Unintended Consequences of EU Deforestation-Free Regulation (EUDR) on Smallholder Coffee Producers, Part 2

[Editor’s note: This is part two of a two-part column by guest author Andrew Hetzel. Read Part 1 here. Daily Coffee News does not engage in sponsored content of any kind, and all views or opinions expressed in this piece are those of the author/s.]

A coffee mill in Timor-Leste. Photo by Andrew Hetzel.

The first half of this piece provided an overview of the European Union Deforestation-Free Regulation (EUDR) requirements, as well as a brief overview of the coffee sector in Timor-Leste. This half will examine how compliance with the new law may be an impossibility for many smallholder coffee farmers in Timor-Leste (and perhaps elsewhere in the coffee-producing world), resulting in unintended consequences. 

Traceability and Administration of Data

EUDR requires that coffee must be traceable throughout the supply chain to the GPS coordinate (property < 4ha) or polygon (property > 4ha) where it is farmed. Individual plots must be selected, as regional boundaries are not acceptable. This data must be retained for five years from the date of production.

Collection and administration of geolocation data is unaffordable and beyond the capability of many smallholders operating independently. Not all of the country’s rural population has an advanced smartphone used in geotagging, electrical power is unreliable and illiteracy is high. 

Many Timorese sell unprocessed coffee to mills through a web of intermediaries who provide valuable credit and transportation services. Intermediary stages complicate traceability, as village collections are consolidated into truckloads for delivery. Some farmers may also be reluctant to provide information, fearing taxation or expulsion from disputed land. 

Two large exporters operating in Timor-Leste source unprocessed coffee from a known base of farmers that maintain sustainability certifications, making them better positioned to adapt to EUDR’s traceability requirements. Nevertheless, tracking individual harvests from the field to the correct export shipment is not easy under the best circumstances.

Thousands of farmers may contribute to a single ocean container of coffee. The largest cooperative in Timor-Leste has more than 27,000 farmers’ deliveries daily during the harvest.

Compliance with National Law

EUDR requires that value chains be “compliant with all relevant applicable laws in force in the country of production.” However, strict compliance with national law is not necessarily customary in developing countries and will be difficult to guarantee among many smallholder suppliers. 

Up to 71% of workers in Timor-Leste operate in the informal sector, outside of government taxation or legal registration. Few smallholder farmers are registered as taxpaying individuals or businesses, as may be formally required. 

Land title and property rights are particularly complex in Timor-Leste. Decades under Portuguese and Indonesian rule created overlapping systems of land tenure. As of 2016, “more than 80% in rural areas had no legal rights to the land they live and/or farm on,” and some are contested. The EU issued guidance allowing goods from unregistered or customarily farmed lands, but prohibiting goods from illegally occupied or disputed lands. 

Despite often being illegal in Timor-Leste, bribery is also not uncommon as a means to expedite business processes and prioritize port shipments. These conditions, or noncompliance with other laws, may further exclude smallholders from European market access.

Appearance and Proximity of Deforestation

Slash and burn clearing for subsistence farming is the primary driver of deforestation in Timor-Leste. With the highest fertility rate in Asia, subsistence farming is expected to expand to feed an ever-growing population. Nevertheless, coffee will be deemed the cause of any deforestation detected in the proximity of subsistence farming under EUDR.

Timor Leste coffee farm. Photo by Andrew Hetzel.

A Timor-Leste subsistence farm. Photo by Andrew Hetzel.

Remote sensing by satellite is expected to be the primary method of verification. Coffee, however, is difficult to assess correctly using modern sensing technologies, as it is often grown under canopy in agroforestry systems. Inaccuracies may lead to inconsistencies in identifying primary or secondary forests, and the false appearance of land use change from routine pruning after the cutoff date. 

Impact on Smallholders

Many coffee farmers of Timor-Leste are unlikely to be EUDR compliant by January 2025, if ever. While alternative export markets like the United States, Australia, and Japan may absorb Timor-Leste’s coffee previously destined for Europe, the microeconomic law of supply and demand suggests that the drop in aggregate demand for any good results in a lower selling price level.

Other smallholders across Africa, Southeast Asia, and Latin America may be in a similar position, compounding the disruptive impact of noncompliant supplies flooding global markets. Faced with the threat of new and unclear risks, large multinational trading firms have already slowed forward purchasing from large-volume smallholder origins like Ethiopia. 

Reduced earnings from lower demand combined with increased costs or difficulty of compliance will force struggling smallholders to abandon coffee in search of other work and nutrition for food security. The most likely alternative to coffee farming in Timor-Leste is subsistence farming, a proven direct driver of deforestation.

Conclusion

Slowing climate change by eliminating deforestation caused by agriculture is an admirable goal. Unfortunately, the structure of EUDR makes the achievement of that goal unlikely in Timor-Leste. 

No assessment of smallholder wellbeing was performed before EUDR was drafted, nor were relevant stakeholders consulted on its design for viability. The resulting uninformed choices made by EU lawmakers position EUDR to harm people and the environment of Timor-Leste.

While increased deforestation and food insecurity may be unforeseen consequences of EUDR on smallholders, they are not unforeseeable. Coffee price shocks caused by trade disruptions are widely studied and known to cause “greater poverty, malnutrition, deforestation and out-migration” in farming communities.

Might harm to tens of thousands in Timor-Leste be an acceptable loss relative to the billions who may benefit from reduced global greenhouse gas emissions? Perhaps, though, it’s unlikely that such a choice is mutually exclusive. The controversial theory of “embodied deforestation” underpinning EUDR presumes that deforestation is driven by consumption, not other complex social and economic factors. If this is true, lawmakers and their constituents must accept responsibility for the externalities they generate — both the cost of compliance with deforestation mitigation and assistance for those who are disrupted. 

Moving forward, the EU and other governments seeking to implement similar measures should work collaboratively with industry stakeholders to understand and proactively address the root causes of deforestation rather than summarily excluding those at greatest risk.

[The author thanks Jennifer Marcotte-Ouellet for guidance and for sharing primary research data on EUDR’s impact on Uganda’s smallholder coffee farmers.]