Stunningly, it is estimated that 10% of the world’s remaining forests, or 420m hectares, an area larger than the European Union, have been lost between 1990 and 2020, according to the Food and Agriculture Organization of the United Nations, or FAO.
The results have been all too obvious in terms of biodiversity loss and climate change. The FAO evaluates the yearly ongoing loss at 10m hectares of forest. Scaled differently, the NGO WWF assesses the loss at around 30 football pitches every single minute.
Seven deadly sins
The EUDR covers seven commodities responsible for the largest share of EU-driven deforestation: palm oil (34.0%), soya (32.8%), wood (8.6%), cocoa (7.5%), coffee (7.0%), cattle (5.0%) and rubber (3.4%). Without a regulatory intervention, it is estimated that the consumption and production of only the first six commodities indicated above will result into the deforestation of 248,000 hectares--annually--by 2030.
Despite the decreasing impact of the union, its “disproportional large consumption” of goods and services has been estimated to have contributed to 10% of world deforestation between 1990 and 2008. Besides, 90% of global deforestation is caused by agriculture expansion, with more than 50% related to the conversion of forest into cropland and almost 40% into pasture for cattle.
Changing the mindset
A report from the World Economic Forum said that more than 50% of the world’s GDP is “moderately or highly dependent on nature and its services.” In other words, nature loss negatively impacts economic output. The challenge is changing the behaviour and the mindset of the economic actors that still see the forest as a resource to be depleted or an obstacle to more profitable activities into a resource to maintain and enhance.
According to a report by Forest Europe, an intergovernmental coordination body, forest area in Europe has increased by 9% thanks to sustainable management, an outcome that supported a 50% rise in the weight of carbon stored in the biomass between 1990 and 2020, despite wood supply growing by 40%.
Despite the effort by the EU member states to promote, at the global level, conservation, restoration and sustainable management of forests, Forest Europe concluded that an “enhanced union action” was required to “halt deforestation, forest degradation and biodiversity loss” to more efficiently address the UN sustainable development goals.
Combating the cause of climate change with deforestation regulation
The European Commission sees the regulation as a tool to reduce greenhouse gas emissions, protect irreplaceable primary forests and combat biodiversity loss. It will contribute to the Paris Agreement and several EU commitments, including the European Green Deal, among other engagements.
Promoting more nutritious diets and a more sustainable lifestyle can also decrease the pressure on land and resources.
Illegal in the EU, yet legal elsewhere
According to a report by the NGO Forest Trends, around 30% of the deforestation intended for agriculture between 2013 and 2019 was legal in tropical countries, suggesting that a confrontation appears inevitable unless the EU comes up with immediate solutions for the loss of revenues.
It has been reported that Indonesia and Malaysia, the largest producers of palm oil, have already protested that the EUDR is protectionist and discriminatory, and threatened to ban exports to the EU. Argentina, Brazil, Ghana, Nigeria and Canada also perceive the regulation as protectionist and some countries are filing complains at the World Trade Organisation.
Deforestation linked to human right violations
The regulation seeks to protect human rights and gain the consent of indigenous peoples who are disproportionally affected and attacked when defending forest against their conversion into industrial projects or the expansion of agriculture land to produce commodities and their derived products.
In addition to indigenous peoples, the EU aims ambitiously at establishing partnerships to support “local communities, smallholders and micro, small and medium-sized enterprises (SMEs), improving governance and land tenure, increasing law enforcement and promoting sustainable forest management, with an emphasis on closer-to-nature forestry practices, based on science-based indicators and thresholds, ecotourism, climate-resilient agriculture, diversification, agro-ecology and agroforestry.”
Persuading other trade blocks is key to avoid dumping
Convincing the managers of supply chains to the EU is a starting point, but the effort must also influence global markets for the European initiative to be impactful. Yet the EU aims to lead by example and support international cooperation to “create an open and a fair multilateral system where sustainable trade acts as a key enabler of the green transition to fight climate change and reverse biodiversity loss.”
Some legislators in the US have introduced the Forest Act in the senate in 2021, without the draft bill ever facing a vote. Some senators have more recentely expressed the wish to have the regulation move forward, as there are concerns that the US become “the dumping ground for commodities that can no longer make their way into Europe.”
A major reference point for global forest action, the New York Declaration on Forests of 2014, called for protection and restoration. Endorsed by more than 150 (a number that grew to 200) governments (including the EU, US and Japan, but not China, Brazil, nor India), companies, indigenous peoples and civil society organisations committed to do their part to end forest loss by 2030, a commitment repeated by the signatories of the Leaders’ Declaration on Forests and Land in 2021 in Glasgow.
The EU intends not only to enforce the new regulation with its current trading partners but also in future trade agreements.
This article was published for the Delano Finance newsletter, the weekly source for financial news in Luxembourg. Subscribe using this link.