Remote remedies: curbing global deforestation and biodiversity loss via EU markets

The world is in the midst of a climate and biodiversity crisis. While deforestation rates have fallen from historic highs, they remain unchecked. The agricultural sector is a leading driver and, while a significant proportion of production is destined for domestic markets, international demand plays a critical role. For example, about 90% of Finland’s food-related biodiversity footprint is from outside its borders. In other words, economies such as the EU are “offshoring” the impact of their citizens’ consumption.

In response, the EU has recently introduced legislation to clean up its supply chains. The EU’s Deforestation Regulation (EUDR) is an ambitious plan to prevent products linked to deforestation from entering the market. The legislation covers some of the key commodities linked to deforestation: beef, soy, palm oil, cocoa, coffee, rubber and timber, which account for around 80 per cent of tropical deforestation in international trade (WWF 2021, pdf).

However, questions remain about the likely effectiveness of the EUDR. It may reduce the risk of deforestation in the EU supply chain, but some researchers are asking whether this is enough. Do we need to make deeper cuts in EU demand to ensure the protection of the world’s forests?

This is the question that we are exploring in a new project between Sitra, the Stockholm Environment Institute at the University of York, and Leiden University. During 2024, we will explore a range of near-term policy options that could be implemented to tip the balance in favour of forests and global biodiversity.

Consumption policy, including the circular economy, and its potential to halt global deforestation

We will use policy reviews, global supply chain modelling, and indicators for forest loss and biodiversity impacts to assess the global impact of potential EU interventions around the world.

Take, for example, the set of policies that have been proposed in the context of a transition to a circular economy. Minimising food waste and loss, for example, could reduce EU demand for bulk food commodities such as soy or palm oil in the first place, and substitutes and smaller packaging can help address the impacts associated with cocoa and coffee. Similarly, efforts to promote the recovery of critical materials, such as finding solutions to recycle the rubber from the 1 billion car tyres typically discarded each year, could significantly reduce pressures on Southeast Asian forests.

At the same time, a shift to renewable materials also presents new challenges. While timber construction might reduce some of the emissions associated with construction materials such as concrete or steel, substituting timber could lead to additional land use change and loss of carbon sinks (pdf). Therefore, circular solutions that help design buildings with fewer materials, longer lifetimes and more reused and recycled timber are key.

Overall, within any policy domain, there are a variety of interventions that could take place. For each intervention, we need to understand the feasible scale of impact, the likely rate of uptake, and any unintended consequences or factors that might dilute policy success. Wherever possible, interventions should be part of a broader toolbox. A mix of policy interventions will have more profound effects than each intervention on its own.

Assessing the impacts of policy change

In order to assess the potential of EU demand-side policy to bring about transformative, positive, change, our project will undertake a policy mapping and assessment exercise. We will identify key policy areas and interventions that are likely to influence the demand for and sourcing of forest-risk commodities. We’ll do this through four case studies:

1. Circular economy interventions, covering a broad range of demand-reduction, product design and business model interventions.
2. Extending the Carbon Border Adjustment Mechanism (CBAM) to our deforestation-risk commodities and exploring the potential for biodiversity costs to be applied in addition to carbon.
3. Sustainable domestic production, exploring the feasibility of substituting domestic production for imports and the environmental impact of doing so.
4. EU Deforestation Regulation ‘plus’, to explore the potential impacts of broadening the scope of EUDR requirements.

These case studies will be packaged into a set of modelled scenarios that aim to understand how changing EU policy may impact the trade and production flows that ultimately impact on land use change and deforestation, associated emissions, and biodiversity.

In sum, we will examine the impact of tangible, but ambitious, policy measures that extend current EU action on deforestation and international biodiversity loss. Failure to address these issues will have long-term and devastating consequences for all people on the planet. The interventions we identify also have the potential to be a model for other trade and consumption markets. Global action is needed to bend the curve on deforestation and biodiversity loss, but rapid action has to start somewhere and the EU is in pole position to take a leading role.

Our research is due to be completed at the end of 2024, and the results will be made available in an accompanying project report.

This article is published at the World Circular Economy Forum 2024. If you would like to learn more about circular solutions for nature to better understand some of the more impactful business models that can tackle critical biodiversity impacts and generate profits, Parallel Session 5, Circular Business Solutions for Nature, delves deeper into the topic.

Authors:

Chris West – Deputy Director (Research), Stockholm Environment Institute, University of York

Robin Vrijhoeven – MSc student Industrial Ecology, Leiden University

Oliver Taherzadeh – Assistant Professor, Institute of Environmental Sciences, Leiden University

Tim Forslund – Specialist, The Finnish Innovation Fund Sitra