Not an easy ride

Abstract

Demand-side trade regulation is promoted as a policy tool to reduce negative environmental and socioeconomic footprints associated with global commodity supply chains. We present a theory of change (ToC) that explains how the economics of pro-environmental trade regulation can be expected to work, using the recent EU Regulation on Deforestation-free products (EUDR) as a topical illustration. Along this complex ToC, we review and characterize multiple factors that might either constrain overall policy effectiveness or enhance it. Evidence suggests that, in addition to land-use leakage (the displacement of environmental pressures to unregulated domains), predictably strong market-segregating responses might rearrange sourcing and trading patterns, especially where EU commodity import shares are low. Lacking observable and attributable land-use changes, segregation spillovers are harder to document. We outline an economically informed interdisciplinary research agenda around the potential impact pathways of demand-side trade regulations. However, our ex-ante conceptual policy assessment also cautions of potential functional shortcomings in reaching the desired global forest-protective goals.

Citation

Dario Schulz, Johanna Coenen, Mairon Bastos Lima, Laila Berning, Jan Börner, Mathias Cramm, Cecilia Fraccaroli, Gustavo Magalhães de Oliveira, U. Martin Persson, Metodi Sotirov, Sven Wunder, Not an easy ride: Economic research priorities for pro-environmental trade regulation, Forest Policy and Economics, 182, 2026, 103682, https://doi.org/10.1016/j.forpol.2025.103682