EU Regulation on Deforestation-Free Products: A potential game-changer for commodity-driven deforestation

This research paper by the Climate Bonds Initiative analyzes the European Union Regulation on Deforestation-Free Products (EUDR), evaluating its potential to combat commodity-driven deforestation and providing recommendations to strengthen its implementation and scope.

• The EUDR establishes a mandatory due diligence system for operators and traders of specific commodities—cattle, cocoa, coffee, oil palm, rubber, soya, and wood—to ensure they are not sourced from deforested land, regardless of whether the deforestation was legal under local laws.
• Climate Bonds recommends expanding the EUDR's scope to include financial institutions to prevent the financing of deforestation and to align with the EU Sustainable Finance Disclosure Regulation (SFDR).
• The current definition of deforestation in the EUDR is criticized for being too narrow, as it only covers the conversion of natural forests; Climate Bonds suggests including other high-carbon biomes such as savannahs, grasslands, peatlands, and wetlands.
• EU Member States are responsible for enforcement, including conducting annual compliance checks based on a three-tier risk rating (high, standard, low) assigned to the country of origin. Inspection rates are set at 9% for high-risk, 3% for standard, and 1% for low-risk areas per commodity.
• Non-compliance with the EUDR can lead to significant penalties, including fines starting at 4% of an operator's annual EU turnover, product confiscation, and temporary bans on exporting relevant commodities to or from the EU.
• There is a significant risk of a 'two-tier commodity trading system' where high-risk products are diverted from the EU to markets with less restrictive requirements, such as China or the United States.
• Climate Bonds suggests that transition plans and third-party certification schemes, such as the Climate Bonds Standard Version 4.1, can be used by companies to demonstrate EUDR compliance and by financial institutions to identify credible investments.

APA

Pulido, M. A., & Hemingway, R. (2024). EU Regulation on Deforestation-Free Products: A potential game-changer for commodity-driven deforestation. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/EU-Regulation-on-Deforestation-Free-Products-A-potential-game-changer-for-commodity-driven-deforestation-Paper-II.pdf

Chicago

Pulido, María Alejandra, and Rachel Hemingway. EU Regulation on Deforestation-Free Products: A potential game-changer for commodity-driven deforestation. Climate Bonds Initiative, 2024. https://www.climatebonds.net/files/documents/publications/EU-Regulation-on-Deforestation-Free-Products-A-potential-game-changer-for-commodity-driven-deforestation-Paper-II.pdf.

Wikipedia

{{cite report |last1=Pulido |first1=María Alejandra |last2=Hemingway |first2=Rachel |title=EU Regulation on Deforestation-Free Products: A potential game-changer for commodity-driven deforestation |publisher=Climate Bonds Initiative |date=January 2024 |url=https://www.climatebonds.net/files/documents/publications/EU-Regulation-on-Deforestation-Free-Products-A-potential-game-changer-for-commodity-driven-deforestation-Paper-II.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{pulido2024regulation, author = {Pulido, María Alejandra and Hemingway, Rachel}, title = {{EU Regulation on Deforestation-Free Products: A potential game-changer for commodity-driven deforestation}}, institution = {Climate Bonds Initiative}, year = {2024}, month = jan, url = {https://www.climatebonds.net/files/documents/publications/EU-Regulation-on-Deforestation-Free-Products-A-potential-game-changer-for-commodity-driven-deforestation-Paper-II.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }