- WRI: Indonesia’s forest losses are in line with last year’s historical lows, with most losses due to smaller clearing operations;
- US lawmakers call EUDR “nearly impossible” for US producers and exporters to comply with;
- Missouri Senator says large companies are already excluding smaller farmers because of EUDR concerns;
- ISEAS: Indonesians’ trust in the EU as a political and trading partner drops
WRI: Indonesia forest loss remains at historic lows
WRI’s annual overview of primary forest loss has been published, and the numbers confirm that Indonesia’s historically low deforestation in 2022 is the new normal. According to the annual survey, Indonesia lost around 292,000ha of primary forest, around 27 per cent higher than 2022, but still closer to historical lows. The total is at odds with Indonesia’s official figures, which put the number at around 144,000ha. The reason for this discrepancy — as noted by WRI — is the different definition that Indonesia’s Ministry of Environment and Forests (MoEF) for primary forest.
It’s also worth noting that areas of less than 100ha made up the vast majority of the deforestation:
“Primary forest loss in patches greater than 100 hectares made up 15% of the loss in Indonesia in 2023. The expansion of industrial plantations took place in several locations adjacent to existing oil palm and pulp and paper plantations in Central Kalimantan, West Kalimantan and West Papua. According to the Ministry of Environment and Forestry, this expansion occurred in concessions granted prior to 2014 when the current administration took office.
Small scale primary forest loss was also prevalent throughout the country in 2023. Small clearings for agriculture contributed to ongoing losses within several protected areas, including Tesso Nilo National Park and Rawa Singkil Wildlife Reserve. Other losses linked to mining could be seen in Sumatra, Maluku, Central Kalimantan and Sulawesi.”
It’s also worth comparing Indonesia’s forest loss to other countries. Brazil’s primary forest loss exceeded 1.1 million ha, around half of its peak in 2016. Bolivia’s losses accelerated to almost 500,000 ha. WRI notes that in addition to fire, soy has been a key factor.
“Soy expansion has resulted in nearly a million hectares of deforestation in the country since the turn of the century, nearly a quarter of which can be attributed to Mennonite colonies. Though Bolivia has much less soy production than neighboring countries, most of its expansion has come at the expense of forests. The government continues to promote the agribusiness industry by setting ambitious targets for soy and beef exports, promoting the expansion of biodiesel and subsidizing agricultural activity.”
The summary notes that Canada’s tree cover loss almost hit 8.6 million ha for the year, around six times Indonesia’s tree cover loss for the same period (1.4 million), which was similar to US tree cover loss (1.38 million ha). Canada’s losses were largely due to uncontrolled wildfires, and its worst wildfire season on record.
Malaysia, for its part, hardly rated a mention in the WRI assessment; its primary forest loss was just less than 80,000ha, which is very similar to numbers for the past four years.
US joins chorus of EUDR opposition
US lawmakers have expressed their objections to the EUDR. Last month, a group of US senators from both the Democrat and Republican parties wrote a letter to US Trade Representative (USTR) Katherine Tai, calling on the US to seek greater clarification on EUDR implementation. They also gave a hint that US sustainability regulations and standards should give the US some sort of exemption under the EUDR rules.
The key factor that has drawn the ire of the Senators — and the industries they support — is the difficulties of the traceability requirements. As the letter notes:
“In the U.S., 42 percent of the wood fiber used by pulp and paper mills comes from wood chips, forest residuals, and sawmill manufacturing residues – wood sources that cannot be traced back to an individual forest plot… The EUDR traceability requirement will be nearly impossible for a significant segment of the U.S. paper and pulp industry to comply with.”
The letter came just weeks after Missouri Senator Josh Hawley wrote a similar letter to USTR, but in this case highlighting the impacts of the EUDR on the US soybean industry. Hawley wrote:
“American farmers will no longer be able to sell their soybeans to the European Union without a verification proving their goods were not produced on deforested land, or risk substantial fines…
“The harm of this trade barrier is not merely imminent. It is already happening. In order to maintain European market access, agribusiness company Archer Daniels Midland has announced plans to require four soybean facilities in the vicinity of northeastern Missouri to handle only verified, traceable soybeans products. This will impose additional costs on Missouri farmers unable to meet the EU’s overbroad mandate, forcing uncertified farmers to travel far distances to sell their soybeans.”
Sound familiar? The hesitancy of buyers to purchase non-traceable commodities and the lack of clear supply chain solutions is now a weekly story. The Guardian last week covered problems faced by Ethiopian coffee growers, and how the new rules will impact them.
“Orders are already slowing from European buyers, who face fines of up to 4% of their turnover if they bring non-compliant products into the EU.
“Buyers are hesitating to buy our coffee because they are not confident we can demonstrate compliance,” says Tsegaye Anebo, manager of the coffee farmers union in Sidama, about 150 miles east of Kafa. “We are thinking of diversifying to other markets, but that will take years. It’s not simple.”
Felix Ahlers, founder of Solino, a German company that imports 200 tonnes of roasted Ethiopian beans a year, says its business model could become unsustainable.
“At the moment we don’t have a solution,” he says. “We’re hoping we’ll find one, but it’s not clear how we can keep importing.””EU slips in eyes of Indonesia, ASEAN
The annual survey by the ISEAS-Yusof Ishak Institute on ASEAN perceptions of the rest of the world is a fascinating picture of the Southeast Asain region, and 2024 is no exception. As we pointed out after last year’s survey, there was a growing feeling among many within ASEAN that the EU’s approach on sustainability was decreasing in compatibility with the approach in the region.
This feeling has cemented itself further in 2024. As the report notes:
“Although [ASEAN’s] levels of trust towards the EU remains high (41.5%), the trust rating has significantly dropped by 9.5 percentage points and the distrust levels increased by 5.8 percentage points this year.”
Drilling down into the data, the share of Indonesians that have little or no confidence in the EU increased from 48% to 54%. Interestingly, there was a change among Indonesians on why they might distrust the EU. The share of people who state their primary reason for distrusting the EU is that “The EU’s stance on environment, human rights, and climate change could be used to threaten my country’s interests and sovereignty” has fallen to 16% from 29%, but the share of people who “do not consider the EU a responsible power” or think the EU is “distracted with its internal affairs” has increased considerably.
In addition, only 2.8% of ASEANs and 1.1% of Indonesians consider the EU the most influential economic power in Southeast Asia, dropping since last year in both cases. In Indonesia, the EU now finds itself on the same footing as Australia.
Note that on trade, and the question of which ASEAN partners will champion the free trade agenda, the EU has fallen to fourth spot across the region, after China. In Indonesia, it’s at equal-fourth with the United States.
What does this mean for palm oil?
The EU’s image has taken a battering in Indonesia and Malaysia over the past few years, primarily because of palm oil. As we’ve pointed out before, it is the region’s largest agricultural export, and the EU puts up barriers against it and supports campaigns against it like no other country. No other major economy or economic bloc responds to palm oil in the same way.
This “trade warfare” from the EU that started with timber, and then to moved palm, has now been broadened to include nickel.
The shift in sentiment from distrusting European sustainability perspectives has now moved to a lack of confidence in the EU more broadly. For many in the palm sector, this is typified by the appearance of incompetence around EUDR implementation. For others, it’s the inability of EU bureaucrats to be able to hear or respond adequately to Indonesia’s trade and diplomatic concerns.