EUROPEAN COMMISSION Brussels, 23.7.2019 COM(2019) 352 final COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS EMPTY Stepping up EU Action to Protect and Restore the World’s Forests {SWD(2019) 307 final}



I. Setting the scene The state of the world’s forests Forests are indispensable. They are our lungs and life-support system, covering 30% of the Earth’s land area and hosting 80% of its biodiversity. They give us the air we breathe, taking carbon dioxide out of the atmosphere. Forests provide vital organic infrastructure for some of the planet's densest, most diverse collections of life. They provide subsistence and income to about 25% of the world’s population, hold cultural, social and spiritual values and represent a large part of the land traditionally inhabited by indigenous peoples. Today, the world’s forests are in serious danger from deforestation I and forest degradation II , with a forest area of 1.3 million square kilometres lost between 1990 and 2016; this is the equivalent of 800 football fields of forest lost every hour III . In order to ensure human health and well-being and put our societies on a sustainable development path, we must work with others to reverse this trend, and we must protect and regenerate the world’s forests. The threats to the world's forests are one of the biggest sustainability challenges of our time. Deforestation is a major cause of biodiversity decline IV . Emissions from land-use and land-use change, mostly due to deforestation, are the second biggest cause of climate change after burning fossil fuels. They account for nearly 12% of all greenhouse gas emissions, and action in this area is important to fight climate change V . Deforestation can also have a dramatic impact on the livelihoods of the most vulnerable people, including indigenous peoples, who rely heavily on forest ecosystems VI . The EU has put in place a variety of regulatory and non-regulatory actions to deal with the challenges of deforestation and forest degradation. While in the EU forest cover has increased over recent decades (see Box 1), the rate of deforestation in other regions, namely in tropical areas, continues at alarming levels VII . Box 1 - Forests in the EU 43% of EU land – 182 million hectares – is forest or other wooded land VIII . Of this, 134 million hectares are available for supplying wood. Forests in the EU have grown: from 1990 to 2015, forest cover increased by an area the size of Greece IX , thanks to afforestation and reforestation programmes and natural regrowth. The EU Forest Strategy X is the framework to ensure the coherence of forest-related policies. Forest account for half of the Natura 2000 network of nature protection areas, covering 38 million hectares, i.e. more than 20% of the EU’s forest resources. More needs to be done also in the EU to protect and restore forest cover, also because forest expansion has happened recently at a lower rate. Despite all efforts so far, conservation and sustainable use of forests cannot be ensured by current policies. Therefore, stepping up action to protect the existing forests, manage forests sustainably and actively and sustainably create new forest coverage, has to play a crucial role in our sustainability policies. Primary forests XI require special attention as they are unique and irreplaceable, and heavily affected by deforestation. Afforestation and restoration XII of degraded forest lands can help to reduce the pressure on natural forests, and be an effective additional defence in our battle against climate change. However, newly planted forests cannot replace primary forests, which have high carbon stocks, and are characterised by their great age, unique ecological features and the established protection they provide to biodiversity XIII . Further EU measures to protect forests would be consistent with international agreements and commitments, which fully acknowledge the need for ambitious action to reverse the trend of deforestation. The Paris Agreement on Climate Change and the Global Strategic Plan for Biodiversity 2011-2020 adopted under the UN Convention on Biological Diversity and the Aichi Biodiversity Targets promote sustainable forest management, protection and restoration efforts XIV . Reducing forest loss and degradation is a priority under the UN Strategic Plan on Forests XV . Strengthening efforts to manage forests sustainably is also central to the UN 2030 Agenda for Sustainable Development as forests play a multifunctional role that supports the achievement of most Sustainable Development Goals. Figure 1 - Forest goods and services supporting the UN Sustainable Development Goals

