Assessing the implications of implementing European Union countries' anti-deforestation regulations on Indonesia's palm oil industry

Abstract

The European Union Parliament recently issued an anti-deforestation (deforestation-free regulation) policy for several agricultural and livestock commodities, expected to be implemented in 2023. Palm oil considers one of the commodities driving deforestation. Indonesia is the largest supplier of palm oil and its products to European Union countries, so it is not free from the influence of the enactment of this law. This paper discusses the possible effects of implementing these regulations and their implications for the Indonesian palm oil industry and the European Union countries. For Indonesia, this regulation will have affected changing the governance of the palm oil industry for export purposes. Traceability requirements can affect for supply chain separability and the exclusion of smallholders. However, it can also provide the possibility of increasing the position of smallholders in the global market. For the European Union, regulation will impact decreasing supply and incompatibility of the palm oil processing industry and traders in their countries. Indonesia can continue to exist by pursuing several strategies to strengthen export markets outside the European Union countries and deepen the structure of the domestic palm oil industry.