EU considers future of illegal logging and deforestation policy

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During June 2017, two large conferences in Europe addressed policy issues in relation to deforestation and illegal logging. The conferences reaffirmed the EU’s continued political commitment to trade related policy measures in response to concerns about illegal logging and deforestation.

The conferences also highlighted developments in EU policy on issues such as sustainable forest certification and green procurement with significant implications for future development the European market for tropical wood products.

The first conference, the “Illegal logging Update Meeting”, is a regular annual event hosted by Chatham House in London.

The second conference was organised by the European Commission (EC) to present an evaluation and future work plan for the EU Action Plan on “Forest Law Enforcement Governance and Trade” (FLEGT).

The EC meeting also included discussion of the potential for another EU action plan to address wider causes and solutions to deforestation – such as pressure from agricultural commodities and carbon financing.

FLEGT update

The EC’s own evaluation estimates public expenditure of Euro 900 million on the FLEGT Action Plan, mainly derived from the EC budget, in the ten years of its operation prior to 2014. That figure is now likely to exceed Euro 1 billion.

Most of the money has been spent on support for FLEGT Voluntary Partnership Agreements (VPAs) with tropical countries which aim to develop legality licensing systems for all wood exported from partner countries.

The EU Timber Regulation (EUTR) was introduced in March 2013 primarily to give a market incentive for tropical countries engaged in the VPA process – FLEGT licenses are given a “free pass” through the due diligence requirements of EUTR.

At the meeting in Brussels in June, EC officials were candid about the progress of the FLEGT VPA process, noting that the results have been mixed so far. Seventeen tropical countries which together account for over 80% of global tropical wood exports, have either signed or are involved in negotiations towards a VPA. However, only one – Indonesia – has so far issued FLEGT licenses.

Progress varies widely in other partner countries. In some - like Congo, Ghana, Guyana, Honduras, and Vietnam - negotiations are very active. In others - like Côte d'Ivoire, Cameroon, the Central African Republic, DRC and Malaysia - negotiations have stalled or are proceeding only very slowly. There is considerable variation in the willingness of government authorities and industry in partner countries to engage in negotiations or to commit their own resources.

EC officials speaking in Brussels acknowledged that the development of licensing procedures has been considerably more complicated than first envisaged.

However, they were also keen to emphasise that, even in the absence of licenses, there have been broader and potentially more significant benefits of the FLEGT process in many partner countries, notably relating to stakeholder participation and benefits-sharing and in legislative reform and capacity building.

EU takes a more nuanced approach to FLEGT

The experience gained from the FLEGT process to date, and growing awareness of the diverse needs and expectations of different tropical countries, is encouraging the EC to take a more nuanced approach to the FLEGT process.

At the Brussels conference, EC officials said that in practice, negotiation of a VPA requiring implementation of a comprehensive legality licensing system for all exports into the EU is not necessarily the most appropriate tool for all tropical countries.

While no country will be ‘a priori’ excluded from the VPA process in the future, decisions by the EU to begin negotiations with additional tropical countries will be based on careful assessment of a range of factors such as the level of political will, recognition of the rule of law, and institutional capacity in the partner country, together with the current and potential future level of trade with the EU.

EC officials noted that it may be necessary to establish and formally acknowledge an extended preparatory phase for some tropical countries where requirements for a full VPA are not met.

Options other than a full formal VPA may also be considered to deliver FLEGT objectives in some countries, for example specific forest sector support programmes, FLEGT structured-dialogues, and as a component of wider free trade engagements.

However, it was also stressed that the EU would retain the existing policy of only allowing EUTR due diligence checks to be by-passed by importers if the imported timber is accompanied by a FLEGT license.

FLEGT shortcomings

Speaking at the Brussels conference, EC officials acknowledged weaknesses in the FLEGT process even in countries where negotiations have been progressing.

Specifically, it was noted that there needs to be more focus on improved monitoring of VPA impacts, reporting of activities, better understanding and more effective handling of domestic and informal markets in tropical countries, and wider engagement with the private sector.

A particularly critical need was identified to ensure SMEs are adequately consulted and involved during the development of licensing systems. The licensing system offers both challenges and opportunities for smaller operators and their engagement is central to success.

On the one hand, in many countries, smaller operators tend to be those most dependent on informal sources of timber supply and licensing procedures may therefore greatly reduce their access to raw material.

On the other hand, because FLEGT licensing must be applied to all operators, irrespective of size, it demands capacity building and the development of innovative new mechanisms for legality assurance that could improve smallholders access to international markets.

EU debates changing context for VPAs

In considering the future of VPAs and the wider FLEGT Action Plan, EC officials at the Brussels conference said they needed to take account of the changing market and policy context. It was noted that the EU’s relative weight in the global timber trade has fallen considerably since the Action Plan was first initiated in 2003, due both to the financial crises in Europe and the rapid growth in emerging markets.

EC officials also noted that concerns surrounding illegal logging are not limited to tropical countries, and that an important focus of future FLEGT-related dialogue will be with other timber-supplying countries like Ukraine, Belarus, and Russia.

At the same time, there have been major developments in other policy initiatives notably, in 2015, agreement of UN Sustainable Development Goal 15 (SDG 15) to halt global deforestation by 2020, and the Paris Agreement which places efforts to tackle deforestation and promote sustainable forestry at the heart of global carbon mitigation measures.

EC officials particularly emphasised the potential to link future evolution of the FLEGT Action Plan to the EU’s External Investment Plan (EIP) which covers countries in both Africa and the EU’s “neighbourhood” such as Ukraine and Belarus.

The EIP aims to encourage private investors to contribute to sustainable development in these countries, for example by providing guarantees for investments and loans to entrepreneurs and companies with viable business proposals meeting social needs in sectors traditionally regarded as higher risk. With a contribution of Euro 4.1 billion from the EC, the EIP is expected to leverage more than Euro 44 billion of investments by 2020.

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