1 Income from forest products 2 Nourishment from wild fruit and game 3 Medicinal plants 6 Freshwater for drinking and irrigation 8 Sustainable and inclusive economic growth and decent work for all 10 Reduced income inequality 12 Sustainable consumption and production patterns 13 Carbon capture and storage 15 Biodiversity Figure 2 - Impacts of deforestation on Sustainable Development Goals 1 Increased vulnerability to extreme weather 2 Loss of rainfall and crop pollinators 3 Respiratory illness due to forest fires 6 Unsustainable management of water resources 8 Unsustainable economic growth and lack of decent work 10 Income inequality 12 Unsustainable consumption and production patterns 13 CO2 emissions 15 Biodiversity loss Drivers of deforestation and forest degradation Deforestation and forest degradation are driven by many different factors. The increasing demands from a growing global population for food, feed, bioenergy, timber and other commodities, combined with low productivity and low resource efficiency, put more and more pressure on land use and threaten the conservation of the world’s forests. Approximately 80% of global deforestation is caused by the expansion of land used for agriculture XVI . Urban expansion, infrastructure development and mining are also factors driving deforestation. Figure 3 - Forecasted year of disappearance of moist primary forests XVII Other drivers of deforestation include the absence of sound policies (such as integrated land planning and clear land tenure and land rights), weak governance and lack of enforcement, illegal activities XVIII , and lack of investment in sustainable forest management. Negative impacts on forests can also occur when pasture or agricultural land previously used for food and feed markets is diverted to the production of fuels from biomass (indirect land use change – ILUC). Forest degradation is more difficult to quantify. Direct drivers of forest degradation include unsustainable exploitation of forest resources, e.g. for use as domestic energy, and natural events such as fires and pests. Action is needed as the demand for wood for use as fuel will continue to increase, and in 2030 it is estimated that 2.8 billion people will depend on this fuel source, compared to 2 billion today XIX . While most commodities associated with deforestation and forest degradation are consumed at local or regional level, the EU imports XX products such as palm oil XXI , meat, soy, cocoa, maize, timber, rubber XXII , including in the form of processed products or services. When looking at deforestation embodied XXIII in total final consumption, the EU consumption represents around 10% of the global share XXIV .

From challenge to opportunity: EU as a global trailblazer The disappearance and the degradation of forests has received global attention. In the long run deforestation and degradation of forests do not only threaten the economy but humanity itself. There is no one-size-fits-all solution. Fighting deforestation and attaining sustainable forest management are complex challenges. Solutions need to be specific to each country and region, with an overall two-fold objective of protecting existing forests, especially primary forests, and significantly increasing sustainable, biodiverse forest coverage worldwide. It is clear that the EU by itself cannot reverse the trend of deforestation. It needs to be part of a global alliance. The EU has already developed partnerships with other countries to reduce pressures on forests and fight deforestation. Box 2 - EU Forest Law Enforcement, Governance and Trade Action Plan (FLEGT) XXV Since 2003, measures have been introduced under the EU FLEGT Action Plan to fight illegal logging and associated trade. Working with partner countries to improve forest governance and capacity building are key components of the Action Plan. One of its central components, the EU Timber Regulation XXVI , obliges operators who place timber and timber products on the EU market to carry out due diligence to minimise the risk of importing illegally harvested timber. The action plan also promotes dialogue and cooperation with other major markets. The 2016 evaluation of the EU FLEGT Action Plan concluded that it continues to: i) be a relevant response to the challenge of illegal logging; ii) be effective in terms of raising awareness; iii) contribute to forest governance globally; and iv) help reduce demand for illegal timber in the EU. Building on the findings of the evaluation, the European Commission and the Member States have agreed a FLEGT Work Plan 2018-2022 XXVII , which is guiding the work for the coming years. In 2008 the European Commission issued a Communication on Deforestation XXVIII where it set the EU an objective to halt global forest cover loss by 2030 at the latest and to reduce gross tropical deforestation by 50% by 2020. It identified ways to improve EU policies to help conserve the world’s forests, making use of new scientific knowledge and tools. Comprehensive EU free trade agreements include Trade and Sustainable Development (TSD)chapters with binding provisions on environmental protection, climate change, biodiversity and forests, including the obligation to ensure multilateral environmental agreements, such as the Paris Agreement and the Convention on Biological Diversity, are implemented effectively. The European Commission’s ‘Clean Planet for All’ strategic long-term vision for a climate neutral economy by 2050 XXIX recognises that increasing the natural sink of forests, soils, agricultural lands and coastal wetlands is crucial for addressing climate change successfully. The EU Directive on promoting the use of energy from renewable sources XXX includes binding sustainability criteria to avoid direct land use impacts associated with biofuels consumed in the EU. The European Consensus on Development XXXI aims to eradicate poverty, notably through well-functioning ecosystems to support the transition to a green economy. It promotes sustainable agricultural value chains to halt, prevent and reverse deforestation.

