The EU Deforestation Regulation (EUDR) requires importers of wood products into the European Union to provide the GPS coordinates of the real estate property(s) from which all trees used in making the product were harvested. Additionally, if the timber was harvested in a country labeled “high risk”, then documentation of risk analysis and mitigation measures is required to demonstrate that there is negligible-risk of deforestation, forest degradation, and/or illegalities for each timber harvest site. (For more on the EUDR risk classification system see: Will the EUDR label US hardwood lumber high-risk?)
Collecting, verifying, analyzing and communicating this level of data will require significant due diligence costs, administrative burden, and risk. These costs and risk increase at each stage in the processing and transfer of ownership of the product. In other words, the more value that is added to a product, the more costlier and riskier it is to comply with the EUDR. In this way, the EUDR creates an incentive for the EU market to import raw materials rather than value-added product.
Because of this, some of the EU’s demand for lumber will likely shift to demand for logs. This is especially true for U.S. hardwoods. The majority of US hardwood timber is supplied by smallholders and a single lumber consignment can originate from tens, if not hundreds of timber harvest sites.
EUDR could increase US-EU hardwood supply chain CO2 by 4x
Replacing shipments of US hardwood lumber into the EU with containers of logs will result in higher carbon emissions in the EU’s supply chains. In fact, using a conservative estimate, for some species, replacing a single shipment of FAS grade hardwood lumber with containers of logs increases the ocean transport carbon emissions embodied in the EU-milled lumber by 300% per board foot.
In conclusion, the EUDR could increase embodied carbon emissions of forest products imported into the EU. How? By encouraging the replacement of value-added forest products with raw material imports. This would achieve the opposite of what the new regulation is intended to do.
In the following articles, TimberCheck will explore how the EUDR will likely increase supply chain CO2 in US-EU hardwood supply chains.
Part 1: Logs instead of lumber (1): How the EUDR encourages shipping logs instead of lumber
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