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EU’s Deforestation Act and its Impact on India

Updated: Dec 25, 2023

The European Union has enacted a new legislation, called the European Union Deforestation Regulation (EUDR), to address the global concern of rising deforestation. It was passed by the European Council with an overwhelming majority. Marian Jurečka, the former environment minister of the Czech Republic, played an important role in the negotiations. He recognised that the EU is a large consumer of commodities like beef, coca, soy, and timber that contribute towards deforestation.

EU's Deforestation Act and Indian Exports likely to be affected

Illustration by Geostrata

According to this new law, the exporters selling their products to the EU will have to make sure that their products do not contribute to deforestation or they might have to face heavy fines. Eventually, this law aims to ban the commodities that cause deforestation.

This will cover commodities like palm oil, cattle, timber, cocoa, coffee, rubber, and soy, and manufactured goods like beef, chocolate, furniture, and printer paper, as they have been identified as the main drivers of deforestation.

While none of these commodities will be completely banned but the selling companies would be required to submit a “due diligence” stating that their products have not been procured from deforested land or have led to deforestation, including irreplaceable primary forests, after 31st December 2020.

The companies will also have to ensure that their manufactured products comply with the relevant legislations of their country of production and that the rights of the indigenous people have not been encroached upon. This law will be implemented in 18 months for major firms and 24 months for smaller firms.

Though it will affect the smaller firms more due to the high costs of compliance and “due diligence” and would lead to their eventual exclusion from global trade. The EU has devised a four-level penalty mechanism for violation of the law. This includes monetary fines 4 times a company’s turnover in the EU, confiscations of products, confiscations of revenues gained from a transaction, and exclusion from public procurement processes.

The EU is responsible for 16% of tropical deforestation related to international trade and is ready to take up responsibility for the same by implementing this innovative legislation. EUDR is a part of the EU's wider Green Deal plan to reach net-zero emissions by 2050. When deforestation occurs, the carbon stored in the trees is released back into the atmosphere, leading to an increase in temperature, which is a main factor in climate change.

Opposition to the Law-

According to the EU, this legislation will benefit not only our environment and wildlife but also the indigenous people who are dependent on these forests for their livelihood.

Despite the historic move, the world’s first-ever carbon tax has garnered a lot of criticism from developing countries and is likely to be challenged by them at the World Trade Organisation (WTO). This law appears to favour Europe’s export promotion and safeguarding of the European agricultural industry. This will make imports more challenging as they would have to pass the new green policy. The products targeted by EUDR are those, whose imports the EU wants to reduce, thus, promoting its exports. It is aimed at increasing domestic production and lowering imports. The countries most adversely affected by this new law include Malaysia, Indonesia, Brazil, Argentina, Ecuador, Peru, Guatemala, Costa Rica, Colombia, Côte d’Ivoire, India, and Vietnam.

What does this mean for India?

The EU’s deforestation regulation covers about 479 items exported by India to Europe, worth an estimated 1.3 billion USD annually. EU’s share in India’s global exports is about 23.6%, which will be adversely affected. The new law will have a particularly deep impact on India’s coffee, leather, paper, and wooden furniture industry.

Nevertheless, the government has assured that it will work on mutual recognition of certificate with the EU as India’s afforestation performance has been greater than many countries. According to the India State of the Forest Report, 2021. The total forest and tree cover has increased by 15,292 sq km since 2015.

Indian officials are calling out on the EU’S double standards, given its own history of deforestation for agricultural growth while urging the Indian government to take up the issue in the WTO. Meanwhile, the Agricultural & Processed Food Products Export Development Authority (APEDA), India, is working towards implementing a blockchain-enabled trace and track system called GrapeNet for grape shipments to the EU and associated areas. It will trace the details of the system right up to the plot level so that there are no chances of any penalties.

The effect of the EUDR law on Indian exports will be directly dependent on the level of compliance by Indian exporters and the competitiveness of Indian products in the European markets. Indian exporters are adaptable and quickly adapt to all the international norms, which makes their products desirable amongst international markets.





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