COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT minimising the risk of deforestation and forest degradation associated with products placed on the EU market Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the making available on the Union market as well as export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010
Date: 2021-11-17
Institutions: Directorate-General for Environment, European Commission
Subjects: cattle, commodities market, deforestation, export (EU), market approval, reduction of gas emissions, soya bean, tropical plant, vegetable oil, wood product

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   EUROPEAN COMMISSION  Brussels, 17.11.2021  SWD(2021) 327 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT  minimising the risk of deforestation and forest degradation associated with products placed on the EU market Accompanying the document Proposal for a  REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the making available on the Union market as well as export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010 {COM(2021) 706 final} - {SEC(2021) 395 final} - {SEC(2021) 396 final} - {SWD(2021) 325 final} - {SWD(2021) 326 final} - {SWD(2021) 328 final} - {SWD(2021) 329 final}  
 
 
Executive Summary 

Impact  assessment  :  “Minimising  the  risk  of  deforestation  and  forest  degradation  associated  with 
products placed on the EU market” 

A. Need for action 

What is the problem and why is it a problem at EU level?  

Deforestation and forest degradation are occurring at an alarming rate, aggravating climate change and 
the  loss  of  biodiversity.  The  main  driver  of  deforestation  and  forest  degradation  is  the  expansion  of 
agricultural land to produce commodities such as cattle, wood, palm oil, soy, cocoa or coffee. A growing 
world  population  is  expected  to  increase  demand  for  agricultural  land  and  put  additional  pressure  on 
forests, while changing climate patterns will affect food production. 

The EU is a relevant consumer of commodities associated with deforestation and forest degradation and it 
lacks  specific  and  effective  rules  to  reduce  its  contribution  to  these  phenomena.  The  current  legislative 
framework  based  on  the  EU  Forest  Law  Enforcement  Governance  and  Trade  (FLEGT)  Action  Plan 
tackles  illegal  logging  and  contributes  to  strengthening  forest  governance,  but  it  does  not  address 
deforestation  caused by agricultural expansion. This Impact  Assessment  builds on the key findings from 
the Fitness Check of the EU Timber Regulation (EUTR) and the FLEGT Regulation. 

What should be achieved? 

The  objective  of  this  initiative  is  to  curb  deforestation  and  forest  degradation  that  is  provoked  by  EU 
consumption  and  production.  This,  in  turn,  is  expected  to  reduce  EU-driven  GHG  emissions  and 
biodiversity  loss.  The  initiative  aims  to  minimise  consumption  of  products  coming  from  supply  chains 
associated with deforestation or forest degradation – and increase EU demand for and trade in legal and 
‘deforestation free’ commodities and products. 

What is the value added of action at the EU level (subsidiarity)?  

The  main  drivers  of  deforestation  and  forest  degradation  are  linked  to  both  the  EU  and  international 
trade. Action at EU level is essential to enable international trade issues to be addressed in a coordinated 
and harmonised way, and to ensure a level playing field for companies, both in terms of requirements to 
be  met  before  placing  products  on  the  EU  internal  market,  and  in  terms  of  the  information  supplied  to 
customers.  Action at  EU level  would  also  benefit  from previous  EU experience in  dealing with  complex 
supply chains (e.g. stemming from the legislation related to illegal logging for example.) 

B. Solutions 

What are the various options to achieve the objectives? Is there a preferred option or not? If not, 
why? 

The  five  policy  options  considered  were:  1)  An  improved  mandatory  due  diligence  system;  2)  a 
benchmarking system and a list of contravening operators combined with tiered improved mandatory due 
diligence  system;  3)  a  mandatory  public  certification  combined  with  an  improved  due  diligence 
requirement;  4)  mandatory  labelling  combined  with  an  improved  due  diligence  requirement;  5)  a 
deforestation-free  requirement  for  placing  on  the  EU  market  supported  by  benchmarking  and  country 
card systems. 

The  preferred  option  is  number  2.  It  includes  a  country  benchmarking  system  that  will  categorise 
countries according to deforestation patterns linked to the relevant commodities in the scope. There will 

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be three categories of countries — low, standard and high risk. The obligations for operators and member 
states authorities will be vary according to the level of risk of the country of production, with simplified 
due diligence duties for low risk and enhanced scrutiny for high risk countries.  

