- The proposed EUDR delay is the culmination of European and international pressure, and poor decision making within the EU
- The delay is likely to be approved, but there are many EU officials and industries calling for the regulation to be further revised
- The new guidance documents shed some new light on implementation, but the “international cooperation” still leaves many gaps.
Although last week’s proposed 12-month delay to the EUDR by the Commission was met with relief or trepidation, it was the big surprise that wasn’t.
Although many in Brussels were expecting it – or something similar – the surprise for many was the timing.
It’s understood to have very much come straight from the President’s office, without much consultation with her nominee Commissioners
The external stakeholder pressure was obvious. Trading partners like Indonesia and Brazil voiced their concerns. But EU farmers and manufacturers expressed their difficulties in preparation, which was clearly a major factor. The mobilisation of both German manufacturers and a broad political constituency in the European People’s Party (EPP) was clearly added to the pressure to the Commission to change course.
The big question from both outside and inside the EU was basically the same: why hasn’t the Commission provided the clarity operators need? This appeared to be a massive failure by the Directorate-General for the Environment (DG ENVI), and it points to its consistent failure to consult with industry and other DGs (as we pointed out a few weeks ago), make good decisions and effectively implement regulations.
Another big question, though, is how the problems were missed in the first place. Exporters were well aware of the problems, but they seemed to pass EU industries by. Our conversations in Brussels indicate that European industry and parliamentarians were so overwhelmed by everything else under the Green Deal that deforestation seemed like a problem that didn’t apply.
Next steps
While the delay proposal is expected to be tabled before the new Commissioners’ Confirmation hearings in early November, it’s anticipated to pass without significant opposition. Even the Greens have indicated support for the measure, underscoring the absolute necessity of the additional 12 months.
That said, there is still a push to have the regulation altered in some way. The President of the German Timber Federation (GD Holz) said:
“The postponement can only be a first step. It is now important to quickly clarify how to proceed so that companies and partner states receive planning certainty. The EU Commission should also use the time gained to fundamentally revise the regulation.
Here in Germany, the problem of deforestation in the sense of the EUDR simply does not exist; rather, we have the problem that an excessive bureaucracy with unnecessary additional documentation paralyses the companies and commerce.”
Other German manufacturers and businesses are also pushing to have the requirements for the due diligence statements revised. Polish commentators are also still heavily criticising the regulations even with the delay.
These pushes for change will undoubtedly find a sympathetic ear in the EPP. The question is whether they will push for such a change in the Parliament and with the new Commission.
Guidance on the Guidance
Alongside the delay proposal, the Commission finally released its new guidance documents. These clarify certain aspects of the regulation, and many core requirements remain unchanged. The guidance provides new details on geolocation and handling of mixed sources, but maintains the strict traceability requirements that will continue to be problematic for bulk commodities. Mass balance systems, for instance, are still not permitted under the EUDR.
There are also some unusual wrinkles on allowances for compliant and non-compliant areas on the same estate. The guidelines don’t actually prevent a land-owner producing a commodity from clearing existing forest on the same plot of land.
Say you have a 100ha property, and 50ha was cleared before 2020, and it produces soy going to the EU. You provide the information on the 50ha as being compliant, and continue to do so as required.
Under the rules you can then clear the other 50ha of forest for any purpose, e.g. more soy. And instead of sending the soy from the newly deforested area to the EU, you might just send it to China or India. But you can also keep supplying to the EU from the original compliant 50ha.
Instead of rushing to become compliant before the implementation date, farmers might instead simply work out retrospectively which parts of their land are compliant — and continue to clear land.
Some – particularly RAN and Greenpeace — will call it a loophole for “big agriculture”. Some will argue that this respects property rights. But it does add to questions around the regulation’s effectiveness.
This also underlines the hyperbole around the delay. Many Western NGOs have been arguing that the delay equals a ‘death sentence’ for the world’s forests. But it is just that: hyperbole. The delay – for now – means that the payday for consultants shilling solutions is another year off, and prices in Rotterdam might come down slightly.
Going international
The Commission has also unveiled an “international cooperation framework.” While it outlines support for smallholders and the development of traceability schemes, the practical implementation of these initiatives remains to be seen.
The Commission has, in the past, rolled out support and consultation initiatives that have been completely inappropriate for EUDR compliance.
More importantly, it has provided some additional details on benchmarking. There’s a suggestion that most countries will be considered low risk, with many in the standard category. The high risk category would appear to be reserved for countries that are facing sanctions, or are settings where transparency of any kind is difficult – such as Russia or North Korea.
This is more in line with the US State Department’s Trafficking in Persons (TIP) system. Realistically, this will mean classification of Indonesia and other palm-producing countries as ‘standard risk.’
However, Indonesia’s Coordinating Minister for the Economy Airlangga Hartarto has called for the entire benchmarking system to be cancelled, stating that the EU “has no right to be a ratings agency.”
In other words, there’s still some way to go before the EUDR is “resolved”.