On 6 December, the European Council and the European Parliament agreed on the text of a regulation to minimise the risk of deforestation and forest degradation associated with products that are imported into or exported from the European Union. The agreement is provisional pending formal adoption in both institutions.
The agreed text of the regulation has yet to be published and the following description draws on:
- the official Council of the EU press release issued 6 December (https://www.consilium.europa.eu/en/press/press-releases/2022/12/06/council-and-parliament-strike-provisional-deal-to-cut-down-deforestation-worldwide/)
- commentary by International Institute for Sustainable Development: https: https://sdg.iisd.org/news/eu-paves-way-for-landmark-deforestation-free-products-regulation/
- independent commentary by the Mongabay environmental news website https://news.mongabay.com/2022/12/amazing-first-step-as-eu-law-cracks-down-on-deforestation-linked-imports/
The EU regulation on deforestation-free products is a part of the European Green Deal and builds on the 2019 European Commission communication on stepping up EU action to protect and restore the world’s forests. In this communication, the Commission announced four action items on deforestation:
- Reducing the footprint of EU consumption;
- Stepping up international cooperation;
- Improving sustainable financing; and
- Boosting research and innovation.
The new regulation builds on the first action item by recognizing that the EU is complicit in global deforestation through domestic consumption. It complements the 2030 Forest Strategy, with which the EU aims to strengthen reforestation and conservation efforts inside the region and replaces the EU Forest Law Enforcement Governance and Trade regulation (FLEGT), which includes the EU Timber Regulation (EUTR).
The provisional agreement sets mandatory due diligence rules for all operators and traders who place, make available or export the following commodities from the EU market: palm oil, beef, timber, coffee, cocoa, rubber, and soy. The rules also apply to a number of derived products which in the wood sector include furniture, charcoal, and printed papers. The last two items were not formerly regulated under EUTR. A review will be carried out in two years to see if other products need to be covered.
The co-legislators set the cut-off date of the new rules at 31 December 2020, meaning that only products that have been produced on land that has not been subject to deforestation or forest degradation after 31 December 2020 will be allowed on the Union market or to be exported.
The Council and Parliament agreed to define “deforestation” in accordance with the definition established by the FAO for forest monitoring purposes in their Global Forest Resource Assessment (FRA): “the conversion of forest to other land use independently of whether human-induced or not”. This definition implies that deforestation refers to a change in land use, not in tree cover. It is also dependent on a definition of forest, which, in the FRA, combines physical criteria (minimum thresholds of 10% canopy cover, 0.5 hectare area and 5m in height) and a notion of the predominant land use, excluding tree-covered areas where the predominant use is agriculture or urban.
In accepting the FAO definition of deforestation, the legislation will impose no prohibition on products from conversion of “other wooded land” with sparser tree cover (like scrublands and savannas) as the European Parliament had proposed in amendments in July.
The co-legislators define “forest degradation” as “structural changes to forest cover, taking the form of the conversion of naturally regenerating forests and primary forests into plantation forests and other wooded land and the conversion of primary forests into planted forests”. The EU Council press release refers to this as an “innovative” definition reflecting the fact that, according to the FAO 2022 State of the World’s Forests report, a “widely applied definition of forest degradation is unavailable, and data are scarce”.
The legislation prohibits placing on the EU market of any regulated commodity derived from deforested land or forest degradation in accordance with these definitions irrespective of whether the deforestation or degradation is legal or illegal in the country of harvest.
The co-legislators agreed on stringent due diligence obligations for operators, which will be required to trace the products they are selling back to the “plot of land”, identified by geolocation coordinates, where it was produced. At the same time, the new rules are designed to avoid duplication of obligations and reduce administrative burden for operators and authorities. It also adds the possibility for small operators to rely on larger operators to prepare due diligence declarations.
