Deforestation: assessing the impact of different regulatory options

An EU legal framework to halt and reverse EU-driven global deforestation is a European added value assessment (EAVA) for the European Parliament. The study quantifies the impacts of different policy options that could be applied to reduce, or even end, global deforestation caused by EU imports.

The analysis, undertaken by Cambridge Econometrics, reveals that the four demand-driven policy options studied have the potential to reduce EU-driven deforestation and associated carbon emissions with a relatively small impact on the EU economy.

Context

The production of food and biofuel is one of the main drivers of deforestation, contributing to global greenhouse gas emissions and biodiversity loss. The EU is a major global importer of ‘forest risk commodities’ (FRCs), defined as commodities that are often associated with deforestation or forest degradation. The EU aims to develop a regulatory framework to halt and reverse deforestation linked to EU imports of agricultural commodities for food and biofuels produced from crops.

Key findings

At EU level, four policy options are analysed in detail.  In terms of the cumulative reduction in embodied deforestation of imports to the EU compared to baseline, between 2020-2030, the study found that:

  1. mandatory due diligence of supply chains (implemented from 2023) could lead to a cumulative reduction of 62%
  2. mandatory certification (if effectively implemented from 2023) could lead to a cumulative reduction of 76%
  3. mandatory certification standards combined with due diligence of supply chains could lead to a cumulative reduction of 76%; and
  4. mandatory labelling (consumers may favour ‘no deforestation’ products) could lead to a cumulative reduction in embodied deforestation of 4%

The modelling approach combines an existing macroeconomic model with a method to translate the imported quantities of FRCs into land use and deforestation linked to land use. Cambridge Econometrics’ E3ME macroeconomic model was used to measure the economic impact in the EU of each policy option, compared to the baseline (Member State level action) and quantified the changes in EU demand for each of the six commodities studied (driven by changes in production costs and prices).

Each policy option leads to a price increase of FRCs within the EU, leading to higher food and biofuel prices. Due diligence, mandatory certification with due diligence and mandatory labelling will also require a small increase in government spending.

Cornelia Suta Project Manager cs@camecon.com