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A broad EU deforestation approach can help protect climate and biodiversity

Authors:
  • Klimate.co

Abstract

EU action to reduce deforestation and other habitat loss is more likely to be effective and feasible if: 1. Legislation is extended to include not just deforestation and forest degradation, but also the conversion of other ecologically important ecosystems, including savannahs and wetlands. A failure to do this risks large- scale displacement of impacts to non-forest biomes. 2. There is broad commodity and actor coverage, going beyond first importers of key forest risk commodities to include legislation that imposes similar obligations and liabilities on companies working across the supply chain, as well as financial institutions that invest in or lend to these companies. A failure to do this will undermine both the feasibility and acceptability of any interventions. 3. Legislation encompasses both legal and illegal natural habitat conversion, aiming to promote sustainability in a broad sense. A focus only on illegality is insufficient, complex to assess given lack of data on compliance, and creates incentives to weaken legal protection in producer countries. 4. Legislation draws upon existing knowledge and experience of what works, and reflects an understanding of how change will be delivered. This includes policy mixing - employing both sticks and carrots - and actively engaging with producers, traders and manufacturers in key supply chains and regions. Sequencing policies in a tiered approach and gradually expanding scope over time will help prioritise the companies and commodities most exposed to deforestation risks in their supply chains.
TRASE.EARTH | INFO@TRASE.EARTH NOVEMBER 2020 1
BRIEFING
Through its imports of agricultural and forestry
commodities, the European Union (EU) is contributing to
the expansion of cropland, pastures and tree plantations at
the expense of tropical forests and other environmentally
important ecosystems. Second only to China, the
deforestation associated with EU imports of tropical
forest risk commodities - such as palm oil from Southeast
Asia or soybeans from Latin America - amounted to
over 200,000 hectares in the period 2015-2017 (see Trase
Yearbook 2020). That the EU is now taking steps to enact
legislation to address its contribution to natural habitat
loss is welcome, and urgently needed if the Union is to
meet internationally agreed targets to halt deforestation
and its associated impacts on climate and biodiversity.
A broad EU deforestation approach can
help protect climate and biodiversity
Contributing authors: U. Martin Perssona, Simon Bagerb, Helen Belleldc, Helen Burleyc, Jonathan Greend,e, Mairon Bastos Limaa, Caroline S. S. Francaa,
Toby Gardnerd, Thomas Kastnerf, Michael Lathuillièred, Patrick Meyfroidtb,h, Florence Pendrilla, Chris Westd,e
a Chalmers University of Technology, Sweden bUC Louvain, Belgium c Global Canopy, UK d Stockholm Environment Institute, Sweden
e University of York, UK f Senckenberg Biodiversity & Climate Research Centre, Germany hF.R.S.-FNRS, Belgium
KEY MESSAGES:
EU action to reduce deforestation and other habitat loss is more likely to be effective and feasible if:
1. Legislation is extended to include not just deforestation and forest degradation, but also the conversion of
other ecologically important ecosystems, including savannahs and wetlands. A failure to do this risks large-
scale displacement of impacts to non-forest biomes.
2. There is broad commodity and actor coverage, going beyond first importers of key forest risk commodities to
include legislation that imposes similar obligations and liabilities on companies working across the supply chain,
as well as financial institutions that invest in or lend to these companies. A failure to do this will undermine both
the feasibility and acceptability of any interventions.
3. Legislation encompasses both legal and illegal natural habitat conversion, aiming to promote sustainability
in a broad sense. A focus only on illegality is insufficient, complex to assess given lack of data on compliance,
and creates incentives to weaken legal protection in producer countries.
4. Legislation draws upon existing knowledge and experience of what works, and reflects an understanding
of how change will be delivered. This includes policy mixing - employing both sticks and carrots - and
actively engaging with producers, traders and manufacturers in key supply chains and regions. Sequencing
policies in a tiered approach and gradually expanding scope over time will help prioritise the companies and
commodities most exposed to deforestation risks in their supply chains.
BRIEFING
TRASE.EARTH | INFO@TRASE.EARTH NOVEMBER 2020 2
This briefing examines some of the issues raised in the
European Commission’s (EC) consultation on possible
measures to address deforestation and degradation
driven by imported products. The consultation - which
closes on 10 December 2020 - follows a commitment
by the EU to review the potential for demand-side
measures in the Communication on Stepping up EU
Action to Protect and Restore the World’s Forests.
Drawing on the expertise of researchers and experts
from the Trase initiative and partners this brief provides
inputs on the priorities and scope of potential policy
measures. The consultation primarily asks for guidance
on two aspects of scope: the range of products to be
covered by EU policy to address imported deforestation
and forest degradation, and whether legislation should
focus on legality or sustainability in a broader sense.
