STATEMENT: Proposed Amendments to EU Deforestation Law Create Dangerous Loopholes and Uncertainty

STATEMENT: Proposed Amendments to EU Deforestation Law Create Dangerous Loopholes and Uncertainty

November 18, 2024

Statement

Forests Europe

BRUSSELS (November 18, 2024) - The European Parliament voted last week to delay, and proposed amendments to the EU Deforestation Regulation (EUDR) which had originally passed the legislative process in 2023. The proposed amendments need to be approved by all three EU institutions and will be considered by the EU Commission and EU Council this week.

Initially set for implementation on 30 December 2024, this critical regulation aims to curb the EU's role in global commodity-driven deforestation. It prevents coffee, cocoa, soy, cattle, palm oil, rubber and wood, along with certain derivative products, that are linked to deforestation or forest degradation from entering, being traded in or exported from the European market.

Following is a statement by Stientje van Veldhoven, Vice-President and Regional Director for Europe of World Resources Institute:

"This decision is disappointing and undermines the regulation's objective to curb global deforestation by creating the world's first deforestation-free consumer market. The world is currently losing 10 football fields of tropical forests every minute, and we cannot wait to better protect our forests.

"By both delaying and defanging the EUDR, with this vote EU policymakers would reduce the effectiveness of the regulation based on proposals that have not been fully thought through and are not based on credible science.

"The proposed amendments present three major risks. First, the creation of a "no-risk" country category generates loopholes that undermine the regulation by exempting companies from key due diligence requirements. A second risk is using 1990 as the reference year, which may miss more recent deforestation risks and degradation trends. And third, the amendments' unclear language creates uncertainty for companies, investors and smallholder farmers.

"The delay and proposed amendments damage the EU's climate leadership credibility. To preserve the EUDR, the European Commission should formally oppose the amendments. Without unanimous approval by all EU member states, the amendments could then not pass. If needed, the Commission and EU Council could agree on a non-enforcement grace period of 12 months without reopening negotiations, as this would be the quickest path to prevent further chaos."

Below is a more in-depth assessment from Stientje van Veldhoven on three main risks from the proposed amendments:

First, the most concerning change is the introduction of a new "no-risk" country category which creates loopholes that jeopardize the effectiveness of the entire regulation. Under the "no-risk" classification, companies sourcing products harvested in countries deemed to have stable or increasing forest area' would be exempt from key due diligence obligations. This could make it easier for suppliers to bring deforestation-linked products into the EU market via "no-risk" countries, creating a backdoor for commodities produced in high-risk countries.

For example, an unscrupulous supplier from a "no-risk" country could exploit this rule by misrepresenting the origins of leather, coming from cattle from a high-risk country and linked to deforestation. Although the amendments still demand that companies verify their products are degradation-free and legally produced, they no longer have to provide any documentation and no geospatial data, making enforcement difficult.

The second risk lies in the amendment's reliance on 1990 as the reference year for forest area assessments. Assessing forest area change between 1990 and 2020 may not accurately reflect current or future deforestation risks. In fact, by comparing the difference in forest area between two time periods, deforestation can be missed completely if forest is replanted with young, less biodiverse trees or regrows elsewhere. For example, Vietnam, a primary supplier of coffee and wooden furniture to the EU, increased its forest extent by 56% between 1990 and 2020, according to national data reported to FAO. However, WRI's Global Forest Watch estimates that over 1 million hectares of forest has been lost to commodity-driven deforestation between 2001 and 2023.

Furthermore, satellite data availability and quality have increased and improved over the past decade. Crucially, data derived from satellite observations in 1990 are not easily comparable to more recent observations meaning they could misrepresent the status of forest change.

Third, the amendment language requires clarification to prevent uncertainty for companies, investors and smallholder farmers. The revised provisions mandate that an information platform and the country risk benchmarking need to be in place six months before the regulation takes effect. However, the text fails to specify who will verify, and under what criteria, the readiness of related IT and other systems.

Additionally, the amendments do not clarify how the proposed "no-risk" assessment criteria align with the comprehensive country risk benchmarking methodology being developed by the European Commission. This lack of alignment creates more confusion and opens up pushback against the results of the country benchmarking. Some of the proposed amendments include contradictory language that will lead to uncertainty among operators about their responsibility to verify products from "no-risk" countries. Moreover, the creation of the "no-risk" country category raises questions about whether the revised regulation will comply with World Trade Organization non-discrimination rules, potentially setting the stage for trade disputes. This threatens the predictability of the EU's regulatory landscape.