EUDR: Magic Bullet Against Deforestation in Brazil?

The Brussels Effect" is a potent force to be reckoned with. In December 2022, the European Commission rolled out the European Union Deforestation-Free Regulation (EUDR). It became clear that this regulation would force global supply chains to adjust and mitigate their exposure to deforestation-prone regions and suppliers. Rather than accepting deforestation-free declarations at face value, we decided to follow the paper trail. Together with our Brazilian team, we looked into the murky reality of the Amazonian forest frontier.

The Need for EUDR

The EUDR (European Union deforestation-free regulation) is replacing the previous framework aimed at forest protection, the EU Timber Regulation (EUTR). However, the latter only dealt with a narrow category of products, namely the timber that was being harvested and sold in local and global markets. A quick glimpse at satellite imagery from the period when the EUTR was in force reveals that deforestation was progressing.

Fishbone deforestation” pattern typical for Amazonia, observed with composite of optical imagery visualised on Orbify platform

This is not surprising, since timber as a raw commodity is bulky and cumbersome to transport to global markets. The hassle is perhaps only worthwhile for the most valuable exotic species. The rest is used locally or simply burned in situ to clear the land for farming or industrial plantations. Therefore, the EUDR is certainly a step in the right direction because it considers multiple industries, not just the logging business.

It is definitely too early to judge the impact of the EUDR on the deforestation rate in the Amazon. With that said, we have tasked our Brazilian team members to interview stakeholders and investigate the current state of the matter.

Brazilian Sentiments: Responsibility and Concern for Environmental Damage

Without getting into the weeds of local, provincial, or federal politics, the overriding sentiment of Brazilians is a sense of responsibility for their country and the well-being of their people. In this sentiment, news of fraud and bribery connected to deforestation is especially likely to draw attention and be echoed widely.

Take for instance this article which reports that 44 out of the 100 companies with the highest environmental fines in 2022 operate in the Amazon region. This highlights the ongoing issue of environmental damage caused by companies operating in the Amazon. In fact, in 2021 alone, the 100 worst offenders in the region were fined a total of $1.2 billion USD. This amount is distributed between large scale livestock farmers, mining cargo transport, electrical utilities companies.

However, it's important to note that smaller landholders should also take responsibility as they are often involved in deforestation practices. In fact, a recent report by an NGOs Mighty Earth and AidEnvironment  highlighted deforestation on 68 smaller farms with indications of a connection to one of the world's largest meat processing companies JBS, raising concerns about the role of the meat industry and its supply chain in the destruction of the Amazon rainforest.

In recent months, investigations into the financing of companies involved in illegal deforestation investigations had surfaced. A report by Reporter Brasil revealed that the Brazilian Development Bank (BNDES) had been using a legal loophole to finance environmental offenders in the Cerrado region. This raises concerns about the effectiveness of regulations and the commitment of financial institutions to sustainable practices. This particular case also had drawn attention to the irregularities in land ownership registry in some of the provinces. For instance, it was discovered that one plot was legally claimed by three different owners!

Satellite imagery is the main source of information when it comes to tracking the rainforest logging.

While we were looking into deforestation from space media reports, and local interviews, we were omitting the elephant in the room: what actually makes logging illegal?

It became apparent that there is a grey zone about  what makes logging illegal. The European Union Timber Regulation (EUTR) relies on compliance with local regulations, but this can be problematic in countries with weak enforcement and governance. As the cited articles suggest provincial and federal institutions often act too late or are oblivious to the damage. Therefore, it is necessary to examine federal and provincial legislation and policies to ensure they are effective in preventing deforestation and protecting natural resources… So we dug into Brazilian legislation.

Reserva, sustainable management - is a national program that aims to promote sustainable development in the Amazon region by supporting the implementation of forest management plans and the certification of forest products. It is a positive step towards combating deforestation and promoting sustainable practices in the region. However, enforcement and monitoring of these practices must also be a priority to ensure that they are being implemented effectively.

The Land Tenure Problem and Irregular Ownership Deeds

Recent investigation sponsored By Thomas Reuters Foundation revealed the land tenure problem in Brazil.sometimes it is extremely hard to find who is the real owner of the land, and some people even take advantage of this situation. Historically, land-grabbing in Brazil has been facilitated by irregular ownership deeds issued by local notary offices that were never checked by governmental authorities, as can be seen on the Context News published at the beginning of the year. The article shows that a corporate conservation project in Brazil's Amazon rainforest has sold carbon credits from publicly owned land without state authorization:

“The Jari Pará REDD+ project in Brazil has sold carbon credits based on an invalid claim to a 386,000-hectare land parcel, which was registered as public property in 2018. This contravenes Brazilian law and has been confirmed by a Brazilian prosecutor, a Pará state attorney, and researchers. Jari Celulose, the company behind the project, claimed to be the legitimate owner of the land parcel, but it was registered as public land the previous year. However, Jari Celulose argued that a 2021 provisional ruling by a Pará state court gave them possession of the land, which doesn't equal ownership but denotes a considerable degree of control over an asset. The company may seek ownership of the property due to the ruling, which questions the state's decision to register it as public land.”

Another news release from Agência Pública on May 2022 reported that the Ecomapuá Amazon REDD Project, which is also certified by Verra, was selling carbon credits connected to two public conservation reserves in Pará state as can be seen as well on the press release by OpenDemocracy:

“Indigenous communities who live there say the scheme operator, Ecomapua, does not own the forest, does nothing to protect it and has no right to sell the offsets. Community leaders say the Brazilian government had already granted them the land in order to protect their way of life – and claim to have the paperwork to prove it. This year, they filed a £16m lawsuit against Ecomapua and its clients, arguing that the company has “violated the rights” of local people.”

Not Just The Issue of Law But Its Enforcement

A new study by WWF reveals that “18 million hectares of deforestation and habitat destruction in the Amazon and the Cerrado may be due to illegal activity”. Researchers found that the transparency and quality of the permits necessary for rural landowners to deforest or convert areas were inadequate and incomplete. This makes it challenging to differentiate between legal and illegal deforestation, and it makes preventing illegal activity almost impossible. The report concludes that 94% of the area deforested in the Amazon and Cerrado biomes in the states included in the study can be considered illegal due to the lack of clear data. The research underlines the fact that even deforestation and conversion that look legal on paper can turn out to be illegal.

Frederico Machado of WWF Brazil: "The institutions involved in the study were surprised with the dramatic lack of enforcement of Brazilian environmental legislation, not only by the federal government but also by subnational administrations. The data clashes with the information provided by Brazilian authorities and some farmers associations on the quality of our environmental legal framework. Even if the legal framework was a positive one for ecosystem protection – which is not the case, as up to 80% of the devastation of most of our biomes are legally allowed – a law on paper but without enforcement should never be presented as a potential international benchmark."

The Verdict

In conclusion, the lack of clarity in the legal framework of deforestation and poor access to data on land ownership and concessions make the situation murky. The due diligence process required by EUDR might move the needle on this but won’t probably cause a fundamental shift. However, open data policy can help solve this problem, and stakeholders' commitment is necessary to achieve transparency and promote a greener world.