The Impact of the EU Deforestation Regulation on Cocoa - Markets, Trade and Forest Conservation

"Through the Deforestation Regulation (EUDR), the European Union recognises its responsibility for the deforestation, carbon dioxide (CO2) emissions and biodiversity loss associated with the products consumed by its citizens. For a defined set of products associated with high deforestation risk, including cocoa, the regulation requires proof that the covered products, if sold on or from the EU market, are not linked to recent deforestation and are produced in accordance with the national laws of the countries of origin. Given the EU’s status as a major global consumer of cocoa products, the regulation affects the entire supply chain, impacting numerous actors across many countries.This study develops and applies a global market model for cocoa and cocoa products to conceptualise and quantify the impact of the regulation on markets, farmer welfare, deforestation and CO2 emissions. The results of simulating alternative scenarios of how cocoa producing and consuming countries respond to the EUDR indicate large shifts in trade flows and a reduction in global cocoa production, while farmer welfare increases. Cocoa-related deforestation declines, but much less than the initial deforestation figures suggest due to leakage. However, the deforestation reduction effect will increase overproportionally if other major consumer countries adopt similar policies."