The EU is also raising consumer awareness about the need to reduce our consumption footprint on land and encourages people to consume products from supply chains which are ‘deforestation-free’, i.e. those not causing deforestation either directly or indirectly. Despite these efforts, the EU’s objective to reduce gross tropical deforestation by 50% by 2020 is unlikely to be met XXXII , and therefore we must step up action and take an even stronger leadership role in protecting and restoring world’s forests. As a major trader and investor and the largest provider of development assistance, the EU works with partners worldwide. There are many opportunities to work more closely together to protect and restore forests. Forests provide important ecosystem services to society, such as clean air, water flow regulation, carbon sequestration, soil protection from water and wind erosion, providing habitats for animals and plants, restoring degraded land, and resilience to disasters and to climate change. Through these functions, they can mitigate the risk of regional conflicts, reduce migration flows, and increase the output of agricultural activities and the well-being of local communities. Restoring degraded forests and planting new forests have been identified as effective complementary measures to the efforts to halt deforestation. Such reforested areas can provide multiple benefits if they are properly planned and implemented (e.g. by avoiding the replacement of other legitimate and sustainable land uses), in full respect for ecological principles favourable to biodiversity. They can serve as buffer zones for primary forests, protect the soil, accumulate clean water, and ensure genetic diversity. Planting trees on a large scale would also contribute significantly to mitigating climate change XXXIII . Some pathways identified by the Intergovernmental Panel on Climate Change to limit global warming to 1.5° would require an increase in forests by up to around 1 billion hectares by 2050 relative to 2010 XXXIV . In addition, protecting existing forests and sustainably increasing forest cover can provide livelihoods, increase income for local communities and allow for sustainable bio-economies to be developed. Forests represent a promising green economic sector, with the potential to create between 10 and 16 million sustainable and decent jobs worldwide XXXV . The EU will continue developing and sharing its knowledge and experience, ensuring that sustainable forest management, afforestation and reforestation projects take into account local environmental, social and economic conditions. The EU will also continue sharing solutions such as the diversification of clean energy sources that reduce pressure on forests, sustainable timber sourcing, and eco-tourism projects based on rich biodiverse natural forests. II. Objectives and scope This Communication’s objective is to propose ways to step-up EU action to protect the world’s forests, in particular primary forests, and restore forests in a sustainable and responsible way. The overall aim is to protect and grow the world's forest cover to improve people's health and livelihoods and ensure a healthy planet for our children and grandchildren. Stepping up EU action is in line with the EU objective to halt global forest cover loss by 2030 and with EU’s existing international commitments. It answers the calls of the European Parliament XXXVI , the Council, stakeholders from private and public sectors XXXVII . This Communication proposes a set of new actions and aspirations, building upon the 2013 EU Forest Strategy , the EU Biodiversity Strategy to 2020 XXXVIII , the 7th Environment Action Programme XXXIX as well as the European Commission’s ‘Clean Planet for All’ strategic long-term vision for a climate neutral economy by 2050. The Commission's Reflection Paper ‘Towards a Sustainable Europe by 2030’ XL emphasises that deforestation ‘is not somebody else’s problem’. It highlights the fact that the EU consumption of food and feed products is among the main drivers of environmental impacts, creating high pressure on forests in non-EU countries and accelerating deforestation. Therefore, the consumption of products from deforestation-free supply chains in the EU should be encouraged both via regulatory and non-regulatory measures as appropriate.

