To fight climate change and biodiversity loss, the new law obliges companies to ensure that a series of products sold in the EU do not come from deforested land anywhere in the world.
Forests are home to most of Earth’s terrestrial biodiversity. They supply water, provide livelihoods, mitigate climate change and are essential for sustainable food production. Yet deforestation and forest degradation continue at alarming rates. The UN Food and Agriculture Organization (FAO) estimates that 420 million hectares of forest — an area larger than the EU — were lost to deforestation between 1990 and 2020.
Consumption by the European Union drives ten percent of global deforestation. Palm oil and soya account for more than two-thirds of this.
To fight climate change and halt biodiversity loss associated with deforestation, on 6 December 2022 the European Commission, Council and Parliament agreed on a new EU Law on deforestation-free products. The law is part of the European Green Deal: a set of (planned) measures aiming to make the EU’s climate, energy, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels.
The law will obligate companies to verify and issue a so-called “due diligence” statement that goods placed on the EU market have not led to deforestation and forest degradation anywhere in the world after 31 December 2020. Companies will have to know exactly where their products come from, right back to the geolocation of production. While no country or commodity will be banned, companies will not be allowed to sell their products in the EU without this type of statement. They will also have to verify compliance with relevant legislation of the country of production, including on human rights and that the rights of concerned indigenous people have been respected.
The new law aims to guarantee European consumers that the products they buy do not contribute to forest destruction and degradation.
The products covered by the new legislation are: cattle, cocoa, coffee, palm oil and several palm oil derivatives, soya, rubber, charcoal, printed paper products and wood, including products that contain, have been fed with or have been made using these commodities (such as leather, chocolate and furniture). The law introduces a wide definition of forest degradation, which includes the conversion of primary forests or naturally regenerating forests into plantation forests or into other wooded land and the conversion of primary forests into planted forests.
The European Commission will evaluate no later than one year after the entry into force whether to extend the scope to other wooded land. No later than two years after the entry into force the Commission will also evaluate an extension of the scope to other ecosystems, including land with high carbon stocks and with a high biodiversity value, as well as to other commodities. At the same time the Commission shall also assess the need to introduce a due diligence obligation for EU financial institutions. This would oblige them to only provide financial services to their customers if they assess that there is only a negligible risk that these services do not lead to deforestation.
The competent EU authorities will have access to relevant information provided by the companies, such as geolocation coordinates, and conduct checks. They can, for example, use satellite monitoring tools and DNA analysis to check where products come from.
The Commission will classify countries, or part thereof, into low, standard or high risk within 18 months of this regulation entering into force and the proportion of checks on operators will be performed according to the country’s risk level: 9% for high risk, 3% for standard risk and 1% for low risk. For high risk countries, member states would also have to check 9% of total volumes.
Penalties for non-compliance shall be proportionate and dissuasive and the maximum amount of a fine is set at least 4% of the total annual turnover in the EU of the non-compliant operator or trader.
EU Timber Regulation repealed
The regulation will repeal the 2010 EU Timber Regulation (EUTR), which prohibits the placing of illegally harvested timber and timber products on the EU market and imposes mandatory due diligence rules on EU timber traders. To respect bilateral commitments made under the 2005 Forest Law Enforcement, Governance and Trade (FLEGT) Regulation, this regulation will remain in place. The new law provides that wood covered by a FLEGT license fulfils the legality requirement.
The proof of the pudding
The new law has been applauded by many stakeholders working to safeguard the world’s forests. However, as with all laws, the proof of the pudding lies in the willingness and ability of the European Commission and EU member states to enforce it. Experience with the EUTR Regulation has shown that implementation and enforcement were largely inadequate and varied greatly among member states.
After the European Parliament and Council have formally approved the agreement, the new law will be published in the EU Official Journal. It will come into force 20 days after its publication. Some articles will apply 18 months later.