On 17 November 2021, the European Commission (Commission) published its Draft Proposal for a Regulation on Deforestation-free products. Under the future Regulation, commodities and products associated with deforestation and forest degradation, likely including wood, cattle, soya, palm oil, coffee, and cocoa, would not be allowed to be placed on the EU market or exported from the EU and businesses would have to comply with the due diligence obligations established by the Regulation, which would require, inter alia, the implementation of risk assessment measures.
On 13 September 2022, the European Parliament adopted its position regarding the Commission’s Proposal and on 28 June 2022 the Council of the EU adopted its general approach. Since September 2022, the Commission, the European Parliament, and the Council of the EU have been engaging in inter-institutional trialogue negotiations to agree on a common text for the Regulation. Typically, trialogue negotiations last between three and six months, depending on the issues and respective positions. So far, two rounds of trialogue negotiations have been held, one on 27 September 2022 and the latest was held on 9 November 2022. As of now, there is no indication of the outcome of the latest round of negotiation and regarding the date for the next trialogue.
When the first round of trialogue negotiations was held, rumours swirled heavily that the EU institutions were hoping to conclude the trialogue negotiations by the middle of December 2022. This is due to a COP15 on Biodiversity, a Biodiversity Conference organized by the United Nations, scheduled from 7 to 19 December in Canada. After two rounds of trialogue negotiations, it appears unlikely that a political agreement could be reached anytime soon. The important differences in the key elements of the Regulation remain notably concerning. They include the products to be covered by the scope; The definition of ‘deforestation’; Whether financial institutions should be covered by the Regulation; The rules on ‘geolocation’; and Penalties.
Mitigation steps
The CPOPC and individual member countries should engage with the EU regarding this proposed Regulation, which looks poised to have a significant impact on palm oil. Notably, the EU should rely on an internationally accepted definition of ‘deforestation’ and the CPOPC should advocate for particular aspects of the deforestation-free products Regulation catering to the needs of palm oil-producing countries, particularly concerning smallholders and MSMEs involved in the supply chains.
Malaysia should engage not only with the Commission but also with EU Member States and key Members of the European Parliament, underline that, under its Malaysian Sustainable Palm Oil (MSPO) certification scheme, mandatory rules already confirm compliance with several social and environmental standards. Therefore, businesses should be able to rely on the MSPO scheme to ensure compliance with the due diligence obligations set by the Regulation.
Prepared by MPOC Europe
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