Halting deforestation and forest degradation combined with sustainable restoration, re- and afforestation activities provide opportunities for economic development. This requires putting a particular emphasis on the sustainable production and consumption of agricultural and forest-based products. Action at international, national, regional and local levels as well as substantial investments will be necessary. Consequently, this Communication proposes a partnership approach - close cooperation with producer and consumer countries as well as business and civil society. Such partnerships can facilitate action promoting land governance, sustainable forest management and reforestation, transparent supply chains, effective monitoring, sustainable finance and multilateral cooperation. Actions identified in this Communication can also be beneficial for certain other natural ecosystems as their loss is largely caused by the same drivers that cause loss of forests XLI . In preparing this Communication, the Commission consulted widely with stakeholders XLII including through two conferences in 2014 and 2017, and an open public consultation in 2019. The evidence base for this Communication was further strengthened through three studies, in particular the ‘Feasibility study on options to step up EU action against deforestation’ published in February 2018, which identified existing gaps and assessed possible additional policies. For example, while the EU FLEGT Action Plan tackles illegal logging and contributes to strengthening forest governance, it does not address deforestation caused by agricultural expansion. The EU Directive on promoting the use of energy from renewable sources specifies sustainability criteria, which liquid biofuel feedstock and certain biomass sources used for biogas and solid biomass fuels must meet if they are to qualify for financial and regulatory support. However the Directive does not cover uses of commodities other than for biofuels. As the mandate of the current Commission is drawing to a close, this Communication will stop short of laying out a definitive blueprint for the incoming Commission. However, the challenges we face are urgent enough to merit a serious analysis of the problems, a discussion on how to tackle them, the identification of a number of proposals that can be put forward immediately, and the preparation of regulatory and financial responses, which are for the incoming Commission’s political leadership to decide upon. III. Five priorities to step up EU action against deforestation and forest degradation Priority 1: Reduce the EU consumption footprint on land and encourage the consumption of products from deforestation-free supply chains in the EU The EU has also started to address the risk of deforestation arising from the increased use of biofuel. Directive (EU) 2018/2001 on promoting the use of energy from renewable sources XLIII , in addition to binding sustainability criteria, includes rules to minimise the risk of deforestation and sets an overall cap for counting the use of biofuels produced from food and feed crops under the renewables targets. Commission Delegated Regulation (EU) 2019/807 XLIV includes criteria for determining the high indirect land use change (ILUC) risk feedstock for which a significant expansion of the production area into land with high carbon stock is observed. The possibility to take biofuels from high ILUC feedstock into account when calculating the overall national share of renewable energy will be limited for 2021-2023, and phased out by 2030 at the latest. To encourage the EU consumption of products from deforestation-free supply chains we have to make it easier for suppliers, manufacturers, retailers, consumers and public authorities, to identify, promote and purchase such products. Good examples of EU policies to improve supply chain transparency are the Regulation (EU) No 995/2010 laying down the obligations for operators who place timber and timber products on the market (also known as the EU Timber Regulation), and Regulation (EU) No 1169/2011 on providing information on food to consumers, which allows them to distinguish the various vegetable oils contained in products. Other instruments include the EU Ecolabel, green public procurement and other initiatives in the context of the circular economy. Tools such as the product environmental footprint and organisation environmental footprint can also help to better assess pressures on deforestation from various categories of products. However, these initiatives could focus more specifically on promoting forestation and on the fight against deforestation and forest degradation. Certification and verification schemes can also play a role in supporting sustainable supply chains if high standards are observed. The Commission has developed a Guidance Document XLV for the EU Timber Regulation that addresses the role of third-party verification schemes in risk assessment and risk mitigation. Also, in 2018, a study evaluated the sustainability standards for palm oil and summarised the impact of existing initiatives on the sustainable production and consumption of palm oil XLVI . Standards and certification schemes that help to identify and promote deforestation-free commodities should be strengthened through, among other things, studies on their benefits and shortcomings and by developing guidance, including assessment based on certain criteria to demonstrate the credibility and solidity of different standards and schemes. Such criteria should address aspects such as the robustness of the certification and accreditation processes, independent monitoring, possibilities to monitor the supply chain, requirements to protect primary forest and forests of high biodiversity value and promote sustainable forest management.

