Indonesia urges EU to rethink deforestation rules impacting farmers

Indonesia is seeking to ensure European Union Deforestation Regulation (EUDR) does not penalise its smallholder farmers, whose livelihoods depend on exports to Europe.

With the regulation set to come into force in less than three months, anxiety is mounting among Indonesian businesses and their EU counterparts. At the recent Ad Hoc Joint Task Force on the EUDR, Indonesia advocated for a postponement of the EUDR’s implementation, specifically for smallholders.

Europe represents Indonesia’s third-largest export market for palm oil, with annual volumes reaching 4.2 to 4.3 millions tons. Beyond palm oil, the EUDR’s reach extends to other key Indonesian exports such as cocoa, coffee, rubber, and wood products.

The regulation, part of the EU’s Green Deal, aims to halt deforestation driven by European consumption by tracing the origins of products like palm oil, rubber, and cocoa to ensure they are not produced on land deforested after December 2020.

EU’s response and stakeholder reactions

European Commission President Ursula von der Leyen has acknowledged the enforcement challenges of the EUDR. She proposed either delaying its enforcement or finding an alternative solution to prevent the regulation from taking effect as planned. This move aims to resolve the current deadlock and ease concerns among stakeholders.

On 19 July, von der Leyen affirmed the EU’s commitment to its environmental objectives but emphasised the need for a more systematic approach to evaluating the impact of EU laws on non-EU countries. She highlighted the importance of providing more targeted support to help these countries adapt to and benefit from the regulations.

In addition to Indonesia, twenty-eight organisations representing EU primary producers and industries have expressed grave concerns and urged a delay in the regulation’s application.

Indonesia’s concerns

Indonesia, as a major exporter of palm oil, rubber, and cocoa has voiced significant concerns over the EUDR’s compliance requirements. “Businesses in Indonesia are getting more worried by the day, and even more so for the operators in the EU,” Dr Musdalifah Machmud, former Indonesian Deputy Minister at the Coordinating Ministry for the Economy, and current Expert Staff for Connectivity, Service Development, and Natural Resources, told Euractiv.

The stringent documentation and traceability requirements pose a substantial threat to Indonesia’s 2.6 million palm oil smallholders and 8 million smallholders across various commodities.

“To give an indication of the size of the problem, a recent study undertaken in Indonesia estimates that around 97.5% of Indonesia’s palm smallholders cannot meet the EUDR’s documentation requirements,” said Machmud. “This is more than 2.5 million people.”

According to Machmud, many smallholders are already in compliance with the EUDR’s conditions on zero-deforestation and legality, but they face significant challenges in proving this compliance.

“First, they need the resources to compile their legality documentation and to provide their geolocation,” which is essential for demonstrating adherence to the regulations.

Additionally, the palm oil supply chain is complex, involving multiple parties before the palm fruit reaches mills and processors. For EUDR compliance, documentation must be meticulously maintained at each step.

One exporter estimates that around six million points of data are required for each shipment. This complexity often leads larger exporters to bypass smallholders entirely—a trend already observed.

“We are sure that this is not the outcome that the EU was seeking when it introduced the regulation,” said Machmud. “This issue is occurring across multiple commodities and in many countries.”

Key demands for improving the EUDR

Indonesia has identified several key areas for improving the EUDR. Firstly, the EU should review its approach to ensure the inclusivity of smallholders in producing countries. This involves addressing the cost and timeline challenges they face to avoid exclusion from supply chains due to stringent compliance requirements.

Secondly, the EU should acknowledge and respect the improvements made in Indonesia’s legal and sustanabile certification schemes, such as the Indonesian Sustainable Palm Oil (ISPO) and the Timber Legality Assurance System (SVLK). Recognising these national certification schemes would support Indonesia’s efforts in promoting sustainable practices.

Thirdly, the EU’s unilateral approach to developing a global forest map should involve consultation with producing countries. On-site verification is essential to create a scientifically accurate map, ensuring that the data reflects the realities on the ground.

Fourthly, Indonesia stresses the importance of maintaining control over its data. The country expects the EU to work collaboratively on traceability schemes, respecting Indonesian privacy laws and ensuring that data control remains with the producing countries.

Lastly, a clear roadmap is needed after the Ad Hoc Joint Task Force concludes its work. This roadmap should provide a resilient environment for global value chains, outlining the steps and timelines for implementing the EUDR in a way that supports both environmental goals and the economic realities of producing countries.

Indonesia’s progress in reducing deforestation

Indonesia has made significant strides in reducing deforestation, achieving its lowest deforestation rates on record in 2022.

“This success is attributed to two key initiatives: the Forest Moratorium, established in 2011, which protects primary natural forests and peatlands from new concessions, and the Palm Oil Moratorium, introduced in 2018, which aims to curb deforestation linked to palm oil plantation expansion,” said Machmud.

Indonesia’s national palm oil certification scheme, ISPO, is the largest in the world and forms a crucial part of the country’s sustainability strategy. Indonesia has also developed a National Dashboard to provide accessible geolocation and other data for importers.

However, the EU has not recognised this approach, insisting on direct data transmission to competent authorities, which conflicts with Indonesian privacy laws. “The EU still insists that all geolocation data must be handed over to competent authorities. In other words, in order to comply with EU law, farmers will have to break Indonesian law. This impasse could have been avoided with greater consultation,” Machmud added.

Looking ahead: negotiating a balanced EUDR

As the EUDR’s enforcement date approaches, Indonesia continues to advocate for adjustments that consider the realities of smallholders and existing national initiatives. The outcome of these discussions will be crucial for the future of Indonesia’s agricultural sector and its trade relations with the EU.

[By Nicole Verbeeck I Edited by Brian Maguire | Euractiv's Advocacy Lab ]