be viewed as deforestation or
degradation".
GD Holz and ETTF expressed concern that, according to
current information, the "FLEGT process will no longer be
continued in its current form" and that "It is still unclear
how partnership agreements with FLEGT partners and
negotiations with FLEGT candidates are to be handled".
They noted that, irrespective, the associations are
"committed to continuing the [FLEGT licensing] process
in any case, as it ensures more document security and
more awareness of legality and sustainability in the
supplier countries".
While industry associations raised concerns about the
challenges of implementing the existing provisions of the
draft legislation, a statement issued by more than 100
ENGOs on 3rd February calls for a ratcheting up of the
law's extent in terms of eco-system, sectoral and product
coverage and obligations.
They also propose removing the "simplified due diligence"
procedures which exempt smaller operators and operators
from compliance in countries and regions deemed to be
lower risk, while also calling for there to be no ¡®green
lane¡¯ for certification or third-party verification schemes.
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