Consumers and producers should also be better informed about the link between consumption of commodities and deforestation. People should be encouraged, both via regulatory and non-regulatory incentives, to adopt more balanced, healthy and nutritious diets XLVII and to reduce food waste. This more sustainable lifestyle will decrease the pressures on land and resources. Key actions The Commission will : ➢Establish a Platform for multi-stakeholder and Member State dialogue on deforestation, forest degradation and on sustainably increasing world’s forest cover to provide a forum to foster exchanges with and among stakeholders in order to build alliances, push for and share commitments to significantly reduce deforestation, and share experiences and information. ➢Encourage the strengthening of standards and certification schemes that help to identify and promote deforestation-free commodities through, among other things, studies on their benefits and shortcomings and by developing guidance, including assessment based on certain criteria to demonstrate the credibility and solidity of different standards and schemes. ➢Assess additional demand side regulatory and non-regulatory measures to ensure a level playing field and a common understanding of deforestation-free supply chains, in order to increase supply chain transparency and minimise the risk of deforestation and forest degradation associated with commodity imports in the EU. In addition, the Commission will enhance the implementation of the following ongoing actions: -Carry out analytical work with relevant stakeholders to assess the need to require corporate boards to develop and disclose a sustainability strategy, including appropriate due diligence throughout the supply chain, and measurable sustainability targets XLVIII . -Promote the integration of forest-relevant considerations into corporate social responsibility/responsible business conduct practices and foster the transparency, and uptake of voluntary commitments from the private sector, in line with international guidelines. -Further integrate deforestation considerations within the EU Ecolabel, green public procurement and other initiatives in the context of the circular economy. -Actively support the development and dissemination of information and educational materials to help reduce demand for products whose supply-chains may involve deforestation, and at the same time increase the demand for products from deforestation-free supply chains. -In the context of the clean energy for All Europeans legal framework in place, address relevant aspects on renewable energy and biofuels, review all relevant aspects of the report accompanying Commission Delegated Regulation (EU) 2019/807 in 2021 and, if appropriate, revise Delegated Regulation (EU) 2019/807 in 2023 based on the latest available evidence. -Implement the EU FLEGT Work Plan 2018-2022, in particular strengthen the implementation of the EU Timber Regulation. Priority 2: Work in partnership with producing countries to reduce pressures on forests and to ‘deforest–proof’ EU development cooperation In line with EU development-cooperation principles, the Commission will work in partnership with producing countries to fight deforestation and forest degradation. Since 2014, the EU has invested on average €1.2 billion a year to support agriculture programmes in partner countries which face challenges in this area. The investment has focused on supporting climate-resilient agriculture; sustainable intensification and diversification; agro-ecology; and agroforestry. The Commission seeks to promote sustainable and transparent agricultural value chains on the basis of a robust methodology XLIX which is shared by partner countries. This enables the Commission to support action to transform commodity value chains such as coffee, cocoa, palm oil, and livestock.

The Commission has also increased its focus on sustainable forest management (SFM) as a tool for preventing, halting and reversing forest loss and degradation. SFM reconciles economic, environmental and social objectives to: (i) ensure that forests retain their productive value; (ii) increase the resilience of forests to climate change; and (iii) sustain the ecosystem services that forests provide (including biodiversity conservation and carbon sequestration). SFM also helps to promote an innovative bio-economy and tap the high socioeconomic potential of the forest-based sector. Investment in the forest-based sector generates more than twice the amount in other sectors of the economy. For every 100 jobs generated in the forest-based sector, 153 jobs are generated in other sectors as a result L . Promoting sustainable consumption and production of diversified wood-based products is a key element of the bio-economy. The EU has invested more than €20 million in pilot projects related to the forest industry since 2010 through its ‘SWITCH To Green’ programmes. An evaluation in 2018 concluded that EU support for green business development (mostly in Africa and Asia) achieved ‘high impact, in terms of uptake of sustainable consumption and production practices, increased levels of investments and creation of green jobs’ LI . Biological diversity underpins the productive value of forests and forest-ecosystem services, and is therefore essential to counteract forest degradation. The EU has supported the creation and management of protected areas, which amounted to a total of 14.7 million hectares of tropical humid forest in 2018. The EU has also promoted innovative and effective tools to protect forests, such as community conservation (especially by indigenous peoples) and the landscape-based approach LII . Illegal activities create a high risk of deforestation. It is therefore essential to address drivers such as weak governance, and this has been a key element of the EU FLEGT Action Plan. Since 2003, this Action Plan has helped improve transparency, accountability, legal reform, inclusiveness and participatory approaches in supported countries. Promoting responsible land and forest tenure LIII remains a top priority of the EU’s international cooperation and development policy. The EU is currently supporting land governance actions in about 40 developing countries, and the implementation of the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security LIV in another 18 countries. The EU also provides direct support to defenders of human rights and land rights. In the framework of the EU Action Plan against Wildlife Trafficking LV , the involvement of local authorities and communities enhances the effectiveness and impact of efforts to combat forest crime. EU actions have helped to develop and implement policies in producer countries that have already led to a decrease in forest loss and forest degradation. Based on the experience so far, the Commission will scale up existing actions and develop additional actions such as those outlined below. Key actions The Commission will : ➢Ensure that deforestation is included in political dialogues at country level, and help partner countries to develop and implement national frameworks on forests and sustainable forest management. These national frameworks will reflect domestic needs as well as global commitments. This can include helping partner countries to implement their National Determined Contributions to the Paris Agreement and/or the inclusion of forest-governance-related measures in budget-support and public-finance-management policy. ➢Ensure that EU support for agricultural, infrastructure, mining, urban, peri-urban, and rural policies in partner countries does not contribute to deforestation and forest degradation. When justified, EU support should be accompanied by compensation measures, such as support for restoration, reforestation and/or afforestation. ➢Help partner countries to implement sustainable forest-based value chains and promote sustainable bio-economies inspired by the example of the Commission Communication ‘A new Africa-Europe Alliance for Sustainable Investment and Jobs: Taking our partnership for investment and jobs to the next level’. ➢Develop and implement incentive mechanisms for smallholder farmers to maintain and enhance ecosystem services and products provided by sustainable forest management and agriculture. In addition, the Commission will enhance the implementation of the following ongoing actions: -Scale-up efforts to support the rights of indigenous peoples and local communities dependent on forests, as well as environmental rights defenders in accordance with Resolution 28/11 of the UN Human Rights Council. -Strengthen the policy and regulatory framework for promoting sustainable forest management and land-use planning, while integrating biodiversity and climate considerations. -Promote the restoration of forest landscapes, as well as reforestation projects that integrate ecological principles favourable to biodiversity, local population rights, and livelihoods through the provision of enhanced ecosystem services LVI .