The Council and Parliament agreed to set up a benchmarking system, which assigns to third and EU countries a level of risk related to deforestation and forest degradation (low, standard, or high). The risk category will determine the level of specific obligations for operators and member states’ authorities to carry out inspections and controls. This would facilitate an enhanced monitoring for high-risk countries and “simplified due diligence” for low-risk countries.
The Council and Parliament also tasked the competent authorities to carry out checks on 9% of operators and traders trading products from high, 3% for standard-risk countries and 1% from low-risk countries, in order to verify that they effectively fulfil the obligations laid down in the regulation. In addition, competent authorities will carry out checks on 9% of the quantity of each of the relevant commodities and products placed, made available on, or exported from their market by high-risk countries.
The legal text agreed between the European Council and Parliament also takes into account human rights aspects linked to deforestation, including the right to free, prior and informed consent by indigenous peoples.
The agreement maintains the provisions regarding effective, proportionate and dissuasive penalties and enhanced cooperation with partner countries, as proposed by the Commission. It provides that fines proportionate to the environmental damage and the value of the relevant commodities or products concerned should be set at the level of at least 4% of the operators’ annual turnover in the EU and include a temporary exclusion from public procurement processes and from access to public funding.
Indonesia and Brazil raise “serious concerns” about EU legal proposal
On 28 November, a joint letter from Indonesia and Brazil addressed to the Presidents of EU Council, Commission and Presidency was circulated to the WTO Committee on Agriculture. This raises “serious concerns” regarding the EU deforestation-free legislative proposal. The joint letter states: “While we agree that the fight against climate change and the conservation and sustainable management of forests are urgent tasks, we regret that the EU has chosen the option towards unilateral legislation instead of an international engagement to deal with these shared objectives, reflected in the Paris Agreement and the SDGs, to which we have all subscribed”.
In the letter, Indonesia and Brazil jointly encourage the EU “to entertain further consultation with third countries, particularly developing producing countries before the final approval of the proposed legislation”. They also claim that “Some of the concerns expressed by developing countries in formal public consultations about the proposed legislation have, regrettably, been given scarce consideration”.
Indonesia and Brazil raise specific concerns about the country assessment criteria and benchmarking system which they allege “are inherently discriminatory and punitive in nature”. They suggest that “Its most likely effect will be to generate trade distortion and diplomatic tensions, without benefits to the environment” and that “it imposes additional controls, entails reputational risks for companies and is likely to penalize producers in developing countries, especially smallholder farmers and SMEs”.
The letter is available at:
https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/G/AG/GEN213.pdf&Open=True
EU ‘moving the goal posts’ with new timber requirement, Indonesia says
An article published by Mongabay, the independent environmental news service, on 10 November quotes Indonesian government sources concerned about the implications of the EU’s new deforestation-free regulation for the timber licensing arrangements made under the existing FLEGT regulations.
Under the FLEGT, timber certified by SVLK, Indonesia’s national forest certification system, is recognised as fully compliant with the requirements for legal timber under the terms of the EUTR and therefore not subject to any further due diligence by EU operators. This “green lane” advantage in EUTR is one component of the EU’s commitment under Article 13 of the Voluntary Partnership Agreement signed by the EU with Indonesia in 2014 that the EU “promote a favourable position in the Union market” for FLEGT licensed timber from Indonesia.
Arif Havas Oegroseno, the Indonesian ambassador to Germany, is quoted by Mongabay as saying that the process of getting Indonesian timber exporters to comply with the SVLK requirements had been arduous, and that critics of the system might now feel justified in their opposition to it. “There are some people who disagreed with that, [they] will say ‘Look at that, the government is being duped by the EU, so now they have a new standard. So why do we have to go with the SVLK if there are new due diligence standards?’”
According to Mongabay, Arif called the EU’s change of policy “a classic case of shifting the goal posts” and “a violation of the [FLEGT VPA] commitment”. Arif is quoted as suggesting that the EU “say that they accept and recognize the FLEGT VPA, but at the same time they’re introducing a new standard.” Arif suggested that if the EU is now saying that FLEGT Licensed Timber from Indonesia is legal but not sustainable, then the EU should “sit with us again to renegotiate the treaty.” Mongabay also quotes Arif as suggesting that the “failure by the EU to sufficiently engage with Indonesia could erode the latter’s trust”.
