The European Union's Deforestation Regulation comes into force for large operators in December.
While this is a first for large operators, for Indonesia's 2.7 million palm oil smallholder households — who manage 40 percent of the national plantation area — the regulation poses an existential challenge that a mere 12-month postponement cannot resolve.
Over the past month, Jakarta's Institute for Development of Economics and Finance (INDEF) has conducted workshops with palm oil, cocoa, rubber and coffee farmers across Indonesia.
The data reveals a fundamental implementation gap.
While 94 percent of smallholder plots have remained stable since 2015, proving this requires polygon mapping costing €500-1,200 per farmer — equivalent to four months' income for households earning €150-300 monthly. The regulation's requirement for plot-level GPS coordinates and digital documentation through the EU information system assumes infrastructure that does not exist in rural Indonesia, where only eight percent of farmers own smartphones capable of running mapping applications.
Last week, nine women smallholder representatives presented these figures to EU officials in Brussels.
Their cooperatives, representing 12,000 farmers, report that assembling EUDR-compliant documentation takes 40-60 hours per farmer, with translation and verification costs reaching €400. For plantations, dedicated compliance teams reduce per-hectare costs to under €5.
This disparity means the regulation's December 2020 deforestation cut-off date, while technically neutral, creates a two-tier system where industrial agriculture proceeds while small-scale farmers face exclusion.
The timing is particularly problematic.
This week's finalisation of the EU-Indonesia Comprehensive Economic Partnership Agreement promises duty-free access for palm oil from 23 September.
Yet EUDR compliance barriers could reduce smallholder participation in export supply chains by 60-75 percent, affecting farmers who currently generate €800m in annual export income. Zero tariffs become meaningless if producers cannot meet regulatory requirements to clear customs.
The contrast with other EUDR critics is instructive.
US exporters and European business associations cite administrative complexity and request delays or "negligible-risk" classifications for commodities from countries where deforestation ended decades ago.
Indonesia's position differs fundamentally. We seek not exemption but inclusion — practical pathways for farmers who produce 35-40 percent of our palm oil output to remain in global supply chains.
Indonesia has reduced deforestation rates by 75 percent since 2017. The country does not oppose the EUDR's objectives.
However, excluding smallholders from European markets — which represent 14 percent of global palm oil consumption and offer prices 12-18 percent higher than alternative destinations — will push production toward unregulated markets in India, China and Pakistan. This displacement effect undermines both environmental goals and development commitments.
Beyond economics, the exclusion of 2.6 million households risks of pushing farmers into poverty (according to the INDEF in 2024).
Solutions exist within current frameworks.
The commission's guidance acknowledges that certification and third-party verification can support risk assessment. The Team Europe Initiative on Deforestation-Free Value Chains has allocated funding for transition support.
These mechanisms should prioritise smallholder inclusion through specific measures: group compliance systems allowing cooperative-level due diligence could reduce per-farmer costs by 70 percent; public financing for geolocation and cadastral verification would address the €125m infrastructure gap; recognition of credible national traceability schemes would prevent duplicative requirements.
The EU-Indonesia agreement's cooperation chapters provide institutional architecture for implementation. Joint committees could establish a dedicated smallholder transition facility, develop interoperable data standards reducing documentation from 40 to 10 hours per farmer, and ensure verified smallholders maintain market access during the phase-in period.
Such measures would cost less than two-percent of annual bilateral palm oil trade value.
The regulation's micro and small enterprise provisions, taking effect in June 2026, acknowledge differentiated capacity. This principle should extend to production as well as trading.
Simplified requirements for plots under five hectares, phased implementation linked to capacity-building milestones, and recognition of jurisdictional programmes delivering traceability would align the EUDR with development objectives.
Europe faces a choice about what sustainable trade means.
Current implementation trajectories will create compliant supply chains by excluding those lacking resources for compliance, not those causing deforestation. This approach contradicts the EU's €350m commitment to Indonesian sustainable development programmes and broader climate justice principles.
The smallholder women who travelled to Brussels were not seeking special treatment.
They requested tools to meet standards that large plantations satisfy through economies of scale. Their exclusion would not protect forests — satellite data confirms their plots are not expanding.
It would, however, demonstrate that regulations designed for a green transition can, in practice, deepen inequality rather than address it.
Imaduddin Abdullah is a director at INDEF, a Jakarta-based research organisation. In addition to advising the Indonesian government, he has worked with Germany’s GIZ and the United Nations Development Programme.
Imaduddin Abdullah is a director at INDEF, a Jakarta-based research organisation. In addition to advising the Indonesian government, he has worked with Germany’s GIZ and the United Nations Development Programme.