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Management Side

Navigating Regulations... What's Next?

As the EUDR (European Deforestation Regulation) deadline draws (some would say perilously) closer (Dec 31, 2024), industries and countries across the world are speaking up and requesting extensions. That part isn't surprising. What is surprising is that the extension requests are for more varied reasons than usual. (We need more people, new software, etc.)

The biggest issue, from the paper side of things is, the technology needed to trace the fiber flow to comply with this requirement does not currently exist.

And that's a problem.

For example, under the EUDR, each tree would have to be sourced back to where it came from, kind of like a GPS system for trees... Now consider the chip piles at a pulp mill, with trees coming from different places... Not so simple. And on the EU side, in Germany, Austria and Poland, they have the same issues with sourcing trees and wood chips as we have in North America. And implementation will, of course, require advanced technology and extra expenses, passed on to both the farmer and ultimately the customer.

Even European food and beverage manufacturers are feeling the squeeze on this one. Their concern is supply and increased cost.

So you can guess how many countries are putting in requests for extensions to Europe for delaying this deadline.

There there's the simpler approach, which many businesses have taken (or have at least considered) in an increased regulatory environment: avoid the regulations altogether. The EUDR is so difficult to implement that some US pulp and paper manufacturers are considering cutting EU export contracts because they can't prove their paper doesn't come from deforested land. The Confederation of European Paper Industries also (CEPI) agrees and says that the EUDR needs to be changed to be effective and useful.

Side note: The definition of deforestation in the EUDR spells out that felling trees, specifically "transforming certain types of forests into other kinds of forests or other wooded land in a forest", is bad. But clearing land to build houses or 8-lane freeways is perfectly fine.

Hmmm.

The interesting counter argument is, there's a concern that if enough countries say no to following the EUDR and all its expensive, detailed regulations, then setting up trading outside the EU with other non-participating countries may provide for a lower-cost trading outside of Europe.

It'll be very interesting to see which way this goes: will extensions be granted? Will the EUDR be altered to be more realistic? Who knows. The EU has been altering numerous bills lately, and recently even completely dropped an (agricultural) bill due to strong protests.

We have 6 months to see which way the EUDR bill goes.

Stay tuned, and have a happy July!



 


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