The Mongabay article also quotes Adrianus Eryan, head of forestry and land at the Indonesian Center for Environmental Law (ICEL), a Jakarta-based think tank, as saying that the deforestation regulation throws up a “new trade barrier.” “It has the potential to hamper the implementation of the VPA,” Adrianus told Mongabay. “The FLEGT VPA is like a toll road for Indonesian timber products to enter the EU market. If the EU deforestation bill is enforced, there will be a new checkpoint on the toll road. So the process will be longer.”
Adrianus spoke to Mongabay about the possibility of a WTO complaint by Indonesia on the new deforestation regulation, suggesting that this “would be a last resort, given that the timber legality agreement calls for Indonesia and the EU to first address any dispute bilaterally”. Adrianus suggested to Mongabay that the matter should be brought before the Joint Implementation Committee that oversees the VPA. “If after two months that too fails, then the parties may seek mediation by a third party, including the WTO”, Adrianus said.
In a follow up article on 14 November, Mongabay suggested a possible roadmap towards closing the gap between Indonesia’s market expectations for FLEGT Licensed timber and the EU’s new requirements for deforestation-free products.
Mongabay note that in 2021 the Indonesian government had already initiated a process to rebrand SVLK as a mechanism to deliver sustainable timber rather than as a legality verification system. Last year, Indonesia’s Minister of Environment and Forestry issued a regulation that changed the name of the system from Indonesia’s Timber Legality Verification System to Indonesia’s Sustainability and Legality Verification System, still using the SVLK acronym.
Mongabay quotes Agus Justianto, the forest ministry’s Director-General of Sustainable Forest Management, as saying that since issuance of the new regulation, the ministry has prepared new guidelines to ensure SVLK delivers both legality and sustainability aspects. According to Agus, as quoted by Mongabay, “The rebranding of SVLK reiterates the commitment of Indonesia towards effort to achieve sustainable forest government and to supply the market base with legally harvested and sustainable timber and forest product.”
Mongabay also quotes Sigit Pramono, the head of the Indonesian ministry’s forest products export-import directorate, who said that the new SVLK is established not only to develop the country’s timber industry but also to strengthen sustainability components to better align with the EU’s deforestation-free regulation. “We won’t give SVLK certificates if they [timber producers] conduct deforestation,” he told Mongabay.
Sigit told Mongabay that the EU requirement for timber producers to include the geographic coordinates of their plots of land will be included in the guideline of the new SVLK. And in the new SVLK, the sustainability aspect of a producer’s operation will be verified, he added. In the old SVLK, which had a requirement for producers to source their timbers sustainably, there was no verification process. Timber producers only had to submit their sustainability operational plans to the government, Sigit told Mongabay.
With the new SVLK, there’s a verification process to make sure the sustainability plans are truly carried out, said Sigit according to Mongabay. By strengthening the SVLK’s sustainability aspects, the Indonesian government is hoping that Indonesian timber will not have to go through a long due diligence process before being placed on the EU market, he said.
Mongabay speculates that the new SVLK could result in Indonesia being categorized as a low-risk country in terms of deforestation under the benchmarking system to be set up by the EU. This would mean EU operators could apply “simplified due diligence” placing Indonesian timber on the EU market and Indonesian timber would be subject to less checks by EU competent authorities.
The Mongabay articles are available at:
Launch of “Broader Market Recognition” framework for sustainable tropical timber systems
A new process has been launched to better incentivise good forest governance and sustainable forest management in tropical countries through broader market recognition (BMR) of national sustainable timber assurance systems. The launch took place at the Indonesian Pavilion at the COP27 of the UNFCCC held in Sharm El-Sheikh during November with the issue of A Joint Statement to be signed by a coalition of government, private sector, and civil society representatives from tropical timber producer countries “seeking broader market recognition of national verification systems”.
