JAKARTADAILY.ID – Since May 16, 2023, the European Union (EU) has enforced a new anti-deforestation law known as the EU Deforestation Regulation (EUDR), impacting several of Indonesia's key exported commodities to Europe. Aimed at minimizing deforestation risks, this regulation has raised concerns for the Indonesian market.
According to the European Parliament, the EU plays a significant role in global deforestation as both a consumer and wholesaler of various commodities and products. The EUDR intends to ensure that EU consumption and trade do not contribute to deforestation worldwide.
Also Read: Corporate Actions Take Center Stage at Indonesian Stock Exchange: A Look at Today's Activities
Affected Commodities and Derivatives
The implementation of the EUDR has consequences for several commodities exported by developing countries, including Indonesia. The affected commodities include palm oil, beef, wood, coffee, cocoa, rubber, and soybeans. The regulation also extends to derivative products such as chocolate, furniture, printing paper, and other palm oil-based derivatives.
With the implementation of the EUDR, all of Indonesia's major commodities exported to Europe, except for beef and soybeans, fall under this regulation. Failure to meet the deforestation rules may lead to the prohibition of these commodities in EU member countries.
According to Indonesia's 2022 trade balance, exports of palm oil and its derivatives, rubber, coffee, and cocoa generated revenue of US$6.5 billion in the European market. Non-compliance with the EUDR could significantly impact Indonesia's export earnings.
Strict Requirements and Compliance Period
Under the EUDR, exporters sending these products to EU member countries will undergo due diligence processes. Exporters must track the commodities from production to export and guarantee that they are not sourced from deforestation areas after 2020 or January 1, 2021. Violations can result in fines of up to 4% of the exporters' EU-generated income.
The EU will categorize countries of origin based on high, medium, and low deforestation risk. Large companies are granted a grace period of 1.5 years, while small companies have up to two years to comply with the EUDR regulations.
EU's Environmental and Human Rights Perspective
The EU justifies the EUDR by emphasizing the protection of human rights associated with deforestation. The regulation acknowledges the position of indigenous peoples in the areas of origin of the products. European Parliament legal expert Christophe Hansen highlights that consumers in Europe can now be assured that they are no longer unwittingly involved in deforestation.
The EU's insistence on implementing the EUDR stems from the alarming rate of global deforestation. Approximately 10 hectares of forest disappear worldwide every minute, according to research by the World Resources Institute. The EU claims that without the EUDR, they contribute to the loss of around 248,000 hectares (612,000 acres) of forest due to deforestation each year.