However, we argue that in order to be effective there
is a need to also consider other aspects of scope, such
as which land-use changes, biomes or actors should
be covered. We also highlight three key principles for
increasing the effectiveness of the EU policy response.
COTE D'IVOIRE
6.35K
LIBERIA
3.07K
HONDURAS
11.3K
BRAZIL
8.49K
BRAZIL
5.90K
BRAZIL
24.OK
PARAGUAY
9.5K
BRAZIL
10.4K
CHILE
4.53K
INDONESIA
75.2K
HONDURAS
4.06K
MALAYSIA
2.34K
OIL PALM PRODUCTS
SOYBEANS
WOOD P RODUC TS (FOREST PL ANTATION S)
COFFEE, GREEN
SUGAR RAW CENTRIFUGAL
CHICK PEAS
TOBACCO, UNMANUFACTURED
NUTM EG, MACE AND C ARDA MOM S
BEEF AND BUFFALO MEAT
MAIZE
COCOA, BEANS
RUBBER, NATURAL
Figure 1. Origin and commodity with relative tropical deforestation associated with
imports into the EU28 for 2017 (203,000 ha). Based on Pendrill et al (2020).
BRIEFING
TRASE.EARTH | INFO@TRASE.EARTH NOVEMBER 2020 3
BROADEN SCOPE TO INCREASE POLICY IMPACT AND
REDUCE THE RISK OF SPILLOVER EFFECTS
Scope should cover both forest and non-forest
ecosystems: broadening the scope of policies to focus
on ‘natural habitat conversion’ is important to avoid
the impacts being displaced elsewhere, e.g. from
forest to savannah biomes, and to ensure that any
legislation is effective in reducing overall greenhouse
gas emissions while also safeguarding biodiversity
and other ecosystem services. Natural forests are
rightly recognised for their high conservation value
due to their critical biological, ecological, social and/
or cultural importance, and for the services that they
provide, such as carbon storage and sequestration.
However, other ecosystems, such as wetlands
and savannah systems, are similarly valuable.
The risks of limiting EU legislation to just deforestation
and forest degradation is not only that ecologically
important non-forest systems will lack protection,
but also that conversion pressures in these places
may, in fact, increase as a result of spillover effects.
Moreover, legal and practical definitions of forest
vary, which creates uncertainty, ambiguity and
ultimately sows confusion around the scope of the
legislation (see Accountability Framework Initiative).
A broad coverage of commodities and actors is
needed: we know that most of the risk of tropical
deforestation in EU imports is due to a handful of key
commodities from a handful of countries (see figure 1).
Given this, legislation that highlights the importance
of these commodities is a critical step in reducing a
significant proportion of EU driven deforestation.
However, there is a risk that by strictly limiting the
commodities, products and biomes covered by any
legislation the problem is masked, in the case of derived
products, or shifted, in the case of non-target (e.g.
non-forest) biomes and crops, so displacing rather than
eliminating the environmental impacts. For this reason,
legislation needs to apply to all products potentially
linked to natural habitat loss, including processed
products that can contain embodied deforestation
(e.g. chicken, leather products and wooden furniture),
and that it encompasses any region where natural
habitat is converted for commodity production.
Incomplete supply chain coverage has also been
identified as a potential loophole in the EU Timber
Regulation, where due diligence requirements only
apply to operators first placing timber products on
the EU market. To avoid deforestation simply shifting
between actors in response to policy, legislation
needs to apply to businesses across the supply chain,
regardless of size. This also includes extending due
diligence legislation to the investors and financial
institutions that help drive (and benefit from)
deforestation and other habitat loss by providing capital
to supply-chain actors.
Sustainability, not legality, is what matters: limiting
measures to products linked to illegal deforestation
will not suffice to meet the EU’s objective to reduce
its consumption footprint on land and to encourage
deforestation-free supply chains. Many vulnerable
ecosystems lack sufficient legal protection, or
protection is fragile. For example, in Brazil some 88
million hectares of forest could be legally cleared under
current laws and there have been repeated efforts
to weaken Brazil’s Forest Code. Similarly, Indonesia
has recently weakened requirements for timber
exporters, which also sends signals to producers and
markets across the region. A requirement linked to
legality could create perverse incentives to further
weaken existing laws in producer countries.
Assessing illegality also creates an additional burden
for companies beyond identifying deforestation risks,
requiring them to understand complex legal frameworks
across different countries, regions and commodities.
The dearth of available data, lack of transparency and
the fact that there are often multiple, overlapping and
fuzzy legal requirements mean it is notoriously difficult
to assess where deforestation is fully legal and where
it is illegal. An analysis conducted by Trase on illegal
deforestation in Mato Grosso, for example, cannot be
repeated for other states in Brazil due to a lack of data.
BRIEFING
TRASE.EARTH | INFO@TRASE.EARTH NOVEMBER 2020 4
Companies are asking for a level playing field,
with all companies required to meet the same
requirements on deforestation-free supply chains.
