October 2014

Biomass production and the EU Timber Regulation How NGOs can raise issues of illegal and unsustainable biomass production in the context of the EU Timber Regulation

The EU is a major market for woody biomass and the scale of the current demand is projected to rise significantly. At the moment, unsustainable practices, such as using whole trees to produce biomass for energy, are an important concern. The underlying legality of the harvesting of timber, including permitting, payment of taxes and respect for land allocation procedures and communities’ use rights, might also be a concern. Rising demand can be expected to increase the relevance of these problems in the future. In this context, it is worth considering the extent to which, and how, EU Timber Regulation (Timber Regulation) is a useful framework to bring attention to and address these issues. We will first discuss the scope of the Timber Regulation and its main requirements, before addressing the question if and how the Timber Regulation can be used in this context.

Does the EU Timber Regulation apply to biomass? Yes. The Timber Regulation applies to a number of bioenergy feedstocks, including fuel wood, sawdust and wood residues whether or not in pellet form.1 It applies to woody biomass sourced both inside the EU and in third countries. The main legal obligations rest on the company first placing the biomass on the EU market (the ‘operator’). An operator will be regulated by the Timber Regulation irrespective of whether they are selling timber to commercial or private consumers but the Timber Regulation does not impose requirements on (private) end-consumers. Where timber is imported into the EU, the operator is the entity acting as the importer when the timber is cleared by EU customs authorities for free circulation.2 In practice, to decide who the operator is one will have to look at the supply chain in question. For example, where an energy utility based in the EU imports wood pellets from a manufacturer based outside the EU and the energy utility is indicated in the customs declaration as the consignee, the energy utility will be the operator. However, a pellet manufacturer based outside the EU may be the operator where they first import the pellets into the EU and only later seek and supply to individual customers.

1 Cf. EU Commission Guidance Document for the EU Timber Regulation, Sect. 5b, p. 13 http://ec.europa.eu/environment/forests/pdf/Final%20Guidance%20document.pdf. 2 According to the EU Commission, in most cases this will be the entity that is named Consignee on the customs declaration form, see Commission Guidance, p. 3 http://ec.europa.eu/environment/forests/pdf/Final%20Guidance%20document.pdf

The opportunity to raise issues of illegal or unsustainable biomass production in the context of the EU Timber Regulation October 2014

Compliance with the Timber Regulation requires the operator to have information about the origin and legality of timber products. Accordingly, operators will have to work with their suppliers (e.g. sawmills and other wood industry manufacturers) to get this information.

What are the main requirements? Firstly, operators are prohibited from placing wood products (like pellets) made from illegally logged timber on the market.3 To achieve this, and as the second obligation, operators must carry out due diligence to assess the risk that the wood they use was harvested illegally. Due diligence requires operators to: 1. Have access to information about the timber its product was made from (as a minimum the species, country and, in some cases, the region or concession of origin and quantity of timber, as well as name and address of supplier and buyer, plus information indicating the legality of the timber or product);4 2. Assess and evaluate the risk that the products it places on the EU market are from timber that was logged illegally;5 3. Where the risk of illegality is greater than negligible, take steps to mitigate that risk.6 The public authorities enforcing the Timber Regulation in the EU Member States (defined in the Timber Regulation as “competent authorities”) check operators to make sure they exercise due diligence properly and do not place illegally sourced wood on the market.

The opportunity: a role for credible information by NGOs Operators and competent authorities need credible information in order to exercise due diligence or carry out targeted checks respectively. The Timber Regulation expressly recognizes that third parties including civil society may have such information. In fact, relevant information from civil society is essential for the Timber Regulation to work in practice and to achieve its objectives. Operators must take into account credible information that is made known to them or publically available, which indicates risks of timber being harvested illegally. Competent authorities may carry out checks when they have received information from third parties suggesting a breach of the requirements of the Timber Regulation.

3 NB – in the context of woody biomass for energy production, placing on the market includes the act of a company supplying itself with biomass for the sake of generating energy, even though the energy is the product ultimately sold. 4 The Timber Regulation does not require that all this information is necessarily documented by operators as such, but in the event of inspections operators must be able to demonstrate that they have measures and procedures in place which provide access to this information as part of their due diligence system. 5 Taking into account factors including the prevalence of illegal logging of the species in question, and the prevalence of illegal logging in the country of origin. 6 If the risk of illegality cannot be effectively mitigated such that the operator is comfortable that it is negligible, the operator should not place the timber on the EU market. 2

The opportunity to raise issues of illegal or unsustainable biomass production in the context of the EU Timber Regulation October 2014

What kind of information is relevant - legality and sustainability under the Timber Regulation The Timber Regulation is directly concerned with legality which it defines by reference to categories of laws.7 Laws in the country of harvest falling within those categories must be complied with for timber to be considered legal. As such, information NGOs may possess which relates to (risks of) violations of those laws is relevant in the context of the Timber Regulation. The Timber Regulation does not require that operators source sustainably produced biomass. However, it may be that in a given country of harvest, legislation falling within the categories of law that determine legality, does address sustainability issues (e.g. a requirement for forest management plans to address biodiversity protection). In this case, the compliance with sustainability provisions of the legislation would be necessary for compliance with the Timber Regulation. Thus, while sustainability is not a specific requirement of the Timber Regulation, it may be indirectly addressed.