-Continue to support forest conservation through the creation and effective management of protected forest areas, while exploring high conservation values LVII and high carbon stocks LVIII . -Scale-up actions on the sustainable production and use of wood fuels based on lessons learnt from the Global Climate Change Alliance (GCCA+) initiative, while continuing to promote other forms of sustainable renewable energy. Priority 3: Strengthen international cooperation to halt deforestation and forest degradation and encourage forest restoration The EU’s leadership in this area is reflected in its commitment to multilateral action and through the EU FLEGT Action Plan. Action by the EU alone will only have a limited impact in reducing deforestation and forest degradation and in increasing forest cover globally. It is therefore important to strengthen cooperation, encourage consistent action, and avoid the diversion to other regions in the world of trade in products whose supply chains may involve deforestation. At multilateral and bilateral level, the EU already actively contributes to designing policies and standards that address the drivers of deforestation and forest degradation. The EU is promoting a global agenda for sustainable use of natural resources, rural development, food security, sustainable forest management, reforestation, and restoration of degraded forest areas in key international fora. The EU is also working through sectorial intergovernmental organisations, between countries, key stakeholders and initiatives such as the Task Force on Rural Africa LIX , where it shares experience and knowledge, exploring opportunities to develop employment and revenue-generating activities. These actions lead to initiatives to use natural resources more efficiently – producing more with less. As a major trading partner, the EU contributes to growth and socioeconomic development in many regions in the world, while promoting sustainability. In line with the commitment to make EU trade policy contribute to the responsible management of global supply chains LX , the Commission aims to ensure that all new comprehensive EU trade agreements contain provisions on sustainable forest management and responsible business conduct, as well as commitments to implement effectively the Paris Agreement. Some of the EU’s existing trade agreements already include specific provisions to promote trade in forest products that do not cause deforestation or forest degradation; and to encourage the conservation and sustainable management of forests LXI . Key actions The Commission will: ➢Strengthen cooperation on policies and actions to halt deforestation, forest degradation and restore forests in key international fora, including the Food and Agriculture Organization (FAO), G7/G20, the UN Framework Convention on Climate Change (UNFCCC), the UN Forum on Forests (UNFF), the Convention on Biological Diversity (CBD), the United Nations Convention to Combat Desertification (UNCCD), the UN Environment Assembly (UNEA), the Organisation for Economic Co-operation and Development (OECD) and the World Trade Organization (WTO), for instance by promoting best practices and a common understanding of sustainable supply chains, and advocating for the adoption and implementation of strong commitments and provisions. ➢Promote trade agreements that include provisions on the conservation and sustainable management of forests and further encourage trade of agricultural and forest-based products not causing deforestation or forest degradation. The Commission will also explore possibilities to provide incentives to trade partners to address deforestation. It will engage with trading countries to step-up implementation and enforcement of relevant provisions in the EU trade agreements and will draw lessons from these experiences. In addition, the Commission will enhance the implementation of the following ongoing actions: -Assess the impacts of trade agreements on deforestation in Sustainability Impact Assessments (SIAs) and other relevant assessments, based on solid impact assessment and evaluation methodologies. -Address the sustainability of supply chains, including the issue of deforestation and forest degradation, in the context of relevant international commodity bodies LXII (e.g. coffee, cocoa, timber).

