Free Access | 2024-04-12

Potential Impacts of EU Deforestation Regulation on Smallholder Coffee Farmers: Evidence from Indonesia and Uganda

Authors/Editors: Regean Mugume

Abstract:

This article examines the potential impact of the European Union Regulation on Deforestation Free Products (EUDR) on the livelihoods of smallholder coffee farmers in Indonesia and Uganda, two of the world’s leading coffee producers. The coffee sector makes a significant contribution to employment and foreign exchange revenues in both countries. Set to take effect in December 2024, the EUDR requires certain products—including coffee—to be produced on deforestation-free land. Using a mixed-methods approach, which includes household survey data, trade flow analysis and regulation review, we examine each country’s preparedness to implement the EUDR, and its likely impact on the livelihoods of smallholder coffee farmers. The study finds that such farmers, who account for over 90 percent of the coffee production in Indonesia and Uganda, are already facing stagnating or declining yields due to limited access to inputs like fertilisers and credit, which reduces their output and household income. It is likely that the anticipated high costs of implementing EUDR traceability requirements will make it even more difficult for these farmers to invest in practices to improve productivity. To mitigate the impact of the EUDR on smallholder coffee farmers, this article recommends partnerships with the private sector in relation to (i) productivity-enhancing agronomic practices, and (ii) the establishment of coffee traceability systems.