The process to initiate the BMR framework, which has been supported by the UK government, builds on launch of the “Global Forests need Global Governance, A Tropical Timber Accord” signed by forest products trade and industry associations at COP26 in Glasgow in November 2021. The Accord identified a need for political leaders to create a new international initiative (or revitalise an existing initiative) which defines and recognises “a system of defined rules-based ‘legality’ and ‘sustainability’ [for tropical timber products] which supports governance and strong global collaboration”.
The process builds on the far-reaching efforts made by tropical countries to develop and implement multi-stakeholder forestry assurance systems in recent years in response to the EU FLEGT process and wider international measures focused on improved forest governance. The process also responds to evidence that international market recognition of the sustainability credentials of robust multi-stakeholder national systems such as Indonesia’s SVLK and Ghana’s Legality Assurance System and Wood Tracking System (LAS/WTS) is extremely limited.
Contributions to the launch event were made (in person and by web link) by several high-level policy makers including: Mr. Alue Dohong, Vice Minister of Environment and Forestry Indonesia; Madam Rosalie Matondo, Minister of Forest and Economy, Republic of Congo; Mr. Harrison Karnwea, Chairperson Forest Development Authority, Liberia; Mr. Chris Beeko, Director of the Ghana Forestry Commission; and a representative on behalf of Mr. Lee White, Minister of Water, Forests, Sea, Environment and Climate Change, Republic of Gabon.
The session live streamed online and can still be viewed on the Indonesia Pavilion YouTube web channel (https://youtu.be/eLG5yWu6SnE?t=6621).
The BMR Joint Statement emphasises that “robust national timber verification systems have demonstrated an ability to effectively counter deforestation and maintain forest cover, and therefore need adequate support from producer and consumer countries to stimulate further uptake”. Signatories to the Statement “commit to the development of an international framework to drive transformational change in the forest sector by rewarding good governance with strong market incentives”.
The Statement sets out several key principles on which robust national systems should be based, including that they deliver forest management standards that:
- are developed through inclusive multi-stakeholder processes
- ensure compliance with national legal frameworks that include laws that address environmental, social, and economic principles
- require mandatory nationwide compliance with the agreed standard
- provide opportunity for independent forest monitoring
- are audited by an independent third party
- ensure continuous improvement of the standard and system over time
The Statement calls for the establishment of an “oversight structure” that can assess the extent to which national systems that it seeks to promote are characterised as having the elements described above, and which safeguards and strengthens the nationally determined standards. It will recognise the need for and help channel investment in capacity building of small and medium enterprises. On the market side, it will aim to “provide graduated incentives to reflect progress towards a robust national system”, and “advocate a green lane access in international markets for products produced under such systems”. It will also “invest in promotion of products produced under such systems”.
Signatories to the Statement commit to “continuing close collaboration within this group and working with other like-minded tropical timber producer countries to identify an international mechanism that builds on the strengths of the FLEGT process while addressing its weaknesses”. An overarching objective is to “empower collective leadership of producer countries that leads to a greater knowledge sharing, higher level of commitment towards good forest governance, and mutual accountability”.
Tropical timber producer countries are encouraged to join the initiative and thereby “engage in extensive cooperation, to speed up transformational change in the forest sector by incentivising good forest governance with strong market incentives”.
The text of the full Statement is available here: https://timberdevelopment.uk/broader-market-recognition-joint-statement/. Countries that have so far indicated their intent to participate are Indonesia, Ghana, Liberia, Guyana, Cameroon, and Congo. Each country is expected to nominate three signatories, representing respectively government, private sector, and civil society in that country. On the consumer side, support for the initiative has been expressed by the Chinese association CTWPDA and by Timber Development UK. More information on the initiative will follow on from a planned meeting in Bali early next year when a road map will be agreed among the participating countries.