-Within bilateral dialogues with major consumer and producer countries: (i) share experience and information on the respective policy and legal frameworks; and (ii) identify joint activities to inform policy developments based on an advanced understanding of the impacts of deforestation and forest degradation. Priority 4: Redirect finance to support more sustainable land-use practices Substantial investments are needed to address drivers of deforestation, promote sustainable reforestation and afforestation, as well as actively increase the world’s forest coverage and create the enabling environment for more sustainable practices LXIII . There is increased international recognition that financial markets have a role to play in ensuring a more sustainable future and help implement the UN Sustainable Development Goals and the Paris Agreement. It is of paramount importance to redirect the important flows of private finance in the agricultural sector, both in graduated countries and those which qualify for receiving official development assistance, towards activities that are deforestation-free. At the same time it is essential to remove counter-productive financial incentives and subsidies. For the period 2014-2020, the Commission has committed more than €500 million to support forests in partner countries. While this is a substantial amount, investment on this scale will clearly not be sufficient to meet the objectives set out in this Communication. According to the Secretariat of the United Nations Forum on Forests LXIV , financing needs for sustainable forest management alone amount to €60-€140 billion a year worldwide. Besides attracting new public funding, the key challenge will be to make forest-related investments consistent with development that is climate resilient and that reduces greenhouse-gas emissions (Article 2 of the Paris Agreement). In this context, the EU External Investment Plan (EIP) and Regional Blending Facilities are efficient tools in leveraging private funding in sectors like energy, agriculture or infrastructure. While those innovative financial mechanisms can be attractive for the private sector in domains where return on investment is substantial, like sustainable forest management, reforestation and agroforestry, they are less suited to support investments in forest protection, conservation of carbon sinks and biodiversity. Therefore, appropriate public funding for those purposes will remain necessary to support the balance between the multi-purposes of forests (production, conservation, climate, livelihood, peace and health). The Commission has also committed to ensuring that projects under the InvestEU LXV sustainable infrastructure window for the 2021-2027 funding period promote sustainability and do not contribute to climate change. Some important steps have already been taken. These include the EU Action Plan on Financing Sustainable Growth LXVI and the politically-agreed regulations on low-carbon benchmarks LXVII and on disclosures linked to sustainability LXVIII . They also include the proposal to develop an EU taxonomy LXIX to determine which economic activities can be considered to contribute substantially to greenhouse gas mitigation while not significantly harming any environmental objective for the purpose of investments. Investing in sectors that are associated with deforestation can expose investors to operational, legal, or reputational risks. Investors should therefore be encouraged to nudge companies to move to deforestation-free practices or deforestation-free supply chains. Increased transparency throughout the investment chain LXX can facilitate such changes in the real economy. Under the Non-Financial Reporting Directive, large companies in the EU are already required to disclose non-financial information, including on environmental, social and human-rights matters LXXI . The Commission intends to publish soon the results of a fitness check on the EU framework for corporate reporting, including the Non-Financial Reporting Directive. Meanwhile, the Commission is promoting best practices and exploring the possibility of adopting generally accepted principles in environmental management accounting that will further enhance the options of corporate and financial organisation to identify and reduce environmental impacts and dependencies, including on deforestation and land degradation LXXII . That includes work under the Business and Biodiversity Platform and future environmental accounting platforms derived from this partnership approach and supported through the LIFE programme. Key actions The Commission will : ➢Assess, together with the EU Member States, possible sustainable mechanisms to catalyse green finance for forests and how to further leverage and increase funding – including through blending mechanisms and building also on the experience of the EU External Investment Plan (EIP). The objective would be to support producer countries in the conservation of existing forest cover and regeneration of forests, and in creating positive incentives for investments in sustainable forest management and sustainable forest-based value chains. Support in particular partner countries in designing and implementing policies and instruments that can encourage better land and forest governance (such as fiscal policies, green accounting, green bonds, payments for ecosystem services schemes). ➢Consider improving company reporting on the impacts that company activities have on deforestation and forest degradation in the context of any future revision of the Non-Financial Reporting Directive LXXIII further to the conclusions of the Fitness Check on corporate reporting. In addition, the Commission will enhance the implementation of the following ongoing actions: -Integrate considerations related to deforestation as part of the assessment of projects in sectors where these considerations are relevant parameters to assess the project’s impacts.

