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Why Forest Data Sparks New Global Clash Over EUDR Rollout

As global governments dispute maps, tech companies are exploring blockchain technologies to cut compliance costs and ensure full traceability.


Wed 31 Jul 24

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The Australian government—and new Agriculture Minister Julie Collins—is at loggerheads with the EU over EUDR, with Australia joining Brazil, Canada, and Columbia—in arguing that Brussels is using the wrong maps to determine deforestation.

It comes as Australia is racing the clock to convince the EU that tree clearing is not “deforestation,” an important definition that risks millions of cubic metres of timber—sold directly into the EU or via a third country—and a small but highly lucrative beef market.

“The EU’s map is not a single source of truth but acts as one possible source of information for EU operators and competent authorities to determine if deforestation has occurred,” according to a spokesperson who spoke to the Financial Times from Australia’s embassy in Brussels.

Wood Central understands that the disagreement comes down to whether the EUDR will use Canberra’s Forests of Australia Map (published in 2023) or the 2020 EU Observation on Deforestation and Forest Degradation, which uses different definitions of forested areas.

Australia’s concerns come after twenty (out of 27) European Agricultural Ministers called for rules to be delayed amid fears of global supply chains, echoing warnings from government officials in China, the United States, New Zealand, Brazil, Canada, Columbia, Indonesia and Malaysia.

Peter Liese, a prominent German Member of the European Parliament (MEP) and the EPP’s environment spokesperson, has spearheaded the opposition to the law’s imminent enforcement. (Photo Credit: EPA-EFE/RONALD WITTEK)
Peter Liese, a prominent German Member of the European Parliament (MEP) and the EPP’s environment spokesperson has spearheaded the opposition to the law’s enforcement. (Photo Credit: EPA-EFE/RONALD WITTEK)

According to the Australian embassy, Brussels has yet to publish guidance on complying with rules, with several EU member states yet to nominate a national authority to police imports.

In addition, “Australian producers need to prepare for export to Europe months before the year deadline to account for shipping time, yet significant questions remain, such as clarification about what counts as predominantly agricultural land use,” the embassy said. Instead, Australia is now is pushing for a delay in implementing the rules, “until all requirements are understood and are effectively in place.”

“Our private sector has documented multiple cases of cocoa and coffee plantations, as well as commercially grown tree plantations, that have been misidentified as forests,” said Pedro Miguel da Costa e Silva, Brazil’s ambassador to the EU. Adding that producers would now need to spend millions of dollars on private compliance systems because “European operators and competent authorities will not cooperate with authorities to use local monitoring systems that have much higher precision rates.”

Unpacking the EUDR $2.5b Compliance Bomb

In May, Wood Central reported that the forecast compliance cost for the EUDR could balloon to US $2.5 billion as global forest producers drown in red and green tape. For its measure, the EU anticipates the cost “will need to be absorbed by a reduction of profit by operators along the value chain and eventually passed through to the final consumer.”

Yesterday, Wood Central spoke to iov42, a global blockchain company that has now launched Interu—a fully traceable, “best of breed” technology solution tailor-made for global deforestation, who said 18% of global timber importers surveyed were blissfully unaware of EUDR and it’s impact on compliance costs.

iov42 is leading the way in using Blockchain technology to address EUDR concerns. Footage courtesy of @_InnovationZero.

According to Anna Roberts, Head of Market Development for iov42, who is now working with the EUDR, the UK Environment Act, the US Forest Act, and the Japan Clean Wood Act, 59% of importers have insufficient funds for traceability (as per a recent iov42 report) – leading to half of all timber importers surveyed taking a “wait and see approach” to due diligence.

“The Costs of not doing due diligence are huge,” Ms Roberts said, “not only for reputational risk but also fines (up to 4% of revenues) if they fall foul of the EUDR.” Ms Roberts added that a paper company producing notebooks could have 300,000 different forest plots: “You need to gather that data, analyse it, assess it, and share it with the regulator and customers.”

“The real problem is data; how can we collect it at scale, share it across very complex and often less trustworthy networks, and how do you trust that data?”

That’s where blockchain can help. “We found that 67% of all European timber companies we surveyed said that the EUDR will increase market share, but it will require different tools and methodologies.”

“We need best-of-breed technologies, including earth observation, remote sensing, satellite imagery, and even DNA-testing or products,” to get a fit-for-purpose solution that can work for the total supply chain.

Ultimately, the EUDR comes down to traceability. Ms Roberts recently told the Innoation Zero World Congress, “We think there are four critical elements to make traceability possible.”

“First is ecosystem collaboration, second is advanced technologies, and third is trust in data, and finally, equitable distribution of data.”

How the EUDR will work
  • The regulation will assign a low, standard, or high-risk level associated with deforestation and forest degradation to regions within countries inside and outside the EU.
  • This risk classification will guide the obligations of various operators and the authorities in member states to perform inspections and controls. Consequently, this will streamline monitoring for high-risk regions and simplify due diligence processes for low-risk regions.
  • Authorities responsible for these areas must inspect 9% of operators and traders dealing with products from high-risk regions, 3% from standard-risk areas, and 1% from low-risk regions. This inspection aims to confirm whether they are effectively meeting the obligations stipulated by the regulation.
  • Further, these competent authorities will inspect 9% of relevant goods and products either placed on their market, made available, or exported by high-risk regions.
  • Lastly, the EU plans to enhance its cooperation with partner countries, focusing primarily on high-risk areas.

For more information on Australia’s response to EUDR, visit Wood Central’s special feature on EUDR and its implications for the Australian supply chain of beef and timber products.

Author

  • Jason Ross

    Jason Ross, publisher, is a 15-year professional in building and construction, connecting with more than 400 specifiers. A Gottstein Fellowship recipient, he is passionate about growing the market for wood-based information. Jason is Wood Central's in-house emcee and is available for corporate host and MC services.

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