Indonesia and Malaysia tackling deforestation as new EU restrictions loom
Some stakeholders say the European Commission’s deforestation designations are too political for some, and too soft for others. Can the Commission’s balancing act protect the environment without destroying jobs?
A delayed EU anti-deforestation law will soon add new restrictions to EU imports. Palm-oil-producing countries have made significant efforts to reduce indirect land use change from its cultivation. But will it be enough to satisfy the new law?
Last week, the European Commission published a legal act ahead of the start of the world’s first anti-deforestation law, which will take effect in the EU at the end of this year. The act benchmarks countries based on the risk of deforestation caused by their exports.
Four countries were given the designation as being at “high risk” of fuelling deforestation: North Korea, Russia, Belarus and Myanmar.
Major forest nations such as Brazil, Indonesia and Malaysia were assigned the category of “standard risk”. Compliance checks will be required for 9% of exports from high-risk countries, while 3% will be required for those from standard-risk.
The categorisation has caused controversy, with some accusing the Commission of making the designations for political reasons rather than scientific ones.
Others have said the Commission is trying to lessen the impact of the rules after countries and companies complained that the bureaucratic burden would be too much, something which already caused the delay of the start of the legislation from the original date of December 2024.
But the standard risk countries say that the designation reflects the significant progress they have made in tackling deforestation over the past decade.
This has been especially true for palm-oil-producing countries, which were the subject of intense scrutiny ten years ago amid concern that EU biofuel targets for transport were driving an increase in palm oil production, which was in turn driving deforestation. Since then, both Indonesia and Malaysia have made efforts to get a handle on the situation.
Abrupt EU policy shift
The EU’s biofuel targets, first adopted in 2003, were intended to reduce the use of fossil fuels in transport, to combat climate change. So, the possibility that the policy could be increasing climate change by driving Indirect Land Use Change (ILUC) when forests are cleared to grow the crops became alarming to policymakers starting in 2010.
In 2014, the amount of first-generation biofuels that can be used to meet the renewable fuel targets was capped, and palm oil can no longer be used to meet the target.
Forests act as a natural carbonk sink to suck emissions out of the atmosphere, and forest fires are the second-largest contributor to global warming, accounting for 19% of global carbon emissions between 1959 and 2019, according to a study by Oxford University.
Governments, therefore, also have an interest in stopping deforestation, and significant efforts have been made in that direction.
Concerted conservation efforts, commitments towards climate neutrality under the Paris Agreement, and targeted wildlife protection projects have already begun to influence the trajectory of forest preservation and sustainable palm oil production.
Both Indonesia and Malaysia have established a network of protected areas, including national parks and conservation corridors, designed to safeguard remaining primary forests and endangered species habitats. Legislative reforms have been introduced in both countries to improve land-use planning, enforce anti-encroachment measures, and monitor illegal logging activities.
Significant progress
The results of these changes have already been seen.
In 2018-2020, deforestation for palm oil was 45,285 hectares per year, 18% of its peak in 2008-2012, according to research by the deforestation NGO Trase. And that drop came during a period of continued expansion of palm oil production. Some of the drop can be attributed to a drop in the market value of crude palm oil following the legislative changes ten years ago. But there has been a recent spike in palm oil prices since then, which has not been accompanied by a boom in palm-driven deforestation, according to Trase.
“Palm oil presents a positive example of decoupling commodity production from deforestation,” says Anita Neville, Chief Sustainability and Communications Officer at the Singapore-based palm oil company Golden Agri-Resources. “This hasn’t been achieved through policy and pledges alone, but by sustained, collaborative efforts between government as well as the public and private sectors.”
She points to Initiatives such as the Roundtable on Sustainable Palm Oil, which her company is a member of, as an example of ways that industry commitments on implementing No Deforestation, No Peat and No Exploitation (NDPE) can be measured and verified. “What that data demonstrates is that a long-term commitment of time and investment to engage and upskill farmers can improve practices and is effective in tackling deforestation.”
Net-zero emissions
The commitments by Indonesia and Malaysia to reach net-zero greenhouse gas emissions as part of their Nationally Determined Contributions (NDCs) under the Paris Agreement have also played a pivotal role in reorienting policies and industry practices.
These commitments have prompted governments to integrate climate objectives with forest conservation, fostering initiatives aimed at restoring degraded lands and promoting agroforestry practices. As a result, some palm oil producers have begun to shift towards more sustainable land use, such as intensification on existing plantations and dedicating land to conservation, thereby reducing pressure to clear new forests.
The international financial sector and consumers’ increasing demand for sustainable products have also incentivised companies to invest in environmentally responsible practices.
Aside from saving forests, these efforts have also focused on protecting wildlife and biodiversity.
Several projects have targeted iconic species, including orangutans, Sumatran rhinos, and elephants. For instance, wildlife corridors have been established in Indonesia to facilitate movement and genetic exchange among populations, reducing fragmentation caused by plantations.
Community-based conservation projects have been established, engaging local communities in safeguarding habitats and promoting alternative livelihoods.
Other initiatives include rescue and rehabilitation centres for critically endangered species, research on habitat connectivity, and anti-poaching efforts supported by international collaboration. These efforts aim to address the root causes of wildlife decline caused by habitat loss, human-wildlife conflict, and illegal poaching.
Compliant with EU law?
Despite these advances, significant hurdles remain.
Deforestation continues in certain regions due to weak enforcement, land tenure ambiguities, and economic incentives favouring land conversion. 2.4 million hectares of intact forest remain within Indonesia’s oil palm concessions, according to Trase, which presents a risk for backtracking on progress made so far.
“This large area of forest designated for palm oil production underscores both an opportunity for conservation, as well as the potential risk that further oil palm expansion may pose to Indonesia’s rainforest,” Trase has concluded in an analysis. “A fundamental challenge over the coming decade will be to meet continued growth in demand for products derived from palm oil, while ensuring that deforestation continues to decline.”
To address this, comprehensive supply chain transparency, strengthened enforcement of zero-deforestation commitments, and the adoption of satellite monitoring and AI-based land-use tracking are essential. Additionally, supporting smallholder farmers in adopting sustainable practices and ensuring equitable land rights can reduce incentives to clear forests.
Enough progress?
The big question is whether the progress made in Indonesia and Malaysia on palm oil will be enough to satisfy the new EU deforestation law requirements.
Campaigners say they still believe the law is the best tool to stop global deforestation, even if there are concerns about the low number of countries designated as high risk. “The benchmarking system unfortunately falls short of what the science requires… but in practice, this shouldn’t undermine the power of this law to save forests,” said Giulia Bondi, senior EU campaigner at Global Witness, following the publication of the implementing act last week.
“Even when trading in products produced in a ‘low’ or ‘standard-risk’ country, companies will still have to prove their supply chains are free from deforestation and human rights abuses,” she added.
But many companies, and governments both within and outside the EU, say the law risks being too prescriptive and could hinder deforestation efforts – concerns which have already resulted in the law’s delay.
“The EU’s continued uncertainty about EUDR implementation diverts attention from valid concerns that the measure is all stick and no carrot,” says Neville. “Without support and incentives to transition to more sustainable practices, the risk is that smallholder farmers – farming families that don’t have the means or capacity to comply yet – will be shut out of global markets.”
Neville says that regardless of what happens with the EU deforestation law, the industry’s progress will continue, noting that, “Growers, customers and industry bodies will continue our collaboration to tackle the root causes of this problem, hoping to promote resilient, sustainable incomes for farmers that produce responsibly.”
[Edited By Brian Maguire | Euractiv’s Advocacy Lab ]
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