Jussi Viitanen euflegt.efit and efit 17.4.2012

1. European Forest InstituteEU FLEGT and REDD FacilitiesILLEGAL LOGGIG AND FLEGT - HOW A TRADE AGREEMENT CAN PROMOTE GOVERNANCE REFORM Jussi Viitanen www.euflegt.efi.intandwww.efi.int 17.4.2012

2. EU FLEGT Facility • EU FLEGT Facility – established by EFI in 2007 • 32 staff, offices in Joensuu, Barcelona, Brussels, Kuala Lumpur. Activities in more that 30 countries. • Funding: EC, UK, Netherlands, Finland, France; in-kind support from Germany and Spain. Annual budget 2012: 9 million Euros. • To support to EU member states and EC in their policy implementation. Key activities: support to VPA processes, analysis related to forest sector governance and trade, communication and capacity building.

3. What is FLEGT? • The EU Forest Law Enforcement, Governance and Trade initiative. • EU response to the issue of forest governance and illegal logging. • FLEGT Action Plan published in 2003 • Includes actions aimed at both production and consumption: • Public and private sector procurement and investment policies • Regulation to allow control of illegal timber entering the EU – EU timber regulation • Trade agreements between producer countries and the EU – Voluntary Partnership Agreements (VPAs) • Support for Producer Country governments and industry

4. East Asia FLEG Bali Africa FLEG Yaoundé Europe & North Asia FLEG St Petersburg G8 against illegal logging EU TIMBER regulation FLEGT implementing regulation FLEGT regulation FLEGT Action Plan 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Indonesia starts 1st VPA negotiation Ghana signed 1st VPA 6 VPAs signed 4 VPAs in negotiation Historical perspective

5. Consumption: The EU Timber Regulation • Seven years of discussion about the appropriate response to the role of consumption in driving illegal logging. • The EU Timber Regulation was published in 2010 and comes into force in 2013 • Obligations of operators who place timber and timber products (incl. Pulp & Paper) on the internal EU market for the first time • Focuses on due diligence by importers with the required systems set out in the regulation • FLEGT licensed timber from VPAs automatically accepted

6. Production: Voluntary Partnership Agreements • Trade agreement between the EU and a Partner Country • All timber traded must be accompanied by a legality license • Licenses based on a timber Legality Assurance System which includes: • Clarification of the scope of relevant laws = aLegality Definition • Controls for chain of custody • Systems to verify that the law is being followed • Licensing system • Independent monitoring of the system

7. What is negotiated? What are the main challenges? • VPA Annexes and agreement text • Legality definition (based on existing laws of the country) • Timber legality assurance system • Scope of the agreement (product scope) • Implementation schedule • Supporting measures • Public information and transparency measures What is needed to improve forest governance? What actions and means are needed for the reforms? How long would/should the reforms take? Credit picture: Environment Times

8. Formal negotiations – 3 layer process

9. FLEGT VPA process

10. The Legality Definition

11. A FLEGT VPA Legality Definition • Defines which laws of the Partner country must be met to ensure legal compliance • Completely based on Partner country laws • Clearly lays out what is to be checked to test compliance • Requirements, indicators, verifiers, etc. • Developed by the VPA Partner country • Multiple stakeholder input and participation required • Represents one full Annex in the VPA

12. A Legality Definition should cover laws relating to: • Use rights: Harvesting timber within legally gazetted boundaries by the legal holder of rights to harvest. • Forest operations: Compliance with laws regarding forest management including relevant legislation covering environment, labor and community welfare. • Fees and taxes: Compliance with laws concerning taxes, importation, royalties and fees directly related to timber harvesting and harvest rights. • Other users: Respect for other parties’ legal tenure or use rights to land and other resources that may be affected by timber harvest rights. • Trade and customs: Compliance with legal requirements for trade and customs procedures.

