EU crack down on mining-related deforestation

What’s happening? A new report from WWF Germany and the Vienna University of Economics and Business reveals that the EU is responsible for 14% of global forest destruction caused by mining, behind China (18%) and ahead of the US (12%). The report found that between 2000 and 2020, raw materials imported into Germany consumed an area of forest as large as Malta. The report calls for greater transparency in supply chains and more environmentally compatible mining. Coal and gold are the primary culprits, accounting for 71% of all direct deforestation caused by mining. According to the report, the indirect impact of mining on forests must also be considered in future environmental impact assessments. (ESG InvestorWWF)

Why does this matter? Between 2011 and 2021, global tree cover was reduced by 11%. Mining is the fourth largest driver of deforestation behind only agriculture, infrastructure, and urban expansion. The EU was responsible for 1,360km2 of mining-related deforestation between 2000 and 2020, with 85% of this occurring outside of the bloc.

Digging a hole – Over the past twenty years, mining has proliferated at an unprecedented rate with mineral extraction doubling since 2000. This is a trend that is likely to continue – the transition to net zero is largely reliant on mass electrification and battery storage, forecasted to greatly increase the demand for mined resources. The WWF report found that tropical rainforests – the planet’s biodiversity hotspots – were the most affected, accounting for 62% of the mining-related deforestation between 2000 and 2020.

Europe’s response – Last year, more than 100 civil society organisations called on the EU to deliver a strong and ambitious anti-deforestation law that stretched beyond its borders and along supply chains. Soon after, the EU agreed to ban the trade of certain products linked to deforestation to prevent further damage. Last week, the European Parliament passed the law which now awaits a final decision from the European Council.

Under the legislation, companies will be required to issue a due diligence statement proving that their products are not linked to deforestation or forest degradation occurring after 31 December 2020. Firms will also have to provide information on the exact origin of the commodities based on satellite images and GPS data. They must also demonstrate that the production followed national laws. Those violating these rules will be banned from exporting or importing products to the EU market.

The policy does not yet cover mining, focusing on palm oil, soy, cattle, coffee, cocoa, timber, and rubber, as well as derived products, including beef, leather, chocolate, charcoal, printed paper and furniture. A judicial review mechanism allows new additions, meaning mined resources and the products that rely upon them may soon be included.

The Carbon Border Adjustment Mechanism (CBAM), however, will directly impact mining’s value chain. The world’s first border tax is viewed as the “biggest climate protection law of all time” and has been unveiled under the “fit for 55” package. Imports from hard-to-abate sectors including aluminium, steel, cement, fertiliser, and electricity will pay tax on emissions associated with production. This prevents “carbon leakage”, whereby companies outsource production outside of EU borders to bypass the bloc’s carbon prices. The law will enter into force on October 1st 2023 in its transitional phase and will be fully operational by January 2026


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