The European Union (EU) has announced a new regulation that will take effect in 2025. According to this regulation, only chocolate that has not contributed to deforestation and has not involved child labor in its production will be allowed to be imported. This move is expected to make chocolate products like Easter bunnies more expensive, according to economist Birgit Meyer from the Economic Research Institute (Wifo).
The regulation covers a wide range of raw materials, including cocoa or chocolate products, wood, rubber, soy, coffee, palm oil, and beef. Companies will be required to conduct due diligence in their supply chains to ensure compliance with the regulation. Failure to comply may lead to penalties and product bans aimed at protecting forests and human rights globally.
While the EU is not a major producer of goods leading to deforestation, it is a significant consumer. This regulation is likely to impact growing regions like Brazil and Indonesia, where deforestation for products such as beef, coffee, soy, and palm oil may decrease. However, companies upgrading their supply chains may face increased costs that could result in higher prices for chocolate and other affected commodities being passed on to consumers. Despite this potential economic impact, the regulation is expected to have a minor effect on overall prosperity.
The deforestation regulation aims to improve sustainability in the global supply chain by minimizing negative impacts on economic output and leading to relatively small losses in prosperity. It could also lead to shifts in international trade and new standards for producing countries. With proper enforcement of this rule by the EU government and industry players worldwide should be able to achieve its goals successfully