13. Deciding what laws to include in the LD: • Laws the most relevant to address the most serious impacts of illegal logging in that country. • Laws representing the three pillars of sustainability and therefore aimed at addressing social, economic, and environment objectives. • Laws to cover the entire production chain (pre harvest, forest management, transformation and trade). • Laws that make it clear what is required and where inconsistencies have been clarified. • Laws that are a result of stakeholder consultation

14. Stakeholder consultation process • National process consisting of multiple stakeholders and interests • Should integrate stakeholders affected by forestry legislation and operations • Promotes in-country debate involving different perspectives resulting in a more realistic and operational Definition • Process helps identify gaps and inconsistencies that may exist in legislation  could lead to a reform process • Multi stakeholder process brings more credibility and more ownership

15. Balanced Definition Based on Principles of Sustainability ENVIRONMENT Environmental Requirements SOCIAL ECONOMIC Forest Management requirements Trade and Export Worker health, safety, and labor, requirements; Customary and access right requirements Taxes, registration, fee requirements

16. Common steps Used to Develop a Legality Definition • Identify stakeholder groups and establish a stakeholder consultation process • Establish and agree upon the Legality Definition development process • Outline timber tenure rights and timber sources to be covered by the Legality Definition • Collate a ‘long list’ of relevant legislation to consider for Legality Definition requirements • Discuss and decide through multi stakeholder consultation Legality Definition content (e.g. requirements, evidence needed to prove compliance) • Identify where further analysis or work may be needed (e.g. contradictory legislation, gaps, law reform) • Conduct a field test of the Legality Definition once the Legality Definition draft is robust • Review and address field test comments and finalize the Legality Definition • Present Legality Definition information in the form of an Annex in the VPA • Link the Legality Definition to LAS development .

17. Examples: Cameroon

18. Examples: Congo

19. Challenges to an Effective Definition • No blueprint – reflects a country’s regulatory framework • Balanced and comprehensive but not too heavy • ALL stakeholder concerns are heard in the process • Understanding link to verification procedures • Clear, practical and realistic framework of verifiable indicators

20. FLEGT country interaction State of play…

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23. Thank You! www.euflegt.efi.intandwww.efi.int

24. Imports of illegal wood – import source analysis • Complex modelling, incorporating variations in source country illegality & effects of demand-side measures CONCLUSIONS • Overall IL wood imps falling since 2004, dropped 30% by 2008 • Imports of IL wood now falling in all seven countries • Illegally sourced imports also falling per capita in all countries and as % in all except US • US biggest consumer (of 5 countries) by vol/val ($4 bill), Japan biggest per capita and by % of total imports (9%) • More than half of imps by consuming countries are now of processed products arriving via third countries Sam Lawson Chatham House Associate Fellow

25. Impact, causes, cost of reduced illegal logging IMPACTS – in Brazil, Cameroon and Indo over 10 yrs: • 17 million hectares of forest are estimated to have been protected from degradation • at least 1.2 billion tonnes of CO2 emissions avoided • Alternatively, if the trees saved were legally logged this could bring in US$6.5 billion in additional revenues. CAUSES • ALL – increased enforcement, NGO campaigning, consumer ctry actions • Cameroon – independent monitor; Indo – improved general governance COST • Less than $3 per tonne CO2 • OR $6 in extra revenues for every $1 invested Sam Lawson Chatham House Associate Fellow

26. Conclusions & Recommendations • Not a reason for complacency! • Illegal logging still major problem – estimated 100 million m3 per year, or enough logs to create a line running 10x round the world Producer countries • Greater effort needed on areas of problem which are more difficult to detect and tackle and have seen less improvement, e.g. • domestic markets • illegal harvesting by licensed companies • illegal issuance of licences to clear forest • will require a more profound overhaul of regulations Sam Lawson Chatham House Associate Fellow

27. Conclusions Consumer countries • Japan needs to follow US and EU and prohibit handling of illegal wood • Important such laws implemented & enforced – requires cooperation with source countries (which VPAs shows has broader positive effect on policy) Processing countries • China needs to take more concrete action • Prohibit illegal wood use; implement govt procurement policy; require evidence of legality for timber imports (e.g. recognise FLEGT legality licenses) Illegal logging & REDD • ensure REDD agenda supports efforts to tackle IL and improve forest governance, not distract from them (as may be case at present) Sam Lawson Chatham House Associate Fellow