All policy options considered build on common elements: 1) A deforestation-free definition, based on the 
FAO  definition,  which  products  need  to  comply  with;  and  an  additional requirement  for  products  to  be 
legal  according  to  the  laws  of  the  country  of  production;  2)  A  progressive  product  scope,  which  is 
regularly  reviewed  and  updated,  focusing  on  commodities  with  the  highest  EU  embodied  deforestation 
(beef, palm oil, soy, wood, cocoa, and coffee) and related derived products. 

What are different stakeholders' views? Who supports which option?  

The  Open  Public  Consultation  carried  out  by  the  Commission  in  2020  received  nearly  1.2  million 
contributions and showed that a majority of stakeholders agreed on the need of an EU-level intervention 
to  reduce  the  EU’s  contribution  to  global  deforestation  and  forest  degradation.  Most  stakeholders  also 
agreed on setting out an EU deforestation-free definition as a requirement of the policy intervention.  

In terms of policy measures, the OPC showed stronger support for legally binding options (deforestation-
free requirement, mandatory due diligence, mandatory public certification, etc.) than for  soft, voluntary 
measures  like  voluntary  due  diligence,  voluntary  labelling  or  voluntary  private  certification.  The 
overwhelming  majority  of  qualified  stakeholders  —  businesses  associations  and  NGOs  —  supported  a 
mandatory  due  diligence  regime,  although  the  details  of  this  system  vary  from  one  organization  to 
another. 

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise of main ones)?                                     

It  is  expected  that  the  preferred  option  would  prevent  deforestation  driven  by  EU  consumption  and 
production  of  the  six  commodities  included  in  the  scope,  with  projected  benefits  well  above  71,920 
hectares of forest less affected by EU-driven deforestation and forest degradation annually by 2030. This 
would also mean a reduction of at least 31.9 million metric tons of carbon  emissions to the atmosphere 
every year due to EU consumption and production of the relevant commodities, which could be translated 
into  economic  savings  of  at  least  3.2  billion  EUR  annually.  In  addition,  this  option  is  expected  to 
decisively contribute to protecting biodiversity. 

This  option  should  also  contribute  to  achieving  the  specific  objectives  of  the  EU  intervention,  namely 
creating a level playing field for companies operating in the EU market; minimising the consumption of 
products coming from supply chains associated with deforestation or forest degradation; and increasing 
EU demand for and trade in legal and ‘deforestation-free’ commodities and products. 

What are the costs of the preferred option (if any, otherwise of main ones)?                                    

One-off  costs  of  between  EUR  5,000  and  90,000  per  operator  for  establishing  the  due  diligence  system 
depending on the complexity and risk associated with deforestation of the supply chains of the company. 
Recurrent: A range of between EUR 158 million to 2,354 million per year.  

Member States authorities: Around EUR 18 million per year for all member states combined. 

European Commission:  Setting  up and operating  the benchmarking  will  result in  a  one-off  cost  of  EUR 

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337,000 and thereafter EUR 168,000 per year. 

What are the impacts on SMEs and competitiveness?  

This  option  is  expected  to  create  a  level  playing  field  for  companies  operating  in  the  EU  market. 
Producers implementing more sustainable production practices expected to gain share in the EU market  
and see increased competitiveness compared to operators sourcing from ‘high-risk’ countries.  

The  main  driver  for  costs  of  due  diligence  obligations  is  the  complexity  of  supply  chains  and  the  risks 
associated with the sourcing country. The due diligence system combined with benchmarking would allow 
SMEs operators and traders to benefit from lower costs of the simplified due diligence by placing products 
derived from low-risk supply chains. 

Will there be significant impacts on national budgets and administrations?  

No. The costs are described above. 

Will there be other significant impacts?  

There  might  be  potential  shifts  in  EU  trade  towards  ‘low  risk’  producer  countries  from  ‘high  risk’ 
producer countries. Smallholders producing the relevant commodities may face adaptation challenges. All 
these factors are expected to be mitigated by the proposed cut-off date of 2020, as most products currently 
in trade would be sourced from land put into production prior to 2020. 

Proportionality?  

The  preferred  option  would  ensure  that  the  EU  puts  in  place  a  regulatory  framework  that  is  both  very 
ambitious and implementable, while incentivising the sustainability transition in all producing countries, 
within  or  beyond  the  EU,  making  the  EU  a  credible  global  standard-setter.  The  minimum  monetised 
benefits clearly offset the costs. The initiative It is also in line with the gravity of the problem it aims to 
tackle, as well as with the priorities of the European Green Deal. 

D. Follow up 

When will the policy be reviewed?  

The  system  should  be  reviewed  after  five  years  of  full  operation  to  identify  any  issues  and  potential 
improvements. 

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