The recent European Parliament election results have renewed speculation that the implementation of new EU deforestation regulations will be delayed, amid significant opposition to the European Green Deal. A postponement of the EUDR implementation would be favorable for those involved in the palm oil supply chain, from small-scale farmers in Suuth East Asia to manufacturers in Europe.
This concern extends beyond palm oil. Over the past month, producers, exporters, and importers of various commodities have expressed concerns about the EU’s ability to meet its implementation timeline. Both current and former EU officials have hinted that a delay might be necessary. For instance, current EU Agriculture Commissioner Janusz Wojciechowski advocates for a one-year delay in the implementation.
Crucially, the German government has stated that it will not support the regulation’s implementation until the benchmarking is completed. The Commission has already postponed this benchmarking process by at least a year.
WWF admits a delay will be difficult to avoid
Former EU Commissioner and WWF Europe Director Genvieve Pons publicly acknowledges the difficulty in avoiding a postponement of the EUDR implementation, emphasizing: “It will be very difficult to avoid a postponement [of the EUDR implementation] … It will be more, I think, a political question than a legal question.”
She also notes that the EUDR’s development process has been notably different from that of the EU’s Carbon Border Adjustment Mechanism (CBAM), arguing that while CBAM involved extensive consultation with trading partners and cooperation between EU directorates, the EUDR process has faced criticism for its lack of consultation, particularly from the Trade and International Partnerships directorates, which have openly criticized the Environment Directorate.
#Deforestation: #EU–#Malaysia Joint Press Statement on EU Deforestation-Free Regulation (#EUDR) and the Malaysian Sustainable Palm Oil (#MSPO) Certification Scheme | EEAS https://t.co/Nwv8yvIDTe
— Frans Köster (@franskoster070) May 18, 2024
Technical challenges
The cause are firstly, that technical implementation issues have surfaced. The IT system designed to support the process is reportedly inadequate and behind schedule. Sources indicate that the system’s file size limit is too small for the necessary due diligence statements, which could be exceeded in a single shipment. Moreover, the system failed during pilot testing, yet the Commission has decided against a second pilot phase.
This points to a lack of understanding within the Commission about the complexity of supply chains for even simple commodities and products, such as paper and animal feed. Identifying the production location is straightforward, but tracing through the entire supply chain is much more complicated.
Secondly, the benchmarking process has encountered difficulties. Although the process began in early to mid-2023, no suitable tenderer was found initially. It was retendered in late December 2023, and the Netherlands-based engineering firm Guidehouse was appointed in April 2024.
Progress on Deforestation
This comes as NGOs like Global Forest Watch have reported a sharp reduction in forest loss in countries like Malaysia and Indonesia. It follows achievements whereby some 83% of palm oil refining capacity operated under a ‘No Deforestation, Peat and Exploitation (NDPE)’ commitment. Further government efforts include a cap imposed by the government to restrict the area for oil palm at 6.5 million hectares in 2023 and new forestry laws enacted in 2022 to sharpen penalties for illegal logging.
Opponents of the EU’s approach have pointed out that an estimated 93% of palm oil imported into Europe is sustainable and does not cause deforestation, as alternatives like soy require a whole lot more land, pesticides and energy.
Last year, palm oil-exporting countries Malaysia and Indonesia decided to freeze trade talks with the EU in 2023 over Europe’s refusal to recognise their standards to prevent deforestation, while the UK decided to treat Malaysian standards as equivalent, securing the UK a spot in the new big transpacific trade deal CPTPP, which covers around 15 percent of global GDP. A new development is that, according to Politico, the deforestation law risks pushing Indonesia toward China.
German government statements
The complications to implement EUDR demonstrate that the benchmarking process is far from simple. Dr. Christian Brawenz, an attaché at the German Ministry for Agriculture, has moreover stated that the legal basis for the benchmarking process needs clarification before the benchmarking indicators can be adequately determined.
Products from coffee to beef are subject to a new EU law that will force some suppliers to trace their precise origins — with far-reaching consequences for consumers and global trade https://t.co/vKf7nVdPMb
— Bloomberg Economics (@economics) June 8, 2024