The EU regulatory framework for preventing deforestation

July 18, 2023

According to the UN Food and Agriculture Organization, approximately 420 million hectares of forest were lost between 1990 and 2020, corresponding to about 10% of the world’s remaining forests. According to the Intergovernmental Panel on Climate Change (IPCC) 2019 special report, deforestation alone accounts for 11% of greenhouse gas emissions.  These problems are exacerbated not only by phenomena related to climate change, but the expansion of agricultural land used to produce soy, beef, palm oil, wood, cocoa, coffee, rubber and some of their derived products, such as leather, chocolate, tires or furniture.

As a major economy and consumer of these commodities linked to deforestation and forest degradation, the EU has recognized its role in promoting deforestation, and has developed, in recent years, a number of policy measures designed to reverse these alarming trends, ranging from the 2019 Green Deal policy package to its Biodiversity Strategy for 2030. 

Going one step further, on May 31, 2023, the EU adopted a regulation to prevent the marketing, sale and authorization of products that contribute to deforestation (the “Regulation”).  In seeking to address the specific issue of deforestation, the EU highlighted the need to create a balance between protecting the interests of operators and traders, avoiding disruptions to supply chains and protecting the environment, as outlined in Article 37 of the Charter of Fundamental Rights of the EU.

According to the Regulation, certain cannot be made available or exported unless they: (i) are deforestation-free; (ii) have been produced in accordance with the relevant legislation in the country of production; and (iii) are covered by a due diligence statement.  Relevant commodities include oil palm (such as palm nuts and palm-derived acids); rubber (including natural and compounded rubber, as well as pneumatic types of rubber); cattle (including meat, hides and leather); cocoa (including beans, paste, butter and powder); coffee (whether or not roasted or decaffeinated); soya (including beans, flour and meal); and wood (including logs, rough wood and finished wood).

The new Regulation, which went into immediate effect across the EU on June 29, 2023, seeks to:  first, prevent products purchased, used and consumed in Europe from contributing to deforestation and forest degradation; second, reduce carbon emissions caused by EU consumption and production of the commodities in scope of the Regulation by at least 32 million metric tonnes a year; and third, address all deforestation driven by agricultural expansion to produce the commodities in the scope of the Regulation, as well as forest degradation.

In essence, the Regulation aims to reduce the impacts of EU consumption by banning the import and placing stringent due diligence obligations on operators that place products linked to deforestation and forest degradation on the EU market. Following the due diligence exercise (the requirements of which are less burdensome from small and medium enterprises), relevant operators must prepare a due diligence statement containing certain information on the operator and its activities, the country of production and geolocalisation of relevant plots of land from which the project is derived as well as a signed text attesting that no risk or only a negligible risk remains that the products are linked to deforestation. Information will be made available publicly, and regulatory authorities will have the ability to conduct controls and sanction violations.

Given the number of products affected, the implementation of the Regulation will be a complex process requiring time, effort and operational transformations of certain companies. While the regulatory burden is not insignificant, it can be managed through robust compliance strategies and supported through industry-wide partnerships involving governments and civil society. Preventative measures, moreover, can also be taken to promote sustainable land and forest management.

The Regulation is a significant step forward in the EU’s fight to reduce deforestation and forest degradation, setting the global standard for taking industrial action for environmental protection. By taking these steps, the EU has set an example for other countries to follow in order to preserve the environment and promote sustainable development. This framework — together with proactive initiatives in sustainable land management and environmental restoration — appears promising.

CPM