European Commission (EC) President Ursula Von der Leyen’s most consequential green policy during her tenure is set to be delayed for a year. It is one of the most ambitious pieces of legislation to be passed by the central body, spanning across continents, supply chains and jurisdictions.
The EUDR was meant to take effect this December, but, amid criticism from businesses, bloc members and country partners, the commission has proposed a one-year delay. Given the strong pushback, the proposal is highly likely to be voted through in the 13–14 November plenary session.
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Many have welcomed the news with a sigh of relief. There were justified fears of such a wide-ranging and complex policy taking effect when preparations were uneven and government guidance insufficient. The final push, however, may have come from within the bloc as the consequences of an incomplete risk assessment system loomed large.
On the other hand, environmentalists and proponents of the policy have questions. What will happen to those businesses that had rightfully prepared and will now face economic losses? What will be done in the next 12 months to prepare for its implementation? And why did the EU let it get to this point when the December deadline had been set for close to two years?
What is the EUDR?
The EUDR is a piece of climate legislation passed in 2022. Once implemented, it will block any imports that can be traced back to deforestation from entering the European market. It will require vast amounts of data, geolocation systems, digital portals, multilateral communication, and more. It targets commodities that significantly contribute to deforestation including cattle, cocoa, coffee, palm oil, rubber, soy and timber.
The regulation was set to take effect for large businesses in December of 2024 and for small and medium enterprises in June of 2025. The mooted delay would see both of these deadlines pushed back by 12 months, to December 2025 and June 2026, respectively.
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By GlobalDataWhy the delay?
There have been reports of uneven preparation across the bloc, customs unions and major exporters in the Global South, as well as accusations of a lack of government guidance from the European Commission.
According to Nicolas Lockhart, a fellow of the World Trade Institute in Bern and a partner at Sidley Austin, where he assists companies in adapting to EU green policies, these factors by themselves would not have been enough of a catalyst for the delay. He says the deciding factor in the decision to propose the delay came from an issue with the country risk classification process.
The EUDR proposes a system that will classify countries as having a low, standard or high risk of deforestation that will “facilitate operators’ due diligence processes and enable competent authorities to effectively monitor and enforce compliance”.
Evidently, it would be in a country’s best interest to be classified as low risk as this would facilitate imports into and within the EU once the regulation is in place. Earlier this year, the Financial Times reported that the commission would delay assigning a risk category to all countries after there were complaints that the rules would be “burdensome, unfair and scare off investors”. Speaking to reporters, an EU official said they would not complete the classifications “which means everywhere will be medium risk”.
Lockhart says that it was a record-scratch moment for bloc members who thought “this [was] all about cocoa, rubber and palm oil from tropical countries”. He added: “No one anticipated that there would be significant restrictions, burdens and costs on wood products from Finland and Poland, other EU member states or on products from the US, Australia or Canada, for example.”
He says this “led to a lot of political pressure within the EU and also from the US, Australia and Canada”. Three weeks after the news broke that all countries would be classified as medium risk, Reuters reported that 20 members of the EU asked the commission to “scale back and possibly suspend” the law.
The Global South and the ‘green squeeze’
The deforestation law is a massive feat in green policy. It took years of negotiations and decades of activism, but for many communities already affected by climate change, it has still come far too late – even though a core tenet of the EU Green Deal is to ensure a just transition not only for the members of the bloc but for countries in other parts of the world.
Countries in the Global South are already feeling the uneven consequences of the EUDR, and of climate change. Ethiopia, for example, is Africa’s largest coffee producer; it is also one of the poorest countries in the world. In recent years, revenues from coffee exports have generated 30–35% of the country’s entire export earnings. Meeting the EUDR’s high proof threshold will be difficult, given the lack of technology and modern farming techniques.
The Overseas Development Institute (ODI), a trade and economic development think tank, recently performed a modelling exercise showing what would happen in the worst-case scenario of Ethiopia’s exports to the EU ceasing completely. The country would face an 18.4% drop in overall exports, a 3.3% reduction in public revenue and a 0.6% decrease in gross domestic product (GDP). It is still just hypothetical, and the government has already launched a National Action Plan to help the country adapt and comply with the EUDR.
However, complying with the regulations, even with this extended deadline, will be difficult without support from the EU. Another fear regarding the EUDR is that it would shift export patterns, a phenomenon Ethiopia is already suffering from. According to the ODI, sourcing shifts have already taken place from Ethiopia to Brazil “because of its existing compliance infrastructure and ability to meet the EUDR requirements”.
The country has also been facing acute food insecurity fuelled by conflict, aid suspension and one of the worst droughts in recent memory. In the World Bank’s latest Country Climate and Development Reports for Ethiopia, it warns that climate change “could undermine the development gains of the past” and that continued losses in GDP could push millions more into poverty.
Lockhart also raised a point about climate justice. He added that the EU agreed in the climate treaties, like the Paris Agreement, that it would “implement their climate change obligations in a way that is equitable and will take into account the fact that the EU and its member states have contributed more to the climate change problem than many countries in the Global South, where historic emissions are much lower, and where the capacity to adapt to these policies is also lower. This needs to be reflected in the EUDR.”
Investment Monitor reached out to the European Commission via email to ask whether the incomplete categorisation system had been the impetus for the delay and whether they considered the ranking system to be fair. The Commission did not comment on the specific questions and referred the publication to its October press release on the matter.
It said that, according to the classification methodology that was published on the same day, “a large majority of countries worldwide will be classified as ‘low risk’. This will give the opportunity to focus collective efforts on where deforestation challenges are more acute.”
It also announced a strategic framework for international cooperation and engagement on the EUDR that would facilitate support to smallholders, a “human-rights-centred approach”, and other implementation tools such as dialogue and financing. The initiative is being undertaken to promote a “just and inclusive transition to a deforestation-free agricultural supply chain leaving no one behind”.
Green policies like the EUDR are necessary to fight the climate crisis, but as with anything, they come with a cost. So, as the European Commission works towards its implementation, it needs to ask itself what voices matter in answering the bottom-line question: who foots the bill?
