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EU BANS IMPORTATION OF GOODS RELATED TO DEFORESTATION: BRAZIL CASE

Elvire Vérant, Peter Roberto, Pètra van de Gevel, EUCOM

Jennifer Radlinsky, EMH2

Claudia Santillan-Vazquez, Editor; Salomon Montaguth, Senior Editor

December 17, 2022


Deforestation[1]


Geographical Area | Europe

Countries Affected | EU, Brazil


The European Commission announced a new law to cut carbon emissions by halting imports of products linked to deforestation into Europe.[2] Companies will have to prove via documentation the products they intend to sell in Europe were not derived from deforestation.[3] Enforcement of the law starts within 18 months of approval, and the European Commission wants to incorporate fines for non-compliance.[4] Environmental advocates support the new law as a move forward in lowering carbon emissions and protecting locations like the Amazon Rainforest,[5] but they are critical of loopholes and state that the law does not sufficiently protect indigenous peoples’ rights.[6] Companies exporting to Europe will likely demand more specific implementation processes, as the new laws will likely create security problems and increase costs. The law will almost certainly increase corruption and fraud with the falsification of documents. The law will likely impact international relations with trade partners, like the Brazil agriculture industry, where deforestation occurs regularly in the production of goods.


Security Risk Level:

Areas of High Security Concern: Security concerns will likely arise in Brazil from the implementation procedures to ensure compliance with the new law. Ports and entry points will unlikely be ready to enforce the new law, as there will likely be a lack of personnel to inspect cargo and review documentation. This will likely cause delays in product delivery and supply chain shortages for critical items, like food. Criminals will very likely take advantage of unstructured protocols by falsifying documents or attempting to bribe inspectors to allow non-compliant products into European markets. Renegotiation of international trade agreements will likely occur to avoid increased costs or loss of business for exporters and ensure adherence to the law. This will very likely affect Brazil’s economy, as international relations with trade partners will likely decrease due to the regular occurrence of deforestation in the production of goods.

Current Claims: EU; European Commission; Brazil

Groups Involved in Conflict: EU customs; European Parliament; Members of the European Parliament (MEPs); right-wing politicians; anti-deforestation NGOs; environmental advocates; Brazilian agriculture; Brazilian farmers; current Brazilian President Jair Bolsonaro; future Brazilian President Luiz Inacio Lula da Silva; Brazilian Confederation of Agriculture and Livestock (CNA); indigenous people; World Wildlife Fund (WWF); supermarket Lidl; supermarket Carrefour; China

Current Conflicts: The EU agreed to pass a law to ban imports of products linked to deforestation, like palm oil, cattle, soy, coffee, and rubber.[7] Environmental advocates criticize law loopholes, like the limited definition of the geographical areas to be protected.[8] Businesses affected, like those in Brazilian agriculture, disapprove of the costs of the law.[9]

Major Capital Industries: poultry; pork; palm oil; cocoa; soy; coffee; rubber

Potential Industry Concerns: Exporters found to be in violation of the new law will be subject to fines and will likely try to find loopholes to avoid paying high penalties. Products not covered in the initial draft of the law, poultry and pork, will likely increase the potential for widening loopholes for exempted industries. Companies concerned of violating deforestation requirements will likely reduce exportation to Europe, which will likely lower their revenue and force them to employ fewer workers. Companies will likely export their products to countries without deforestation restrictions, like China. The palm oil and soy industry will very likely face revenue loss due to the law. National traceability in countries like Brazil is very likely difficult, undermining compliance by smallholder farmers. Traders of commodities grown in deforestation hotspots will very likely be unable to demonstrate that their product was not produced on deforested land, very likely decreasing the import of palm oil products, like cocoa, soy products, and coffee to the European market. Rubber imports to the EU will very likely decrease, as traders will likely face difficulties proving the products are deforestation-free, very likely impacting the availability of other goods, like medical devices.


Areas of Caution:

  • Political: Since Bolsonaro took power in 2019, deforestation has increased each year due to policies that encourage ranchers, prospectors, and loggers to exploit the Amazon.[10] European collaboration with Brazil, like Norwegian aid for the protection of the Amazon, largely ended when Bolsonaro took power.[11] Incoming president Lula promised to end deforestation in the Amazon and bolster environmental action in the upcoming four years, strengthening political relations with Europe.[12] With the implementation of the law, MEPs stated that it will have a real impact on the daily lives of Europeans, like the availability of coffee and chocolate.[13] Right-wing politicians, as well as European farmers, criticize the European climate agenda, and protest the changes in the agriculture industry.[14]

  • Economic: According to the European Commission's impact assessment, the entire expenses of due diligence for enterprises might range between €158 million and €2.4 billion per year.[15] Setting up due diligence systems would need one-time charges ranging from €5,000 to €90,000, depending on the complexity and risk of connection with deforestation of the operator's supply chains.[16] The CNA stated the European law has the potential to negatively impact small and medium-sized producers currently lacking financial and technical resources to enact traceability mechanisms.[17] Penalties for non-compliance are set to be “at least 4% of the total annual turnover in the EU of the non-compliant operator or trader.”[18] In November 2021, the EU was the second main export destination for Brazil’s agriculture industry, with a share of 16.3%.[19]

