EU deforestation laws could mean chaos for coffee

  • The European Union Deforestation Regulation is set to come into force at the end of 2024
  • Some coffee-producing countries view the legislation as “regulatory imperialism”
  • The problem is not with the final objective of the bill – but with its implementation

POLITICALLY SPEAKING, the European Union Deforestation Regulation (EUDR) has become a hot topic. The bill passed in December 2022 and replaces the existing EU Timber Regulation. It specifically targets deforestation in the coffee, cacao, beef, rubber, soy, and palm oil sectors.

The regulation mandates that all traders must definitively demonstrate that the production of their goods has no connection with deforestation, or else they could face fines of up to 4% of their turnover.

While the goal of putting an end to deforestation is clearly a good one, this legislation has sparked discontent among traders and stakeholders in coffee-producing countries.

More specifically, many are concerned about the potential effects on key exports. Small-scale protests have taken place and officials from affected countries are actively pushing to either cancel or significantly delay the legislation.

Key ministers from Indonesia – the world’s fourth-largest coffee-growing country – have already travelled to the EU to express their view that the legislation “is inherently discriminatory and punitive in nature”.

“We’re discussing trade facilitation… but in parallel, they’re building walls. This is not fair,” said Airlangga Hartarto, Indonesia’s chief economic minister, who raised the issue of “regulatory imperialism” in Brussels recently.

There appears to be turmoil within the EU, too. Frans Timmerman was one of the lead architects of this bill and helped bring it to pass last December. His abrupt departure from the EU suggests this isn’t going smoothly on the inside, either.

The turmoil surrounding this legislation has been well-recorded. However, many of the concerns that have been raised aren’t about the aim of the legislation – but rather about how it will be implemented.

Deforestation laws could cause chaos for the coffee industry

An issue of implementation

As part of this regulation, the European Commission will create a three-tier benchmarking system to categorise commodity-producing countries and regions as low, standard, or high risk.

The system will allow regulators to focus checks on products from high-risk countries, and allow operators to conduct simplified due diligence for products from low-risk countries. 

However, it seems that the EU is oblivious to the potential consequences of these labels on the affected countries’ reputations. Many are concerned about being categorised as “high-risk”, which could discourage importers from buying coffee.

On the other side of the coin, the benchmarking system could affect who producers and exporters are able to sell their coffee to. The chair of the Indonesian Coffee Exporters Association (AEKI), Moelyono Soesilo, has spoken openly at trade events about how this legislation will dissuade exporters from selling to the EU.

In some cases, this is because they may simply be unable to meet the stringent requirements of the legislation. For instance, aerial or satellite photography must be provided for every parcel of land used for coffee production. These images must demonstrate no deforestation has taken place and need to be submitted with each trade – or else the entire container can be rejected.

Establishing the infrastructure to identify which land belongs to whom and then going on to photograph it will be expensive and complicated.

“With this law, who bears the cost of certifying?” Soesilo asked. “This is an impossible problem for small farmers who have a land area of less than one hectare with a production of one tonne of [coffee].”

“The practicalities of mapping small farms and supplying accurate data on an ongoing basis will be very complex and likely quite expensive,” says Natasha Bartczak, logistics coordinator at Osito Coffee.

EU deforestation laws apply to the coffee industry

The broader perspective

On a broader scale, this indicates that the EU has failed to recognise a difference between smallholders and larger estates. While the legislation clarifies that small and medium enterprises (SMEs) won’t need to fulfil all the requirements stipulated in the legislation, it remains unclear which specific criteria they will need to meet.

The uncertainty surrounding these rules presents a significant obstacle to how effectively this legislation can be implemented. 

These challenges are compounded by the fact that the EUDR sets out a tight timeline to implement all its requirements.

This is part of a wider issue: The coffee supply chain is complex and involves many intermediaries – more so than other commodities involved in the legislation. Traceability has long been an issue for the industry, and it’s another factor why this may be so difficult to implement.

For example, the EU have 16 months to develop a system that can effectively process imagery, while having complete confidence that they will be able to identify instances of deforestation.

Furthermore, some argue that coffee is not the most relevant commodity for this legislation after all. In Brazil, for instance, forests were cleared for coffee production over 100 years ago in most growing regions. Today, the Amazon rainforest is primarily being used to raise cattle, not plant coffee.

For all the requirements a farmer has to meet, the EU must make sure it’s targeting areas of the agricultural network that are posing the most risk to the environment.

Ultimately, many in the coffee industry believe that the EU has taken too much of a slapdash approach to this legislation. This may or may not be so, but significant efforts are needed to address these concerns before the bill takes effect next year.

Coffee Intelligence

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