What can NGOs do with this information? For NGOs to use the Timber Regulation to raise issues of illegal and/or unsustainable biomass, clear and credible information needs to be provided which indicates either that  

the biomass feedstock used or sold by an identified operator is illegal – i.e. it is produced in violation of the provisions of national legislation (which may include sustainability), or there is a clear risk of illegality associated with feedstock from certain sources.

The information can be provided to the competent authorities enforcing the Timber Regulation in order to contribute to their internal intelligence and to inform the targeted checks carried out on operators using woody biomass derived from the identified risky sources. Information can also be shared with operators or trade associations, with an explanation of why operators must take it into account to comply with the Timber Regulation. This may be a way to influence an operator’s scrutiny of their own supply chains, which could lead them to ask more robust questions of their suppliers and potentially alter their sourcing decisions. In addition, NGOs may have evidence suggesting that companies do not produce biomass in the (sustainable and/or legal) way that they claim in public statements. These inconsistencies can be highlighted by NGOs to cast doubts on the credibility of information disseminated by biomass suppliers. Operators need credible information on their supplies to comply with the Timber Regulation. If inconsistencies in supply information exist, NGOs may be able to argue that operators cannot rely on the information about the timber that they are receiving from their suppliers. In this case, operators would need additional information to meaningfully assess the risk of illegality.

7 The relevant categories of law are: 1)Rights to harvest timber within legally gazetted boundaries; 2) Payments for harvest rights and timber including duties related to timber harvesting; 3) Timber harvesting – including environmental and forest legislation which can include forest management and biodiversity conservation, where directly related to timber harvesting; 4) Third parties’ legal rights concerning use and tenure that are affected by timber harvesting; and 5) Trade and customs, in so far as these apply to the forest sector. 3

The opportunity to raise issues of illegal or unsustainable biomass production in the context of the EU Timber Regulation October 2014

Can the Timber Regulation be used to obtain supply chain information? The Timber Regulation requires that operators and entities further down the supply chain (‘traders’) keep records that so that wood such as pellets can be traced from its origin to the last (commercial) user. Competent authorities will look for this information when carrying out checks. Operators and traders do not need to make supply chain information public. While competent authorities must disclose some information on request, it is unlikely that this duty applies to specific supply chain information. Equally, since operators don’t have to respond to NGOs’ requests for information on their due diligence, NGOs cannot easily verify whether they have adequate due diligence systems in place. If however NGOs suspect that a biomass business is not carrying out due diligence as required, or isn’t aware of the implications of the EUTR on their business, an NGO could increase pressure on the business raising potential non-compliance with competent authorities. It should also be noted that the EU Commission draws up reports on the application of the Timber Regulation every two years based on information from the Member States. The reports are likely to include consolidated information on the number of checks carried out as well as the number of informal warnings or notices of remedial actions issued and possible sanctions for infringements. They should be made available proactively by the EU Commission, or otherwise should be available on request. This may be of interest to NGOs working on biomass related issues, despite the fact that it may not be very specific or timely information.

Sustainability/legality certification and concerns by NGOs Some biomass plants may be using wood that has been certified as sustainable and legal by voluntary schemes. It is important to note that within the framework of the Timber Regulation, voluntary certification may be used as a tool to comply with the due diligence obligation, e.g. to strengthen the credibility of information indicating that timber is legal. However, under the Timber Regulation voluntary certification is not sufficient evidence of legality and therefore an operator must do more than buy certified timber to comply with its obligations. If NGOs have evidence suggesting that the requirements of the certification scheme in question have not in fact been fulfilled, this information can be used to illustrate the weaknesses of the certification scheme and potentially to cast doubt on the adequacy of an operator’s steps to comply with the Timber Regulation. In addition, this information may be lodged directly with the certification body as a formal complaint.

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The opportunity to raise issues of illegal or unsustainable biomass production in the context of the EU Timber Regulation October 2014

Emily Unwin Lawyer +32 (0) 2808 4319 [email protected] www.clientearth.org

ClientEarth is a non-profit environmental law organisation based in London, Brussels and Warsaw. We are activist lawyers working at the interface of law, science and policy. Using the power of the law, we develop legal strategies and tools to address major environmental issues. ClientEarth is funded by the generous support of philanthropic foundations, engaged individuals and the UK Department for International Development.

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