-Consider guidance on — and improvement of — different measurement approaches used at EU and Member-State level to better understand the value of forests and the characteristics of forest-risk financing. -Pay careful consideration to deforestation in the implementation of the Action Plan for Sustainable Finance, including in the creation of an EU taxonomy for economic activities. Priority 5: Support the availability of, quality of, and access to information on forests and commodity supply chains. Support research and innovation Effective forest policy needs reliable information on forest resources, their condition, and how they are managed and used. It also needs reliable information on land-use change. The EU has been supporting research and capacity building in this domain at the global, regional and national levels LXXIV . It has also been supporting the monitoring of deforestation and forest degradation by using Earth Observation data from different sources. The EU’s Copernicus Earth Observation and Monitoring programme provides full, free and open access to Sentinel satellites data and information from Copernicus services. This has helped to reduce the cost of monitoring Sustainable Development Goals indicators like the indicator on sustainable forest management. Copernicus is a key tool to strengthen global or national forest monitoring systems. The Commission is also implementing the EU’s Bio-economy Strategy LXXV , including the establishment of a Knowledge Centre for Bio-economy and an EU monitoring system for the bio-economy, covering ecosystems and their services. However, there is a need to further harness the EU’s earth-observation and supply-chain data, and to combine research and monitoring capacity to develop an early warning system. It is important to encourage the consumption of products from deforestation-free supply chains in the EU and to fine-tune assessments of the impact that consumption by the EU and other markets has on the world’s forests. This requires better monitoring of trade flows down to national, regional and local levels, and better access to timely information. A number of initiatives LXXVI have emerged in recent years that seek to achieve this, but only a few of these supply-chain transparency initiatives have been developed into truly accessible platforms capable of informing the decisions of a wide range of actors. The EU research framework programme Horizon 2020 has already financed significant research and innovation in relevant areas LXXVII . However, more research and scientific evidence is needed for the transition towards more sustainable land-use practices and supply chains to halt deforestation and forest degradation. This research is needed in domains such as: climate-change mitigation and adaptation; the identification and implementation of nature-based solutions LXXVIII ; forest and landscape restoration (including afforestation and reforestation); trade-flows; and market monitoring of commodities associated with deforestation and forest degradation. The Commission will enhance its efforts on these issues, not least through the next EU innovation and research framework, Horizon Europe. In addition, it will support the sharing of best EU practices on renewable energy, smart agriculture and other relevant areas with other countries. Key actions The Commission will: ➢Build on the already existing monitoring tools, and establish an EU Observatory on deforestation, forest degradation, changes in the world’s forest cover, and associated drivers. The objective of this is to facilitate access to information on supply chains for public entities, consumers and businesses. ➢Explore the feasibility of developing a Copernicus REDD+ service component to strengthen the existing global or national forest-monitoring systems, as well as to establish long-term European capacity and leadership in this domain. ➢Improve coordination of work among relevant research institutes, including through the north-south and south-south cooperation frameworks of the European Innovation Partnership. The aim will be to strengthen capacity and help put research results to good use in key consumer and producer countries, including by supporting regional observatories. ➢Share innovative EU practices on the circular economy, sustainable bio-economy, renewable energy, smart agriculture and other relevant areas with other countries. In addition, the Commission will enhance the implementation of the following ongoing actions: -Assist producer countries in tracking progress in the implementation of policy objectives, including: (i) the forest-related components of Nationally Determined Contributions; (ii) commitments related to deforestation and legal and sustainable commodity production; and (iii) related trade.

-Step up efforts to improve the availability, quality and harmonisation of reliable information on forest resources and land-use change to inform policy-making by a wide range of stakeholders, including in partner countries. -Continue to support the development of global LXXIX and regional LXXX information systems to monitor the effects of forest fires, which burn about 67 million hectares of forest worldwide each year LXXXI .



Conclusion The Commission is proposing a list of initial actions, and paving the way for additional measures to be considered and decided upon by the next political leadership of the Commission. Successful implementation of this Communication will require a constant dialogue between the EU and its partners in the world, strong involvement of the private sector, and active consultation with civil society, as identified in Annex 2. Significant financial resources will also need to be mobilised. The Commission invites the European Parliament and Council to endorse this Communication and to engage actively in implementing the actions it contains, in close cooperation with all relevant stakeholders. The Commission will monitor and report on how the actions are implemented, and will assess whether they successfully address drivers of deforestation and forest degradation.