By Maytaal Angel
LONDON (Reuters) - The European Commission said on Wednesday that financial institutions are not backing the EU's new deforestation law, which has faced a backlash from producing countries concerned it will create unfair trade barriers.
The landmark law requires importers of commodities like coffee, cocoa, beef, soy, rubber and palm oil to produce a due diligence statement proving their goods are not contributing to the destruction of forests, or risk hefty fines.
Deforestation is responsible for about 10% of global greenhouse gas emissions that drive climate change, and the law, which comes into effect at end-2024, aims to tackle the European Union's contribution.
"Clearly there's a price to pay. We're putting lots of money in (to help producing countries), but financial institutions are not following," said Leonard Mizzi, head of unit at the Commission's department for International Partnerships.
Mizzi, speaking at the World Coffee Summit in London, said that while financial institutions are willing to fund sustainability initiatives in the energy sector, they consider agriculture too small and complicated.
He called finance the 'big elephant in the room' and said a regulatory approach to combating deforestation was necessary because voluntary pledges by companies to clean up their supply chains using audits by third parties like Fairtrade have had limited impact.
Addressing the concerns of producing countries about the law, Mizzi said the EU is pursuing a 'multi-stakeholder approach' - pointing to regional coffee dialogues it is holding with several Latin American countries.
"It's not an easy process but it's not going to be that complicated to implement (either)," he said.
Indonesia has called the law an example of 'regulatory imperialism', while Malaysia has said it is a "deliberate effort" to increase costs and barriers for its palm oil sector - a key source of export revenue for the country.