When the European Commission recently proposed a 12-month delay to its flagship deforestation regulation, the news was contested and praised in equal measure.
Known as the European Union Deforestation Regulation, or EUDR, the rules would exclude from the EU market products linked to deforestation. This might include cacao from West Africa, palm oil from Indonesia, natural rubber from China, or coffee from the Amazon basin which fuels the workday across Europe.
The fundamental problem that the EUDR is trying to solve is uncontested: land use change - often associated with agricultural expansion - represents about 23 per cent of global carbon dioxide emissions and is a major driver of deforestation and biodiversity loss. Something must change in the way that we produce and trade agricultural commodities.
The debate over the EUDR is important because government policy has the potential to help farmers and the broader agricultural sector adapt to greener practices free of deforestation - much like the “just transition” in helping fossil fuel workers and communities prepare for a cleaner future.
If done correctly, public policy can incentivise private sector investment to support this transition. “Demand-side” regulations like the EUDR can build consumer confidence in the sustainability and legality of commodities entering the market.
They are also critical to move us to a world beyond voluntary action and into mandatory compliance, providing a level playing field for all companies involved in commodity production and trade.
But if done incorrectly, or in isolation, the rules could just change where commodities end up. Market segmentation could occur where commodities which easily comply are sent to the EU, and those harder to comply are sent elsewhere without similar regulations.
In other instances, the costs of compliance could be passed on to those with the least ability to adapt to the new norms. This includes smallholder farmers who are forced to spend a significant amount of money or risk being excluded from a global trading system.
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The EUDR is an important policy tool. It can enhance the professionalism of the agricultural commodity sector by building positive working relationships between industry, government and civil society.
At a larger geopolitical level, trade disputes could emerge. These can add costs, inflame tensions, undermine other development efforts and even have the potential to disrupt the flow of goods and services.
To make the EUDR effective, there is a smart mix of measures that could be adopted at the same time.
These include effective dialogues between producer and consumer countries, targeted international co-operation and technical assistance, innovative financial instruments which can ease the costs of the transition for farmers, and traceability and monitoring efforts.
These sorts of interventions can minimise negative trade impacts and help countries in the Amazon like Brazil, or those in Southeast Asia like Indonesia - both major exporters of agricultural products to the EU - ensure compliance with the new regulations.
The EUDR is an important policy tool. It can enhance the professionalism of the agricultural commodity sector by building positive working relationships between industry, government and civil society.
There are many good examples where countries and companies are already preparing for and even implementing practices in line with the upcoming regulation. For example, the cattle sector in Brazil is taking steps to introduce 100 per cent traceability for each animal. This can ensure that beef, leather and other products can continue to be sold, deforestation-free, in the EU.
But these practices will take time to come to fruition. The period of delay proposed by the European Commission can be used constructively: to assess early progress, refine the tools and build the capacity needed to implement it successfully.
The transition from voluntary action to mandatory compliance is underway. This will quite literally change the landscape. The window of opportunity to get this right is now.
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