  • Social: Indigenous people are recognized as the best guardians of forests, and deforestation rates are significantly lower in areas where indigenous people live.[20] According to the UN report ‘’Forest Governance by Indigenous and Tribal Peoples,’’ safeguarding their rights is essential in preserving forests and biodiversity.[21] Environmental advocates say that the law does not sufficiently protect indigenous peoples’ rights.[22] In September 2022, the European Parliament took notice of calls by indigenous people, the EU, and NGOs to uphold indigenous peoples’ rights in the EU’s deforestation law.[23] MEPs implemented measures to ensure that companies respect international human rights, like indigenous people having the right to informed consent for importing products into the EU.[24] MEPs also implemented measures to counter land-grabbers and loggers from taking indigenous peoples’ land.[25]

  • Environmental: The EU ranks as the second biggest importer of goods linked to deforestation, after China, being responsible for 16% of deforestation associated with international trade, affecting 203,000 hectares and producing 116 million tonnes of CO₂.[26] The European law only protects ecosystems defined as “dense and closed forests,” which excludes other geographical areas, like “other wooded lands.”[27] Environmental advocates warn that companies could move their production to non-protected biodiversity hotspots, like the Cerrado Savanna in Brazil.[28] Activists are also worried that countries ranked with high-risk of goods originating from deforestation will try to send these products to low or medium risk countries to bypass the law and enter the European market.[29]

Predictive Analysis:

  • Who: The ban will very likely impact various businesses and industries, like small and medium-sized farmers in Brazil linked to deforestation, likely leading to these companies choosing to limit or cease operations in the EU. This will likely lead Brazilian agricultural businesses to pursue exports with countries that are less concerned about consuming goods linked with deforestation like China. This will have a roughly even chance of forcing EU companies, like the supermarkets Lidl and Carrefour, to switch their providers for some products, like beef.

  • What: A number of Brazilian small and medium-sized farmers will likely exploit law loopholes to avoid fines and losing profit. This will likely lead to the use of a third-party country associated with low risk of deforestation to enter the EU market without passing mandatory checks or use a forgery manufacturer to create fake certificates. This will likely reduce the positive environmental consequence of the ban, as deforestation will likely continue to occur. This will almost certainly affect the global climate, increasing the depletion of forests in Brazil and the exploitation of other environments, like the savannah. Soil erosion and flooding will very likely continue, which will very likely hinder Brazilian farmers’ ability to maintain a livelihood and increase indigenous peoples’ environmental displacement.

  • Why: Brazilian small and medium-sized farmers will almost certainly lack the finances and technical resources to comply with the ban. Forgery manufacturers will likely suggest a price lower than the cost assessed to comply with the EU ban. This will likely allow small and medium sized farmers from Brazil to continue their businesses, but increased costs will likely reduce revenues. In the long-term, Brazilian farmers will likely have to shut their farm to comply with the deforestation law, and they will likely move their businesses to other Brazilian biomes that are not protected under the law. This will likely reduce indigenous peoples’ access to resources, very likely forcing indigenous communities to relocate to inadequate areas, likely endangering them physically and psychologically.

  • When: Next year, Brazilian agricultural businesses, the European Commission, and environmental NGOs, like WWF, will likely observe the impacts of the ban, like financial losses and environmental benefits. Businesses will very likely resist the ban, likely delaying the ban’s environmental benefits. Delayed reductions in deforestation will very likely continue to disrupt ecosystems where deforestation-linked raw resource industries operate.

  • How: There is a roughly even chance that agricultural businesses, like cattle farmers, will engage in criminal activities to evade the ban. European law enforcement and customs agencies will very likely uncover them, likely leading to these agencies imposing fines on businesses. Fines and criminal proceedings will very likely impede the ability of the businesses to operate, likely reducing Brazil’s revenue from exporting to a significant agricultural importing region. The European Commission will likely renegotiate international trade agreements to reduce increased costs for exporting business and to ensure adherence to the law.

The Counterterrorism Group’s (CTG) EUCOM and EMH2 Teams recommend that the European Parliament and EU customs work with other major importers and exporters, like Brazil, to facilitate the implementation process. The teams also recommend that the Brazilian government work with the CNA to increase the registration of rural properties to expand the existing database of smallholders, possessors, and indigenous people to improve the national traceability systems. The registration of rural properties will help traders of commodities in deforestation hotspots to demonstrate that their product was not produced on deforested land. The teams recommend that the EU considers indigenous activists and NGOs in the implementation of the deforestation law to ensure the importation of Brazilian products is not linked to land-grabbers, loggers, or violence against indigenous people. The teams recommend that the Brazilian and European governments affected by criminals falsifying documents or attempting to bribe inspectors conduct anti-corruption operations to root out internal corruption in law enforcement.


