How Do EU Deforestation Rules Affect Global Coffee Exports?
The EU Deforestation Regulation takes effect in January 2025 and requires coffee and six other agricultural product groups to prove they are not linked to deforestation before import. Coffee accounts for about 7% of EU deforestation linked to those goods. East Timor, where coffee is over 90% of non-oil export revenue, is among the countries most exposed.
Compliance is hard for smallholders: unclear land ownership, scattered plots, no GPS tools and high illiteracy rates make documentation difficult. Coffee sustains 77,000 rural households in East Timor, and the EU is its largest market. If compliant supply shrinks, non-compliant coffee could flood global coffee exports, pushing prices down and hurting the farmers least able to adapt.
The European Union's upcoming zero-deforestation regulation (EUDR), set to take effect in 2025, requires imports of coffee and six other categories of agricultural products to prove they are not linked to deforestation. This environmental milestone, however, could place a heavy burden on smallholder countries that rely on coffee exports. Take East Timor as an example: coffee accounts for over 90% of its non-oil export revenue, sustaining the livelihoods of 77,000 rural households, and the EU is its largest market. Yet local complexities in land ownership, scattered smallholder plots, lack of GPS capability, and high illiteracy rates make it difficult for the vast majority of coffee farmers to meet compliance requirements. This not only threatens East Timor's coffee industry but could also lead to non-compliant coffee flooding the global market, driving down prices and worsening the plight of smallholders.
Recently, Andrew, a contracted consultant and team leader for an agroforestry restoration project funded by the East Timor government, pointed out that the EU's zero-deforestation regulation will deal a blow to the country's coffee exports and affect most small-scale growers.
Agricultural expansion and deforestation are the second-largest source of greenhouse gas emissions, after fossil fuel combustion. To reduce agriculture's negative impact on the climate, the EU previously passed the Deforestation Regulation (EUDR), scheduled to take effect in January 2025, requiring seven categories of agricultural products to prove "zero deforestation" before import, with coffee among them. It is said that coffee accounts for about 7% of deforestation caused by the EU.
Although the regulation is hailed as an important milestone in environmental protection, its design does not fully take into account the complex supply chains dominated by smallholders, with coffee being a typical example. Beyond large estates, coffee also depends on millions of smallholder farmers. The requirements of legislators may be out of step with local production systems or far exceed the capacity of vulnerable farmers. Some farmers who depend on coffee for their livelihood will face the most severe obstacles.
Currently, multiple coffee-producing countries have been affected, and East Timor is one of them. Coffee has long been the country's most important cash crop, accounting for over 90% of the value of non-oil merchandise exports, an important source of income for 77,000 rural households, contributing 37% of the nation's primary income, while the EU is the largest export market for East Timorese coffee. In 2022, the EU accounted for 33.5% of global coffee exports, and the actual share is even higher when including products such as decaffeinated coffee transshipped through intermediary countries.
In East Timor, thousands of smallholders engage in coffee cultivation, with each household typically operating less than one hectare of land, often scattered across multiple plots. Local land ownership issues are particularly intricate. Decades of Portuguese and Indonesian rule left behind overlapping land tenure systems. As of 2016, more than 80% of rural residents had no legal rights to the land they lived on or cultivated. EU guidelines prohibit goods from illegally occupied or disputed land, and the EUDR also requires that coffee supply chains be traceable to the GPS coordinates of the growing site, with plots individually marked, and data must be kept for five years from the date of production. This means that the collection and management of geolocation data become an unbearable burden, compounded by unstable electricity supply and high illiteracy rates. Some farmers may also be unwilling to provide information for fear of increased taxes or being evicted from disputed land.
As a result, a large number of coffee farmers in East Timor find it difficult to comply with EUDR requirements. Although coffee-consuming countries such as the United States, Australia, and Japan can absorb East Timorese coffee, the microeconomic laws of supply and demand indicate that any decline in total demand for a commodity will lead to lower sales levels. At the same time, other smallholders in Africa, Southeast Asia, and Latin America may also fall into similar predicaments, which will amplify the destructive effects of non-compliant supply flooding into the global market.
The above content is compiled by CoffeeHunters, a coffee news website.
