Vulcan View: The latest EU developments 2 December – 6 December

EU extends compliance timeline for landmark Deforestation Regulation

On 3 December, the European Parliament and the Council of the EU reached a provisional agreement to postpone the implementation of the EU’s Regulation on deforestation-free products by one year. This delay extends the deadline for compliance to December 2025 for large companies and June 2026 for SMEs. The decision followed feedback from member states, European political groups, businesses, and non-EU countries, citing challenges in meeting due diligence requirements by the original deadline.

The delay aims to provide stakeholders, ranging from producers in tropical regions to EU-based importers, additional time to establish robust due diligence systems. These systems will track and certify that commodities and products are free from deforestation and comply with the legal standards of the country of origin. Jessika Roswall, the new Commissioner for Environment, hailed the agreement and assured that the delay gives “additional certainty and predictability to businesses”.

Background

The EU’s Regulation on deforestation-free products is a pivotal piece of environmental legislation designed to minimise the EU’s contribution to forest destruction worldwide. This comprehensive law ensures that commodities sold within or exported from the EU are deforestation-free, targeting “high-risk products” such as cattle, cocoa, soy, coffee, and palm oil. Thus, this regulation tackles a significant environmental challenge by supporting the ambitious goals of the EU Green Deal to combat climate change and preserve natural ecosystems.

Controversies

The law faced significant political hurdles, particularly from the centre-right European People’s Party (EPP) group in the European Parliament. The EPP attempted to include a “no risk” category, exempting low-deforestation regions from due diligence checks, which faced backlash for potentially undermining the law’s integrity. Critics, including NGOs, warned it could create loopholes and incompatibility with WTO rules. This proposal was ultimately abandoned following resistance from EU member states.

In addition, some businesses and the EPP expressed concerns about the administrative burden of compliance, calling for simplified processes. In response, the Commission has pledged to streamline reporting requirements during the regulation’s review no later than 30 June 2028.

Finally, nations like Brazil, Indonesia and Malaysia have criticised the law as discriminatory, arguing that it penalizes developing countries undergoing agricultural expansion while favouring EU producers.

Conclusions

The EU Deforestation Regulation represents a landmark approach to addressing global environmental challenges. By creating a robust framework that requires companies to demonstrate the deforestation-free origin of their products, the EU is leveraging its market influence to drive sustainable practices worldwide.

While the implementation timeline has been extended to ensure smoother adoption, the core objective remains unchanged: minimising the EU’s contribution to global deforestation and supporting more sustainable, environmentally responsible supply chains.

Minister Jack Chambers welcomes Q3 figures, stresses need for fiscal buffers

Minister for Finance Jack Chambers has hailed the strong Q3 results for the domestic economy but warned that Ireland’s economic outlook has become “increasingly uncertain”. In response to the Central Statistics Office publishing the Quarterly National Accounts for the third quarter of 2024, Minister Chambers welcomed strong indicators of economic performance such as modified domestic demand increasing by 1.3 per cent relative to the previous quarter and being up 4.1 per cent on an annual basis.

However, Minister Chambers balanced his optimism by acknowledging that the figures within the quarterly accounts are in the past and that Ireland is vulnerable to instability in the global environment, “While today’s figures are encouraging they are, of course, backward looking. Indeed, the economic outlook has become increasingly uncertain and risks are now clearly titled to the downside with the most pressing risks external in nature. As a small, open and highly globalised economy, Ireland is particularly vulnerable to any deterioration in the external environment.”

In further positive news from the quarterly accounts, Consumer spending was up 1.7 per cent on an annual basis, while GDP grew strongly by 3.5 per cent in the third quarter and increased by 2.9 per cent on an annual basis. In light of these surpluses, Minister Chambers reinforced his belief in resourcing Ireland’s fiscal buffers to safeguard against future shocks, “In particular, we must continue to build up our fiscal buffers, invest in our people and our infrastructure, and ensure the economy remains competitive, this will help ensure that we are in the best position possible to address future challenges.”

Of note for the upcoming Q4 quarterly accounts, last month, Ireland’s corporation tax haul rose to record highs as the Apple windfall taxes continued to flow into the exchequer. Ireland took in a total of €13.7 billion in corporation tax in November, a key month for corporate tax intake. This was an increase of 117 per cent on last year’s intake of €6.3 billion.

As committed to by the main parties of the last governing coalition in Fianna Fáil (Minister Chambers’ party) and Fine Gael, with both now appearing likely to govern together again following the general election results, corporation windfall receipts and the influx of the €13 billion from the Apple Tax ruling will be utilised to resource Ireland’s two sovereign wealth funds, the Future Ireland Fund and the Climate, Nature and Infrastructure Fund.

Compliments of Vulcan Consulting – a member of the EACCNY