The EUCOM Team recommends the EU to monitor the impact of the deforestation law on the import of products to the EU, like cacao, soy, palm oil, and rubber and the effects it has on supermarkets, like Lidl and Carrefour. The EUCOM Team will observe and analyze the impact of trade deals due to the deforestation law on the European and Brazilian economy and society. The EMH2 Team will continue to monitor the impact of the law on deforestation in high risk countries like Brazil. The EMH2 Team will be alert on independent reports from environmental NGOs to track any deviation from the law. The CTG’s Worldwide Analysis of Threats, Crimes, and Hazards (W.A.T.C.H.) Team will provide updates on new developments concerning the deforestation law.

________________________________________________________________________

[1]“Deforestation” by Crustmania licensed under Attribution 2.0 Generic (CC BY 2.0)

[2]Green Deal: EU agrees law to fight global deforestation and forest degradation driven by EU production and consumption, European Council of the European Union, December 2022, https://ec.europa.eu/commission/presscorner/detail/en/ip_22_7444

[3]Ibid

[4]Council and Parliament strike provisional deal to cut down deforestation worldwide, European Council of the European Union, December 2022, https://www.consilium.europa.eu/en/press/press-releases/2022/12/06/council-and-parliament-strike-provisional-deal-to-cut-down-deforestation-worldwide/

[5]Deforestation: EU law bans goods linked to destruction of trees, BBC, December 2022, https://www.bbc.com/news/world-europe-63872393

[6]Indigenous leaders say new EU anti-deforestation law falls short, Reuters, December 2022, https://www.reuters.com/article/global-environment-deforestation-indigen-idUKL8N32X5B9

[7]Deforestation: EU law bans goods linked to destruction of trees, BBC, December 2022, https://www.bbc.com/news/world-europe-63872393

[8]EU agrees law preventing import of goods linked to deforestation, Reuters, December 2022, https://www.reuters.com/business/environment/eu-agrees-law-preventing-import-goods-linked-deforestation-2022-12-06/

[9]European bill passes to ban imports of deforestation-linked commodities, Mongabay, September 2022, https://news.mongabay.com/2022/09/european-bill-passes-to-ban-imports-of-deforestation-linked-commodities/

[10] Brazil: Lula pledges to end deforestation in the Amazon after election victory, Euronews, October 2022, https://www.euronews.com/green/2022/10/31/brazil-lula-pledges-to-end-deforestation-in-the-amazon-after-election-victory

[11]Ibid

[12]Ibid

[13]EU agrees new law to kick deforestation out of supply chains, Euractiv, December 2022, https://www.euractiv.com/section/climate-environment/news/eu-agrees-new-law-to-kick-deforestation-out-of-supply-chains/

[14]How Dutch farmers became the center of a global right-wing culture war, NBC News, December 2022, https://www.nbcnews.com/news/world/dutch-farmers-emissions-global-right-wing-culture-war-rcna60269

[15]“Towards deforestation-free commodities and products in the EU”, European Parliamentary Research Service, 2022, https://www.europarl.europa.eu/RegData/etudes/BRIE/2022/698925/EPRS_BRI(2022)698925_EN.pdf

[16]Ibid

[17]European bill passes to ban imports of deforestation-linked commodities, Mongabay, September 2022, https://news.mongabay.com/2022/09/european-bill-passes-to-ban-imports-of-deforestation-linked-commodities/

[18]Towards deforestation-free commodities and products in the EU”, European Parliamentary Research Service, 2022, https://www.europarl.europa.eu/RegData/etudes/BRIE/2022/698925/EPRS_BRI(2022)698925_EN.pdf

[19]Brazilian agricultural exports hit record in 2021, Brazilian Farmers, January 2022, https://brazilianfarmers.com/news/brazilian-agricultural-exports-hit-record-in-2021/#:~:text=Wheat%20and%20soy%20bran%20are,the%20United%20States%20(9.8%25).

[20]UN report: indigenous people are the best forest guardians, Rainforest Rescue, March 2021, https://www.rainforest-rescue.org/updates/10177/un-report-indigenous-people-are-the-best-forest-guardians

[21]Ibid

[22]Indigenous leaders say new EU anti-deforestation law falls short, Reuters, December 2022, https://www.reuters.com/article/global-environment-deforestation-indigen-idUKL8N32X5B9

[23]European Parliament champions indigenous peoples’ rights in landmark deforestation law, Fern, September 2022, https://www.fern.org/publications-insight/european-parliament-champions-indigenous-peoples-rights-in-landmark-deforestation-law-2558/

[24]Ibid

[25]Ibid

[26]EU consumption responsible for 16% of tropical deforestation linked to international trade - new report, WWF, April 2021, https://www.wwf.eu/?2831941/EU-consumption-responsible-for-16-of-tropical-deforestation-linked-to-international-trade

[27]Ibid

[28]Final agreement on EU deforestation law draws near, WWF, December 2022, https://www.wwf.eu/?8322941/Final-agreement-on-EU-deforestation-law-draws-near

[29]Lives and forests at risk: Indonesia shows flaws in EU’s plans to fight deforestation, Politico, December 2021, https://www.politico.eu/article/lives-forest-risk-indonesia-show-flaw-eu-plan-fight-deforestation/

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