Global Canopy’s Forest 500 assessment found that
151 out of 187 companies operating in the EU had a
deforestation policy for sourcing that went beyond
legal deforestation, and some companies have called
for proposed due diligence legislation to go beyond
illegality. The definitions laid out in the consultation
should also consider issues around environmental and
social justice, as these are an important part of the
principles of sustainability as set out, for example, by
the Accountability Framework Initiative.
Dealing with trade-offs and data gaps: while a
more comprehensive EU policy is likely to increase
effectiveness, both directly and indirectly (by limiting
risks for negative spillovers), there are some areas
where there may be trade-offs between policy
scope, cost, and the availability of data to support
implementation of legislation.
Current gaps in supply chain data must not become
a barrier to action, or a reason for delay, but rather
companies must act on the basis of the best available
data, taking a pragmatic approach in identifying key
areas of risk.
We suggest that trade-offs between scope and cost
are handled, not by limiting the scope, but through a
tiered approach where stricter demands apply to those
commodities, geographies and companies that are
more closely linked to large-scale commodity-driven
habitat loss.
PRINCIPLES FOR AN EFFECTIVE EU POLICY
RESPONSE TO NATURAL HABITAT LOSS
Effective EU action to reduce the loss of tropical forests
and other valuable ecosystems requires policies that
are both feasible and impactful. Drawing upon a recent
assessment of EU policy options for addressing imported
deforestation, we argue that the following principles are
key to achieving this:
Policies and guidance must build on effective theories
of change: we already know quite a lot about which
policies are effective in stemming deforestation, how
and under which conditions, and which are not. Several
of the policy proposals listed in the consultation - such
as labelling, voluntary due diligence, private certification
schemes, or consumer information campaigns - are an
important part of the puzzle but, alone, are insufficient
to instigate change at the scale and pace needed.
For policies that have the potential to level the playing
field and unlock more effective action by the private
sector - such as mandatory due diligence - the devil is in
the detail. In order to be effective, due diligence systems
must be tailored to the specific context (i.e. region
and commodity) as impacts are affected by location,
production system, forest type, and socio-economic and
cultural context-dependent factors. Careful guidance on
how to implement a policy can be just as important as
the policy instrument chosen.
Apply policy mixing to increase complementarity,
feasibility and effectiveness, while reducing risks of
spillover: there is often a trade-off between political
feasibility and effectiveness in environmental policy, but
this can be overcome through policy mixing: packages
of policies that build policy legitimacy and support (e.g.
coupling ‘sticks’ with ‘carrots’) while creating synergies.
For instance, development assistance or green diplomacy
- listed in the consultation - may alone do little to
reduce loss of natural habitat in producer countries. Yet
they can be crucial for supporting more stringent and
effective policy measures, such as import bans or stricter
sustainable criteria. They can also mitigate politically
damaging claims that legislation is being used as a
barrier to trade. Efforts that support public governance
in producing countries can also contribute to reducing
the potential impacts of “market bifurcation” or supply-
chain divergence - i.e. that production not complying
with EU policies would continue but would be directed
towards other consumer markets.
Designing optimal policy mixes requires identifying
the ‘low-hanging fruits’ (i.e. feasible policy proposals
BRIEFING
TRASE.EARTH | INFO@TRASE.EARTH NOVEMBER 2020 5
building on viable theories of change), such as
mandatory due diligence, and focusing on priority
targets in a tiered manner, while finding ways to
increase support by key stakeholders, and reduce and
share costs and complexity.
Such a tiered approach may require focused guidance
on the priorities for specific commodities. Guidance
can also be important for enforcement by providing a
benchmark for judging whether a company has taken
proportionate action or not. It is important that a tiered
approach is periodically re-evaluated to minimise risks
of any spillover and to ensure emerging frontiers of
habitat loss are not overlooked.
Complementarity with existing policies, e.g. renewable
energy, trade agreements, and the EU sustainable
finance plan, is critical for building policy support.
Sequencing policies and gradually expanding scope
over time can ensure that priority targets are tackled
first, and also help facilitate acceptance and reduce
risks of spillover.
Engage a broad consortium of finance, supply-chain
and government stakeholders: broad political and
financial support in both producer and consumer
countries is essential to build the foundation for strong
policy action to address deforestation by both the
public and private sector, while ensuring legitimacy and
effective implementation. Support for producer countries
can help legitimise more stringent interventions, e.g.
trade policy measures, by establishing the foundations
on which such interventions rest, e.g. good governance
and technical capacity. Existing EU policies such as
FLEGT and the IUU function through collaboration with
producer countries to support stronger, domestic action.
Support for producers and producer countries can also
facilitate the successful implementation of ongoing
industry supply-chain and jurisdictional initiatives,
as well as mitigate risks that smallholders and other
vulnerable groups are sidelined in the process.
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